Top 10 technology IPOs of 2007
The market for tech IPOs heated up in 2007, and while EMC spinoff VMware attracted investors beyond anyone's expectations, other stocks tailed off late in the year.
After a couple of slow years, high-tech initial public offerings (IPOs) came back strong in 2007. In a year in which server virtualization was all the rage, the most lucrative IPO of the year was, fittingly,EMC's spinning off 10 percent of its server virtualization subsidiary VMware.
And like VMware, the other successful IT IPOs in 2007 reflected hot technologies as much as solid management and financial success. The rising Software-as-a-Service (SaaS) tide helped NetSuite complete a lucrative auction IPO. Continually growing needs for data storage helped two storage system vendors, a data warehousing firm, and a data deduplication pioneer to go public. Two companies that address security were also among the top IPOs of the year, as were a VoIP vendor and InfiniBand chip maker.
However, the stock prices of the new public companies followed a trend of spiking after the IPO before tailing off later in the year.
Here are what we at SearchStorage.com consider the hottest IT IPOs of 2007:
VMware's August IPO was worth nearly $957 million -- and EMC spun off only 10 percent of the server virtualization company it bought for $625 million in 2004. The morning after its IPO priced at $29, VMware stock opened at $52 and soared to $125.25 in late October before falling to $83.05 on Dec. 31. That's nearly a threefold increase in share price within four months of going public, and represented the best tech IPO since Google raised $1.67 billion three years earlier. VMware continues to ride the crest of server virtualization – its $358 million in revenue last quarter was a 90 percent increase from last year, and its $85 million in net income represented a 71 percent year-over-year hike.
NetSuite completed the final – and most interesting – IPO of 2007. The Web-based accounting software vendor owned by Oracle CEO Larry Ellison used an auction format similar to Google's 2004 IPO. It priced shares at $26 on Dec. 20, well above its target of $19 to $22 set after it was revised upwards twice. The IPO raised $161.2 million, and the stock soared to $39.14 at the end of its first day of trading and opened at $40.16 on Dec. 31. Yet, unlike VMware, NetSuite isn't close to profitability. It lost $35.7 million on $67.2 million in revenue in 2006. This year, NetSuite lost $20.6 million for the first nine months of 2007 and its red ink total was at $241.6 million before the IPO.
With more data stored than ever before, companies are increasingly turning to tools that help analyze the data and fuel business intelligence. Netezza offers data warehouse appliances that do just that. Its July IPO opened at $12 – higher than its expected price of $9 to $11 -- and raised $115.5 million. After reaching a high of $17.57 Aug. 1, Netezza's price slipped to $14.01 by Dec. 31. Netezza finished last quarter with $33.4 million in revenue – up 44 percent over last year – and had net income of $2.9 million for its first profitable quarter.
Mellanox, riding a rising InfiniBand tide, began trading at $17 in February. That was above the semiconductor firm's target of $12 to $14, and raised $102 million. Although down from its high of $24.85, Mellanox opened at $18.22 on Dec. 31 -- still above its IPO price. Unlike most of the 2007 tech IPOs, Mellanox turned a profit before going public and had a net income of $8 million last quarter on revenue of $22.7 million, up 15 percent from last year.
3PAR, the company that helped popularize thin provisioning in storage systems, completed its IPO in mid-November when it started trading at $14 – above its target range of $11 to $13 – to raise around $95 million. Shares soared to $17.99 on its first day of trading but fell to $13.30 by Dec. 31. 3PAR hasn't yet reported earnings as a public company, but its SEC filings show $66.2 million in revenue last quarter and $2.3 million in losses for the quarter.
Like VMware, Data Domain rode a hot technology -- data deduplication -- to a successful IPO. The IPO price of $15 in June beat its target of $11.50 to $13.50 and raised $94.2 million – despite forking over 390,000 shares to rival Quantum as part of a cross-licensing agreement. Its shares hit $41.14 in October and opened at $26.11 on Dec. 31. Unlike VMware, Data Domain was hardly a cash cow before going public and has yet to get in the black, losing $880,000 last quarter despite a 189 percent year over year increase in revenue to $32 million.
Cavium Networks got an IPO price of $13.50, above its target range of $12 to $13. The company that makes semiconductors for security devices raised more than $91 million with its May IPO. Cavium's share price rose to $35.60 in September before coming down steadily to $23.47 – still well above its IPO price – on Dec. 31. Cavium broke through into the black for the first time last quarter, recording a profit of $1.3 million on revenue of $14.2 million – up from $9.2 million last year.
Sourcefire capitalized on IT's emphasis on security with its March IPO. The network intrusion detection firm priced its IPO at $15 -- above its $12 to $14 target – to raise $86.3 million. Sourcefire's revenue of $14.8 million last quarter increased 36 percent over last year, but it lost $2.8 million. After peaking at $18.83 a week after its IPO, Sourcefire's price tumbled and opened at $8.69 on Dec. 31.
VOIP vendor ShoreTel's IPO started with some fireworks July 3. It first announced pricing of $10.50 on June 27, but the IPO was delayed after competitor Mitel sued ShoreTel for patent infringement. ShoreTel finally priced July 3 at $9.50 -- in the middle of its target range -- and raised $86.3 million. ShoreTel's shares closed its first day as a public company at $12.15, hit a high of 19.96 in late October and dropped to $12.95 on Dec. 31. ShoreTel's revenue last quarter of $32 million represented an increase of 57% over last year and it reported a net income of $2.6 million, up from $1.85 million for the same quarter last year.
Midrange storage system vendor Compellent had a great opening day as a public company in October. Its IPO price of $13.50 beat its expected range of $10 to $12, raising around $85 million. By the end of the first day, shares hit $24.19. But the high point of $24.96 also came on that first day, and the price was cut more than in half when it hit $11.60 in late November before ticking up to $12.25 on Dec. 31. Compellent has yet to show a profit, and lost $2 million last quarter on revenue of $13.4 million – a 112% revenue jump since last year.