Rhythms priced at $21 per share, but rose to 69 at the end of the first trading day. Dramatically emphasizing the stock market value of internet companies, Rhythms NetConnections, a provider of DSL lines, went public April 7 and closed its first day worth more than $4.88 billion. That’s for a company that generated losses of more than $36.3 million on sales of $528,000 last year. Catherine Hapka, the company President,  is now worth $200 million, while the initial investors have made billions.

Northpoint  IPO successful on May 5. Offered at $24, it closed at $40. The following May 4th report was a lucky guess: Based on the success of Rhythms and Covad, they should do very well. Goldman Sachs is underwriting. They have backing from Intel and @Home, and commitments from Microsoft. If the market values them similarly to their major competitor Covad or lesser competitor Rhythms, the 121 million shares will be worth $40 or more per share, although the offering price will probably be $24 or so.
    Morgan Stanley holds nearly 3,000,000 options, indicating a likely profit of over $60M in addition to underwriting fees in return for a bridge loan of less than that amount. The Chairman of Northpoint, Mike Malaga, owns 7M shares, but he worked for the money, even offering to get up at 5 a.m. to do an east coast interview. Elizabeth Fetter, the President who joined them this year, has rights to over 2,000,000 shares, and other executives also have substantial stakes. Board member Reed Hundt, former Chairman of the FCC, holds 250,000 options at a favorable price. Five venture firms (see below) will continue to hold most of the stock, with interesting minority partners including Intel and Microsoft.

Northpoint is one of the leading companies in this business, with strong operations and good prospects. We wish them well, but can’t guarantee stock performance.
From S-1 5/4/99
This is an initial public offering of shares of common stock of Northpoint Communications Group, Inc. We currently estimate that the initial public offering price will be between $22.00 and $24.00 per share. Our common stock has been approved for quotation on the NASDAQ National Market under the symbol "NPNT".    
     At our request, the underwriters will reserve at the initial public offering price up to $30 million of common stock for sale to Microsoft Corporation. This would represent 1,304,348 shares of common stock at the midpoint of the offering price range. We may also request the underwriters to reserve additional shares of common stock for sale to potential strategic partners.
                  Underwriters are Goldman, Sachs & Co., Morgan Stanley Dean Witter,  Credit Suisse First Boston. Currently in 17 Markets. Expanding to 28 Markets by the end of 1999.   Our planned coverage will allow us to reach approximately four million businesses and 30 million households, including more than 80% of the small- and medium-sized businesses in our 28 markets.
  We are currently providing services in 17 metropolitan areas in the United States and intend to offer service in a total of 28 metropolitan areas by the end of this year. We have been and expect to be the first, or one of the first, to offer DSL services in these markets. Our networks consist principally of digital communications equipment that we own and install in telephone company offices known as "central offices" and existing copper telephone lines that we lease to connect our equipment with end users' premises. We will initially install our equipment in the central offices with the highest density of small-and medium-sized businesses in our 28 markets. We have already secured and purchased space in over 625 of those central offices and intend to expand the coverage of our networks in these markets over time by installing equipment in additional central offices.  Upon completion of our planned expansion, our networks will be able to reach approximately four million businesses and 30 million households, including more than 80% of the small- and medium-sized businesses in our 28 markets. We have already obtained required regulatory approvals, including competitive local exchange carrier authorizations, to offer services in each of those markets. We are currently providing or have entered into agreements to provide our services to more than 85 network service providers and have connected approximately 3,200 of their end users to our networks.
   We have entered into strategic and commercial relationships with Microsoft, Tandy, @Home, Intel, Verio, Cable & Wireless, Frontier Corporation, Concentric Network, ICG Communications and Enron Communications, among others. Microsoft has expressed to us its intention to purchase $30 million of our common stock in this offering, although it is not bound to do so. Other strategic partners have invested $48.4 million in our company.  Northpoint was founded in May 1997 by six former MFS/WorldCom executives who developed and implemented the first commercial DSL service.
Because We Have a Limited Operating History, It Is Difficult to Evaluate Our Business
We Expect Our Losses and Negative Cash Flow to Continue
   To date, we have incurred substantial operating losses, net losses and negative cash flow on both an annual and quarterly basis. For the year ended December 31, 1998, we had operating losses of approximately $25,361,680, net losses of $28,846,706, and negative cash flow from operating and investing activities of $52,913,000. We cannot assure you that we will ever achieve profitability or generate positive cash flow.
   We expect our operating expenses will increase significantly, especially in the areas of operations, sales and marketing, as we develop and expand our business and, as a result, we will need to increase our revenue to become profitable.
We Need to Make Capital Expenditures, and the Amounts, Timing and Returns are Uncertain
  In 1999, we will have to make significant capital expenditures estimated at $130,000,000 to $160,000,000 to develop our business and deploy our services and systems.

