Blog Post

Return of the Tech IPO

Paul Kedrosky may not know much about the power of Blackberry (hence no need for Blackberry 2.0), but he does know the stock markets… very well. He has been calling for a comeback of the technology IPOs in 2007. And he is right about that. We are beginning to hear rumblings of many companies looking to tap the IPO markets. For instance, Michael Arrington is reporting on a possible IPO for NetSuite, which is looking for a $1 billion valuation.

If that was not enough, there is Clearwire looking to go public…. again! Glu Mobile has IPO dreams. And then there is Peter Thiel talking about Facebook being worth $8 billion, or more than MTV. (Okay, maybe he should stop going to Yelp parties, but still, he does have a point.) That it’s not going to happen with Yahoo, so the only other option for Facebook is going public.

Ironically, while all the attention is on big and sexy names, the IPO market is coming back as a result of smaller, relatively unknown players. Paul points to Isilon’s IPO and its first day gains. Riverbed is another company that has done relatively well in a tough market for technology offerings, along with VoIP gear supplier Acme Packet, which listed in October. Others like Veraz Networks and Aruba Networks are poised to go public soon as well.

Amongst the names I expect to go public next year, Infinera is in the most-likely category, and they will perform well, given their business fundamentals, and how well they are doing. Force 10 Networks is other company that can tap the public markets in 2007, if momentum holds.

These are the kind of IPOs that might finally shift Silicon Valley’s attention away from companies with questionable futures to ones that build real technology products. But we shall wait and see… pretty much the attitude of readers who are participating in our IPO poll. What are your picks for most likely IPO candidates for 2007? We will publish the final picks on Dec. 31, 2006.

12 Responses to “Return of the Tech IPO”

  1. I am bullish on some of these companies and and bearish on others. From a fundamental perspective, none of them look good. All are burning considerable cash. Infinera, for example, has raised nearly 320M and did about 60M in 06′, but also had negative earnings of close to 90M. I don’t know about you guys, but unless I think its going to be the next Intel, I wouldn’t touch it at this point. Not to mention it is optical! I would consider Clearwire, as it is positioned to be the dominant Wimax wireless provider- and has a clear barrier with its spectrum position. Besides, warrented or not, most investors have faith in Craig M. and will probably push up the stock.

  2. David,
    While I agree that $8bil for facebook is utter insanity, I think you need to double check your math. When NewsCorp acquired Myspace, there were approximately 22mil users on MySpace. $580mil/22m users = $26.3/user.

    So, at $26 per user, facebook would be valued at $237m. Still a far cry from $8b, but much more than $52m.

  3. Facebook, was last estimated to have around 9 million users, so at the valuation that news corp bought myspace for ($5.80 per user), it would be worth a measly $52.2 million! At a $1 billion valuation, Facebook was looking for $111 per user. At $8 billion…well you can figure it out. It’s a little bit much, and at that rate, News Corp sure got a bargain.

    Am I the only one who sees a bubble forming?

  4. I would actually like to see more web 2.0 companies go public, and prove that this medium can actually generate revenue. If they are successful, it will help all of us. If they are not, then we were wasting our time anyway.

  5. I forsee lots of IPO’s and a nice big tech rally! I think even Microsoft will see a big jump in 2007. I dont have much money to invest but whatever I have is already in the stock market or my account waiting to take action.

  6. i’d hate to see a company like facebook go public…it seems that in doing so, a lot of internet companies lose the agility to respond quickly in an ever-changing online environment.

  7. Om,

    Paul was early on this meme but he wasn’t the only one. :)

    Seriously, the software IPO market in particular has gotten healthier throughout 2006.

    While ISLN deserves special mention given its outstanding performance, let’s not forget about Double-Take (DBTK) which also came out that day.

    And other names like Commvault (CVLT), Divx (DIVX), Omniture (OMTR) to name a few.