XYLAN MAKES MARKET SPLASH.
Two decades ago, immigrants Steve Kim and Yuri Pikover struggled to learn English and took odd jobs to pay for school.
Today, the founders of the fledgling Calabasas-based Xylan Corp. are rich by almost any standards. Kim is worth about $360 million on paper. Pikover has $160 million.
Their company, which makes computer network switches, went public Tuesday with an opening price of $26. It closed at 58-3/8, not only propelling the founders to dizzying wealth - but also making some of the company's employees millionaires.
"It's a really crazy market and we thought we would be very well-received," said the 46-year-old Kim. "Actually, it was beyond my expectations."
Added the 34-year-old Pikover: "Ever since I've been in this country, my intention was always to eventually have my own business and to become successful. Now, it has come to fruition and it's a wonderful feeling."
Nasdaq officials said Xylan was the best performing initial public offering so far this year. With a 124.5 percent return, it's the fourth-biggest first-day gain recorded on Nasdaq. It even eclipsed Netscape, the highly touted Internet firm, which had a first-day gain of 108 percent.
The company raised $89 million on 4.83 million shares, which include 630,000 overalloted shares reserved for higher-than-expected demand.
Xylan's stock price closed at $56.25 on Wednesday.
Bob Mescal, a research analyst at New Issues newsletter in Deerfield Beach, Fla., was impressed. But he said the real test is the stock's staying power.
"It's a rapidly growing company but very speculative," he said. "We thought the price was a little bit dicey. . . . Let's see what happens as it settles down."
Xylan makes switches that enable computers to "talk" to each other simultaneously. Its client list includes MCI, Lockheed Martin Corp. and Samsung Electronics.
After losing money in 1993 and 1994 - years devoted to research and development - Xylan made a profit in the fourth quarter of 1995.
Major competitors like Cisco Systems Inc. are a threat, but Kim believes that Xylan's advantage is the flexibility that comes with its small size.
Xylan had sales of $30 million in 1995 and employed 255 people. Cisco has revenues of $2 billion and 4,400 workers.
But working against the odds is nothing new to Kim and Pikover.
A native of Seoul, South Korea, Kim came to Los Angeles 20 years ago to attend UCLA's graduate school in engineering. He took part-time jobs to put himself through school. After graduation, he worked for various companies as an engineer.
In 1984, Kim decided to start his own business out of his garage, designing fiber optics data communications for computer networks.
"In a lot of countries, starting a business out of garages is impossible," Kim said. "This is the country that provides opportunities. You're talking about the American Dream."
With $15,000 of his own savings and $85,000 pooled from other investors, Kim started Fibermux. In 1993, the company was sold for $54 million.
Pikover came into the picture in 1988, hired as a salesman. He quickly rose to become a regional sales manager, winning Kim's friendship and trust.
In 1993, Kim and Pikover founded Xylan Corp.
Originally from Kiev, in the former Soviet Union, Pikover and his family arrived in New York in 1979. He attended a technical college for engineering studies before moving to Los Angeles in 1982. He continued his studies at Cal State Northridge and UCLA.
Pikover remembers holding two jobs to afford college: "I was a shipping clerk in the morning and delivered meat for a local supermarket at night."
After college, he worked as an engineer before embarking on a sales career.
"I found marketing a lot more exciting," Pikover admitted.
The son of two retired Ukrainian hairdressersis now a multimillionaire on paper, but he remains blase about his success.
"I drive a (Nissan) Pathfinder and I think I'll keep it for a while," said Pikover, who lives in Chatsworth. Kim lives in Calabasas.
Douglas Hill, Xylan's vice president of marketing, who's now a millionaire on paper due to an employee stock option plan, said he's pretty calm despite winning the corporate equivalent of a lottery.
"It's funny, I didn't feel very different," he said. "It sort of weirded me out. I thought it was really strange. . . . I knew we'd do well but not this well."
He half-jokingly adds: "I plan to someday be a professional backpacker."
(color) Steve Kim and Yuri Pikover founded Calabasas-based Xylan Corp. Myung J. Chun/Daily News
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|Publication:||Daily News (Los Angeles, CA)|
|Date:||Mar 14, 1996|
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