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Updated: Synacor Rises 5% In IPO, After Shares Price At Low End

Shares of Synacor, a provider of Web portal and "TV Everywhere" authentication services to cable and telecom operators, opened up 5% in its initial public offering Friday after the company priced the shares at the low end of already reduced range.

The company's shares began trading Friday on the NASDAQ under the symbol "SYNC." The stock -- priced at $5 per share -- opened at $5.75 per share, climbing 27% to $6.37 in early trading. The stock pulled back later in the day to close Friday at $5.25 per share, with 4,029,740 shares traded in the session.

Synacor sold 5,454,545 primary shares at $5, for proceeds of $27.3 million. Previously the company had anticipated raising up to $75 million. It originally pegged expected pricing at $10 to $12 per share before reducing that this week to $5 to $6.

Additionally, the IPO's underwriters have options to buy 1,022,725 shares (of which 311,096 shares are from Synacor) at a discounted rate within 30 days. The lead underwriters on the IPO are BofA Merrill Lynch and Citigroup.

In the fourth quarter of 2011, Synacor had an average of 18.7 million monthly users through its customers, according to comScore.

The Buffalo, N.Y.-based two company's biggest customers for 2009 and 2010 were Charter Communications and CenturyLink, which together accounted for 62% and 60% of its revenue for 2009 and 2010 respectively. The company also has signed Dish Network and Verizon Communications and Toshiba as clients.

For the year ended Dec. 31, 2011, Synacor estimates revenue of between $90.6 million and $91.0 million, an increase of between 36.9% and 37.5% from the year prior, with net income between $3.8 million and $4.2 million.

Synacor cites its main competition as in-house information technology staffs at MSOs and telcos that roll their own Web solutions. Other competitors include major portal operators Yahoo, Google, AOL and MSN.

But Google is also a key partner for Synacor. Among its risk factors, Synacor said it relies significantly on revenue from Google, with which Synacor has a revenue-sharing relationship.

Under that deal, Synacor includes a Google-branded search tool on the websites of Charter, CenturyLink and other customers. Google-related revenue was approximately 48%, 45% and 49% of its revenue in 2008, 2009 and 2010, respectively, and approximately 55% of revenue for the nine months ended Sept. 30, 2011.

Synacor's agreement with Google expires in February 2014 "unless we and Google mutually elect to renew it," and Synacor noted that Google may terminate the agreement if Synacor experiences a change in control, if it doesn't maintain certain search and display advertising revenue levels, or upon the two-year anniversary of the agreement in February 2013.

As of Dec. 31, Synacor had 260 employees in the U.S. and one employee in the United Kingdom. The company's three primary data centers are located in shared facilities in Atlanta, Denver and Amsterdam, The Netherlands, and it also maintains a secondary data center in a shared facility in Buffalo.

Synacor's investors include Crystal Ventures, Intel Capital, Advantage Capital Partners, North Atlantic Capital and Walden International.

Last month, Synacor named three new board members: former Charter chief technology officer Marwan Fawaz; Gary Ginsberg, executive vice president of corporate marketing and communications at Time Warner Inc.; and Michael Montgomery, president of entertainment-industry consulting firm Montgomery & Co., who was previously CEO of the Sega GameWorks joint venture between Sega, Universal Studios and DreamWorks.