The high-technology sector continued to provide work for bankers this week as Gandalf Technologies Inc. tapped J.P. Morgan & Co. and RBC Dominion Securities to give both strategic and operational financial advice.
The move, announced Monday, sent Ottawa-based Gandalf's stock up 17%, to $2.74 a share, as investors sensed a chance to benefit from a strategic change of direction. Shares in Gandalf had been trading as high as $18.99 last May.
Later in the week, 3Com agreed to buy U.S. Robotics for $6.6 billion of stock-the second-largest technology acquisition ever. Goldman, Sachs & Co. advised 3Com on the deal; Morgan Stanley & Co. worked for U.S. Robotics.
Bankers have poured resources into analyzing and serving the entire high-technology sector as it has evolved and consolidated in recent years.
"We have a very rapidly growing technology practice in the U.S. and Canada," said David Weir, a managing director in J.P. Morgan's merger and acquisition group, "and have had an intense focus on the technology sector over the last two years."
RBC Dominion Securities, a unit of Royal Bank of Canada, will act as Gandalf's financial adviser and will lead a short-term financing for the company this quarter, said a Gandalf spokeswoman. The financing will probably entail a convertible security issue of less than $100 million.
J.P. Morgan Securities "was hired as advisers to help us sort out our strategic options and search for strategic partners," the spokeswoman added.
The Gandalf spokeswoman said the company has not precluded a sale but is exploring other options.
With a market capitalization of about $150 million, Gandalf is one of the few midsize high-tech companies that remains independent after a period of rapid consolidation.
Share values in the sector have fluctuated wildly since early December, said Richard Woo, an analyst at Montreal-based Thomson Kernaghan & Co.
"When any product gets a good piece of news, it jumps 50 cents," said Mr. Woo; "any bad news, it drops 50 cents. There are a lot of itchy fingers on the trigger."
Gandalf produces hardware and software for high-speed data networks that let employees "telecommute" from outside the office. Equity values in the entire sector plummeted after computer giant Intel's December decision to cut the price of its remote access technology, said Mr. Woo.
Industry leaders such as 3Com Corp. and Cisco Systems Inc. this month reported both slowing demand and revenue growth, leaving the sector nervous and panicky, he added.
Gandalf's announcement came two weeks after its president and CEO, Tom Vassiliades, resigned for personal reasons, a move welcomed by analysts.