Sept. 27--Three more Silicon Valley IPOs Friday demonstrated that while Wall Street remains hungry for tech stocks, its appetite is mostly centered on a few key sectors.
Redwood City's RingCentral, which delivers corporate telecommunications services over the cloud, saw its initial public offering soar, much like two other valley software companies that went public last week.
But San Francisco cleantech company Pattern Energy enjoyed only a modest uptick in its stock price. And shares of Mountain View-based Violin Memory, a maker of enterprise storage technology, plunged in value when trading began.
It was a far cry from the dot-com era, when investors pounced on seemingly every tech company that came to market.
"I don't think we're in a bubble. A bubble means there's a lot of euphoria and a lot of companies going out," said Manuel Henriquez, who runs a Palo Alto tech investment firm called Hercules Technology Growth Capital.
However, he added, "I think there are certainly valuation bubbles in certain sectors."
The street's reaction to RingCentral was similar to -- though not as intense as -- last week's reception for enterprise-software makers FireEye and Rocket Fuel. Both saw their prices more than double during their first day of trading and have maintained solid gains through the past week.
RingCentral's technology funnels a company's phone calls over remote networks to reach employees at their desks or on the go. CEO Vlad Shmunis, in an interview from New York, noted than when the company launched 10 years ago with the idea of delivering business communications over the cloud, "We were probably ahead of the market."
Thursday night, RingCentral sold 7.5 million shares to institutional investors for $13 apiece. Shares then shot higher when trading began Friday on the New York Stock Exchange; RingCentral closed at $18.20, a gain of 40 percent from the IPO price.
By striking a partnership with AT&T and expanding its customer base to more than 300,000, the company has managed to steadily grow revenues from $50.2 million in 2010 to $114.5 million last year. Losses have grown as well, however; RingCentral lost $35.4 million in 2012 and $23.9 million in the first six months of this year, according to its regulatory filings.
Shmunis called the nearly $100 million the offering added to his company's coffers "enough to carry us through to break even," though he wouldn't say how many years that might take.
As to whether RingCentral left money on the table by pricing its shares at just $13, Shmunis said: "Our bankers did an amazing job in getting just the right people to invest in the company. Of course, we'd much rather see our stock go up than go down on the first day of trading."
Perhaps, but Violin CEO Don Basile pronounced himself happy with Friday's debut even though his company's shares dipped more than a dollar from the price they commanded from institutional investors Thursday night.
Violin priced those shares at $9, but the company's stock never topped $8 once trading began on the NYSE. Trading under the ticker symbol VMEM, shares closed at $7.02, a decline of 22 percent from the IPO price.
"The market goes up, it goes down," Basile said from New York. "We just have to keep executing, and the investors will understand the value of enterprise storage."
The third company making its stock debut Friday, Pattern Energy, sold 16 million shares at $22 apiece, raising $319 million. Shares of the San Francisco firm, which develops and operates wind farms, closed Friday's first day of trading up nearly 6 percent.
Gary Kremen, a serial entrepreneur and cleantech investor in Los Altos, was heartened by the reception. "High quality cleantech is back," he said.
While some pundits have written off clean energy after the high-profile flops of companies like Solyndra and Fisker Automotive, Kremen noted that power generation companies that hold long-term sales contracts with utilities are in stronger shape. "I don't think the sector is dead; it's just selective," he said."
Similarly, Violin Memory -- which focuses on solid-state drives utilizing flash memory -- is in a heated competition with companies that specialize in software-based storage.
Storage industry analyst George Crump said it remains to be seen which business model will win out in the long run. But, he noted, "the financial markets tend to get enamored with software companies compared to hardware companies."
Violin also was entering the market with slowed momentum after losing a contract with Hewlett-Packard (HPQ) last year that made up 65 percent of its revenue. In the 2013 fiscal year, which ended Jan. 31, Violin's net loss more than doubled to $109.1 million.
Basile downplayed the notion that investors were spooked about the loss of HP's lucrative arrangement, noting that Violin has forged new sales partnerships with Dell, SAP and Microsoft.
Asked whether he'd considered delaying the stock debut until revenues rebounded, Basle said: "IPO markets come and go. You have to take advantage of market windows."
Citing the specter of a looming federal government shutdown that could disrupt the stock markets and limit IPOs, he said he was glad Violin seized the moment to add public capital.
Whether because of similar concerns about Washington, D.C., or simply in order to catch their collective breath, no Silicon Valley companies are scheduled to go public next week.
Contact Peter Delevett at 408-271-3638; follow him at Twitter.com/mercwiretap. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.