NAS IPOs at $12, below expected range.
It closed almost exactly at the offering price, which was $2-4 less than anticipated in the last SEC filing. NAS is a networking company with plans to rapidly expand their DSL CuNet on the East Coast, but has only limited deployment now. Rhythms in particular found that the stock market was kind to early stage DSL providers with strong business plans and alliances, but NAS did not get the same response. Is the gold rush off for new DSL providers? (June 4)

Network Access Systems is a small reseller with big stock market plans. NAS is a communications networking and consulting firm that has jumped into the DSL opportunity. They have experienced people, but DSL is a very limited share of their revenues to date. They have ambitious plans for expanding regionally, and have deployed 51 DSLAM’s.
From SEC Filings by the company:
Because the focus of our company is changing to a high speed digital communications service, our business is difficult to evaluate
      We have refocused our company, through our CuNet services, on the provision of DSL-based high speed digital communications services, which is a change from our historical activities. We began in 1995 by helping our customers integrate their network equipment and by providing them with related network services. Because our business focus has now changed, and we expect to dedicate most of  our resources to develop our nascent CuNet services, it is difficult to evaluate our business.    
      Our financial results now and in the future are not, and will not be, directly comparable to our prior financial results. Substantially all of our revenue in 1995, 1996, 1997, 1998 and the first three months of 1999 was derived from data communications products and services and networking solutions. Although in the short term we expect to continue to derive the majority of our revenue from our networking solutions activities, we expect that over time CuNet will constitute the more significant portion of our total revenue. Revenue from CuNet, which we began offering in January 1999, has been minimal. As a result, not only have we changed the focus of our company, you also have very limited historical financial information upon which to base your evaluation of our performance and an investment in our common stock. To achieve the growth that we expect, we are depending on the success of our CuNet services.
We intend to substantially increase our operating expenses and capital expenditures in an effort to expand rapidly our infrastructure and DSL-based network services. We expect to incur substantial operating losses, net losses and negative cash flow during the build-out of our network and our initial penetration of each new market we enter. These losses are expected to continue for at least the next two to three years.
Because two of our networking solutions customers account for a high percentage of our revenue, the loss of a significant customer could harm our business
    To date, our largest customers have been AT&T and Zeneca Pharmaceuticals, a division of Zeneca, Inc. AT&T and Zeneca accounted for 50.4% and 9.6%, respectively, of our revenue in 1998 and 55.5% and 9.0%, respectively, of our revenue in the three months ended March 31, 1999. The loss of either customer could adversely affect our business.  
Our Business
    We are a leading provider of digital subscriber line, or DSL, technology and networking solutions to businesses. Through our CuNet, pronounced "CopperNet", branded service, we offer customers high speed "always on" connections to local, metropolitan and wide area telecommunications networks. As a complement to our CuNet service, we also offer network integration, which includes design and installation, network management, network security and professional services.
    We currently are targeting the Bell Atlantic region for our CuNet service.
We believe that we have formed a closer day-to-day working relationship with Bell Atlantic than our competitors, which will allow us to provide more responsive, consistent and higher quality service in our target markets.
    We began CuNet service trials in November 1997 and currently offer CuNet service in Boston, New York, Philadelphia, Baltimore, Washington, D.C. and Richmond. We have formed networks in each of these cities and connect each of them to our own private high speed fiber optic network, or backbone. We expect to extend our network coverage to include Norfolk, Pittsburgh and Wilmington, Delaware by the end of 1999. So far, we have collocated our equipment in 51 central offices and we expect to raise the number of central offices in which we have collocated equipment to 360 by the end of this year. As opportunities present themselves, we may expand our network beyond our initial target markets and into adjacent regions. We have recently entered into an interconnection agreement with Bell South.
   We began our company in 1995 by providing data communications products and services for corporate networks, serving as a premier partner for Paradyne Corporation, Ascend Communications, Inc. and Cisco Systems, Inc. Shortly thereafter, we began offering our customers further services for their networks such as network management, network security and professional services. We have built a significant presence in the Bell Atlantic region and currently have over 400 networking solutions customers. To reach our customers, we employ a direct sales force, which we expect to grow to more than 140 people by the end of 1999. We also market our services through sales partners in multiple channels including Internet service providers, local and long distance carriers and other networking services companies.    
Our Management
    Our senior management has extensive experience in network integration, management and security and in providing professional services. Our Chief Executive Officer, Jonathan P. Aust, was one of the principal architects of the data network AT&T created to handle monetary transfers for the Federal Reserve System. Other members of our senior management team have worked for well-known telecommunications companies, including Level 3 Communications Inc. MCI WorldCom Inc., AT&T and Cable and Wireless, USA.

