PJC Piper Jaffray Companies

Two U.S. companies broke a monthlong bad pricing streak in the IPO market, and then went on to deliver strong first-day gains Friday.

Custom-designed parts manufacturer Proto Labs Inc. (PRLB) and social commerce software company Bazaarvoice Inc. (BV) each priced their initial public offerings above their expected ranges, the first deals to do so since Guidewire Software Inc. (GWRE) topped its range on Jan. 24. Of the 16 IPOs that have debuted since Guidewire's, 10 ended up pricing below range, and none priced above their midpoints.

Like Guidewire, Proto Labs and Bazaarvoice went on to deliver good first-day trading gains, with Proto Labs rising 81.3% to close at $29, and Bazaarvoice increasing 37.6% to close at $16.51.

Although the broader stock market environment has definitely been on the rise, which is a necessary component for IPO performance, it's too early to say that good pricing and trading on these two deals portends easy days ahead for other IPO hopefuls. Earlier this week, an offering from seed developer Ceres Inc. (CERE) came to market at $13 after it reduced the low end of its price range to $16 from its original aim of $21, indicating that investors aren't jumping at every company seeking to come public.

The main driver for both Proto Labs and Bazaarvoice was investor interest in their use of technology, though each relies on a different type.

In Bazaarvoice's case, it all came down to a single word description: cloud. Cloud-based technology companies, which host software, data and services, have been performing well this year--starting with Guidewire's deal in January.

"If you're in the cloud," investors are instantly interested, said Francis Gaskins, president of research site IPOdesktop.com.

Bazaarvoice uses the cloud to deliver its software to business customers who want to collect, display, analyze and redistribute consumer reviews on their websites. Although the company isn't profitable, it has generated the kind of double-digit percentage revenue growth that tech investors like. In the nine months that ended Jan. 31--its fiscal year ends in April--Bazaarvoice saw its revenue increase 65% to $75 million, compared to the same period a year earlier, as it added new clients and increased revenue from existing clients.

Unlike Bazaarvoice, Proto Labs' technology hook requires a paragraph to sum up, but investors were willing to listen. The company uses proprietary software and automated manufacturing technology to cut out most of the skilled labor normally required to manufacture custom parts for product prototypes and small pilot production batches. Proto Labs, which interacts with its customers primarily online, targets its services toward product developers who use three-dimensional computer-aided design software.

Low-volume manufacturing has traditionally been a time-consuming and expensive endeavor due to the need to set up equipment and processes for each design, but Proto Labs says that its technology has allowed it to automate many of the steps so that it can ship parts in as little as one business day after receiving a design.

In 2011, its revenue increased by 52% to $99 million, compared to 2010 as sales to both new and existing customers increased. Net income in 2011 rose 64% over 2010 levels to $18 million

Proto Labs Chief Executive Bradley A. Cleveland said that during the company's road show, he received a lot of positive feedback ahead of the higher pricing.

"It's a pretty cool combination of a high tech company and a manufacturing company," Cleveland said during a telephone interview.

Jefferies Group Inc. (JEF) and Piper Jaffray Cos. (PJC) managed Proto Labs' offering. Morgan Stanley (MS), Deutsche Bank AG (DB) and Credit Suisse Group (CS) managed Bazaarvoice's offering.

-By Lynn Cowan; 301-270-0323; lynn.cowan@dowjones.com

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