Although weak demand forced Entropic Communications Inc. to make a big cut in the size of its initial public offering, the San Diego-based semiconductor company saw its stock soar 40% in its Nasdaq debut on Friday.

The chipmaker ended up pricing 8 million shares at $6 each, after revising down its earlier plans to sell 10 million for $9 to $11 per share. However the stock rallied in the aftermarket, opening at $6.83 and climbing to a high of $8.46 by early afternoon. It closed at $7.40.

Entropic, whose technology helps service providers deliver uninterrupted video over home networks, raised $48 million in the offering, with which it plans to pay down debt, and use the balance for working capital and general corporate purposes.

Underwriters Credit Suisse Group, Lehman Brothers Inc., Thomas Weisel Partners LLC, JMP Securities LLC and ThinkEquity Partners LLC have an option to purchase 1.2 million additional shares.

Entropic's chipset enables service providers and network operators to deploy video throughout the home without interfering with other consumer devices and networking environments already in place. The technology uses existing cable wiring to provide HDTV, digital-video recorders, set-top boxes, home gateways and media center PCs.

In the first nine months of the year, the company lost nearly $31.5 million on $82.4 million in revenue, compared with a $5.57 million loss on $24.9 million a year earlier. As of Sept. 30, it had accumulated $91.8 million in debt.

Major shareholders include CMEA Ventures (12.6%) Redpoint Ventures (10.3%), Focus Ventures (6.4%), Granite Ventures (5.5%) and Mission Ventures (5.1%). Aside from CMEA, whose stake drops to 11.1%, each firmÕs stake will dilute only slightly after the offering. The stock's strength in the aftermarket will pad a considerable profit margin for Entropic's venture capitalists. Shares of the company's $36.3 million Series B round in 2003 had an adjusted purchase price of 23 cents each; while the $28 million Series C stock went at 25 cents apiece in 2006.

Other shareholders in the company with stakes of less than 5% include Anthem Venture Partners of Santa Monica, Calif., Cisco Systems Inc. of San Jose, Calif., Comcast Interactive Capital of Philadelphia, EchoStar Communications Corp. of Englewood, Colo., Intel Corp. of Santa Clara, Calif., Motorola Ventures of Schaumburg, Ill., Panasonic Corp. of North America, based in Secaucus, N.J., Time Warner Inc. of New York and YAS Broadband Ventures LLC of Andover, Mass.

How Entropic's stock performs beyond the IPO is going to be of great interest to the private companies in the home networking space that might be looking at offerings in 2008.

Entropic's competitors include home networking technology developer Gigle Semiconductor, which closed a $20 million Series B round in November, and home audio networking chipmaker BridgeCo Inc., which received $23 million last summer. Additionally Intellon Corp., a broadband-over-powerline chipmaker, is currently in registration to sell 7.5 million shares at $9 to $11 each.

Frederick Muto, Jason Kent and Charles Kim of Cooley Godward Kronish LLP are issuer's counsel, while Alan Denenberg of Davis Polk & Wardwell is underwriters' counsel. - Carolyn Murphy contributed to this report.