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Paradyne to go public

The maker of computer networking software and equipment files to sell up to $85-million in stock.

By HELEN HUNTLEY

LARGO -- A decade after dropping out of the public spotlight, Paradyne Corp. is about to sell stock again.

The maker of computer networking software and equipment registered with the Securities and Exchange Commission on Friday to sell up to $85-million in common stock. It employs 855 people, most of them working in Largo.

Paradyne specializes in broadband technologies, allowing a single telephone line to be used for several purposes at once. The company said businesses using its equipment can access computer networks at speeds of up to 45 megabits per second, 800 times faster than standard 56K modems.

Once one of the Tampa Bay area's most prominent public companies, Paradyne fell on hard times in the 1980s after being caught up in a government purchasing scandal. AT&T Corp. bought the company for $250-million in 1989.

Paradyne is now controlled by Texas Pacific Group, a private investment group headed by financier David Bonderman and based in Fort Worth, Texas. The group bought Paradyne from AT&T spinoff Lucent Technologies for $175-million in 1996, intending to take it public. At the time of the purchase, part of Paradyne's operations were spun off into a separate company, Globespan Semiconductor Inc., in Red Bank, N.J., which Texas Pacific also is taking public.

Paradyne's SEC filing does not specify the number of shares or the price of the offering, but says Texas Pacific will retain control even though it will be selling some of its shares.

Paradyne lost $3.6-million on $198.8-million in sales last year. Most of those revenues came from sales of new broadband products that are expected to represent an increasing share of the company's business. Paradyne said it is focusing on technologies such as digital subscriber lines (known as DSL), which pack data onto traditional copper phone wires.

The company said it expects broadband technologies to drop in price as demand for high-speed transmission grows.

One of the biggest risks facing would-be Paradyne investors is that sales to a single company -- Lucent Technologies -- accounted for 47 percent of the company's revenues last year, and Paradyne's contract as an exclusive supplier of certain equipment to Lucent expires in June 2001.

"Diversification and expansion of our customer base is particularly critical because of the highly competitive nature of our business," Paradyne said in its filing. "Our contracts are generally subject to annual renewal . . . and our customers generally do not have any obligation to purchase products solely from Paradyne."

Paradyne has a list of blue-chip customers, including General Electric, First Union Corp. and Merrill Lynch. However, it also has some impressive competitors, including Ascend Communications, Cisco Systems, Motorola, Nokia and 3Com.

Founded in 1969, Paradyne once had as many as 4,000 employees. The company's fortunes went downhill after 1983 when it was charged with defrauding the Social Security Administration in a contract for computer equipment. The company was accused of showing Social Security officials a cabinet with blinking lights and claiming it was an encryptor used to scramble telephone signals.

To settle federal charges as well as shareholder and other lawsuits, Paradyne pleaded guilty to conspiracy to defraud in 1987 and paid out more than $12-million.

Paradyne struggled under AT&T's ownership, and the company laid off hundreds of workers.

Bonderman and Texas Pacific have invested in a wide variety of businesses, from Kraft's caramel and marshmallow unit to Continental Airlines.

Recent ventures include a recently completed public offering of part of the group's shares in Ducati Motor Holding SpA, an Italian motorcycle company. Through another venture, the $10-billion Newbridge Capital, Bonderman and his partners are attempting to take over troubled Korea First Bank.

Bonderman was formerly an adviser to Texas billionaire Robert M. Bass, whose investments once included an interest in the Times Publishing Co., the parent of the St. Petersburg Times. Times Publishing paid $50-million to the Bass group to buy its shares in 1990.

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