Copper Mountain is the main supplier to several of the companies above, and UUNet as well. Will the manufacturers do as well as the providers? Yep, they also tripled the first day, and continued to rise.   An excellent company, actually earning a profit from sales. Their DSLAMs are the used by Northpoint, Rhythms, and MCI/Uunet. Strong management and a growing line of products, with interesting voice offerings as well as building units. Morgan Stanley leads the underwriting.

Redback is another favored manufacturer, with sophisticated equipment. Another first day triple. This is getting boring, and makes us envious of the company “friends & family”. Good equipment that has become almost the standard in the DSL world, that controls the network.

Paradyne is one of the true pioneers of DSL, once having been part of AT & T The chip design division was spun off and is now Globespan. They offer nearly every version of DSL, and have an international client base (including Harvardnet, see below). Their Hotwire MVL System doubles typical DSL loop reach - exceeding 30,000 feet, according to the company, and is widely deployed by Harvardnet (see below) that plans to open 600 offices to DSL in the next two years.
From their S-1
The symbol will be PDYN
We are offering 4,000,000 shares of our common stock. A group of stockholders is offering an additional 2,000,000 shares.- The underwriters have an option to purchase an additional 900,000 shares from these stockholders to cover over-allotments.- This is our initial public offering, and no public market currently exists for our shares. We anticipate that the initial public offering price will be between $12.00 and $14.00 per share.Lead underwriter is DONALDSON, LUFKIN & JENRETTE, with BANCBOSTON ROBERTSON STEPHENS, DAIN RAUSCHER WESSELS, RAYMOND JAMES & ASSOCIATES, INC.  The undersigned is facilitating Internet distribution. DLJDIRECT INC.
Our objective is to maintain and build upon our position as one of the leaders in the broadband access market by focusing on next generation digital subscriber line, more commonly known as DSL, service level management, more commonly known as SLM, and other broadband access products. We have a long history of technological innovation, and we hold over 155 U.S. patents and have over 100 U.S. patent applications pending. We have sold our products to over 50% of the Fortune 500 companies and to businesses and network service providers in over 125 countries.

Harvardnet filed for its IPO on June 11. They are a regional DSL provider, strongest in Boston but expanding throughout New England, with strong technical and marketing leadership. They use Paradyne MVL for extended reach, and have a customer oriented, can-do attitude. They also own an Internet backbone that stretches from DC to Maine.
From their S-1
Massachusetts, Maine, New Hampshire, Rhode Island, New York, New Jersey, Pennsylvania, Maryland, Washington, D.C. and Virginia. As of May 31, 1999, we provided service at 24 central office locations and were installing equipment in 23 additional central office locations in eastern Massachusetts, southern Maine and southern New Hampshire. We expect to collocate in approximately 150 Bell Atlantic central office locations in the Northeast region by the end of 1999 and in an aggregate of more than 600 central offices in the Northeast and Mid-Atlantic regions by the middle of 2001. As of May 31, 1999, we had approximately 500 DSL and leased lines in service and more than 1,100 Web hosting business customers. Our customers include the Atlantic Monthly, the Boston Museum of Fine Arts, Fidelity Capital, KPMG Peat Marwick, Nantucket Nectars, Sage Networks and Staples.
    We deliver our services over our own advanced Internet protocol-based backbone network that connects markets from Maine to Virginia. This network is designed for reliable, secure, high performance transport and delivery of Internet protocol-based data. The network primarily operates at the OC-3 capacity level (155 Mbps) and includes fiber optic connections to major Internet exchange points. In addition, we have peering relationships with over 90 Internet service providers to facilitate the efficient and cost-effective exchange of customer traffic.
WE WILL NEED ADDITIONAL FINANCING WHICH COULD BE DIFFICULT TO OBTAIN. We intend to grow our business rapidly and expect to incur significant operating losses and negative cash flow for the foreseeable future. Therefore, we will require additional external financing in the future.