SoundBite IPO Up in the Air After “Mugging” by Competitor

10/19/07

There’s no new word today on the fate of SoundBite Communications’ IPO.

The Bedford, MA-based voice messaging firm was expected to price the deal Wednesday. Instead, according to an SEC filing, the company received a letter written on behalf of Universal Recovery Systems (URS) claiming that SoundBite’s technology may violate some of URS’s issued patents and will violate a patent filed by URS but not yet issued. The letter went on to say that URS would consider selling the patents to SoundBite, and set a deadline of next Wednesday before extending the offer to one of the firm’s competitors.

Though SoundBite said it believed that the allegations were without merit, the letter seems to have, at least temporarily, derailed the IPO. As of this afternoon, there has been no new word of when the deal will price, says Ben Holmes, publisher of research firm Morningnotes. Holmes doesn’t mince words about the URS letter: “It was a mugging—that’s spelled m-u-g-g-i-n-g.” If the allegations prove unfounded, he says, URS “should be sued into oblivion.”

For its part, SoundBite says in the SEC filing that it intends to “defend vigorously” against the patent-infringement claims, though it notes that doing so could be costly in terms of both cash and managers’ time. Holmes point out Sunnyvale, CA’s ShoreTel faced similar eleventh-hour patent charges filed the day the company priced its IPO this past June. That deal was delayed for about a week; it ultimately re-priced one point lower, but still within its stated target range, Holmes says.

SoundBite’s most recent registration statement, filed yesterday, estimates the 6 million-share offering at $12 to $14 per share. That was unchanged from its previous statement, filed before the patent allegations surfaced.

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