Quarterdeck's shares skyrocket since June debut.

Quarterdeck's shares skyrocket since June debut

Quarterdeck Office Systems has proven a roaring success on Wall Street. It may be the hottest high-tech concern in the nation to go public recently.

Shares of the Santa Monica computer-software concern have doubled in price since they were first sold over-the-counter in mid-June.

The stock debuted at $10 a share and six weeks later was up to $16, topping a nationwide list of high-tech IPOs compiled by a major venture capital firm. By press time last week, it was hovering around $20 a share.

Quarterdeck had already gained nationwide glamour when its QEMM-386 program became the top-selling software in the United States for two months last year, unseating the legendary Lotus 1-2-3 spreadsheet program.

Now the local company has gained muscles from its IPO. More than $15 million was raised, nearly doubling its total capitalization.

But the stock spurt on Wall Street, of course, raises an alternate question, and a touchy one at that: Was the stock simply price too low?

"It might have been," conceded co-founder and Chief Executive Therese E. Myers. She chuckled uncomfortably at that question.

Taking Quarterdeck private at last week's price would have netted her company an extra $15 million to spend on products and operations. Personally, she could have gained an extra $1.9 million, since she offered to the public 185,000 of her own 1.7 million share holdings.

But Monday-morning quarterbacking isn't fair.

"It's really easy, on hindsight, to say, |Gee, we priced it too low,'" said securities analyst Bruce Lupatkin of Hambrecht & Quist Inc., co-underwriter of the IPO.

In fact, Lupatkin, Myers and other observers said last week that Quarterdeck's recent dance on Wall Street owes more to the IPO's peculiar timing and especially to its aftermath.

On June 11, the very day privately owned Quarterdeck offered a 17 percent stake to the public, arch-rival Microsoft Corp. - the nation's most powerful software company - announced it began shipping new versions of its DOS software, the "disk-operating system" that controls the basic functions of IBM-compatible personal computers. DOS is the mega-seller that is running on about 70 million personal computers worldwide.

"I just shook my head," said a shocked Myers, 46. "Against all of our intentions, we came out on exactly the same day."

Quarterdeck officials were praying that Microsoft's new DOS version 5.0 would not be viewed as a threat to Quarterdeck products and, ultimately, to the strength of the IPO.

The software industry had been expecting Microsoft's release, plus a blockbuster advertising campaign rumored at $25 million, back in March. That would have allowed Quarterdeck and the industry to assess DOS 5.0 prior to June. If DOS 5.0 were no threat, Quarterdeck could go public with the full backing of the industry, otherwise it might reassess the IPO.

But Microsoft's release was delayed, and the uncertainty gave cold feet to some money-fund managers. They told the underwriters so, and that dampened prospects for upping the offering price.

"We priced Quarterdeck will full knowledge of that risk," noted Lupatkin. "We felt we had to go full speed ahead, without knowing exactly the timing of the introduction or what goodies (Microsoft) would put in its product."

Why is software titan Microsoft so important? All Quarterdeck products simply enhance Microsoft DOS, which has been wildly successful but has stark limitations for sophisticated users. Quarterdeck's DESKview line enables users to run several programs simultaneously, view them in windows and transfer data among them - much like the more "friendly" Apple Macintosh. For example, a user can compose a letter in word processing, query a database and calculate a percentage in spreadsheet programs at once.

Piggybacking on DOS' weaknesses, nine-year-old Quarterdeck recorded a hefty $7.6 million profit on $26 million in sales for the fiscal year ended Sept. 30, 1990. Although it was on track to post even better results this year - profits up 54 percent and sales up 77 percent - the Microsoft challenge persists. Theoretically, Microsoft could roll out a super-improved version of DOS needing no enhancers, and it would wipe out Quarterdeck's sales.

But that never happened: DOS 5.0 has been out on the streets for three months and Quarterdeck's sales seem to have continued strong. Some independent software researchers have said Quarterdeck's QEMM software, or Quarterdeck Expanded Memory Manager, for instance, is still needed to wring extra memory capability from the new DOS 5.0. Three weeks after the IPO, QEMM-386 was the No. 3 software shipped to stores and resellers, according to PC Magazine, behind DOS 5.0 at No. 1.

And last week Quarterdeck began shipping its new QEMM version 6.0, which boasts it can deliver another 80 kilobytes, or another 13 percent of memory, to DOS users.

"People have predicted the demise of Quarterdeck ever since 1983," scoffed company product spokesman Charles McHenry. "Let's face it, DOS is crippled and it's created a heck of an aftermarket for enhancers."

Large companies agree. Buyers of more than 50 copies of Quarterdeck products run from Union Carbide to IBM, and from the CIA to the Union Bank of Switzerland.

And investors apparently agree. Two are officials at the Santa Monica offices of venture-capital firm Peregrine Ventures who sit on Quarterdeck's board and recommended against selling Peregrine's 17.1 percent stake when Quarterdeck went public. That decision yielded Peregrine a $30 million paper profit, as of last week.

Others who held onto major stakes include co-founder Gary W. Pope, 39, and three other venture capital firms.

As for who's been gobbling up Quarterdeck stock, CEO Myers said no new investor has disclosed a stake of 5 percent or more to the Securities and Exchange Commission.

Beyond fulfilling its goals stated in the stock prospecturs, "we don't have any direct understanding of why it's doing so well," said Quarterdeck financial spokeswoman Cecelia Wilkinson.

A recent bullish report by securities analysts Al Tobia of Mabon Nugent in New York helped.

So did the publication of a Hambrecht & Quist performance round-up of 19 big IPOs during the first half of 1991. Quarterdeck's 60 percent gain by late July topped all. next was Platinum Technology, with a 53 percent increase, followed by Video Lottery Technologies, at 52 percent, and Envoy, with 41 percent.

PHOTO : Therese E. Myers: Co-founder, CEO