Arista Networks has filed to go public at $200 million under the symbol ANET. The company has seen steady revenue growth since 2010, with a compound annual growth rate of 71%, according to its S-1 filing.
In 2013, Arista's revenue grew 87% from 2012, to $361.2 million. Net income grew from $2.4 million in 2010 to $42.5 million in 2013, a CAGR of 105%.
And between December 31, 2010, and December 31, 2013, Arista's customer base grew from 570 to 2,340 among large Internet companies, service providers, financial services organizations, government agencies, and media and entertainment companies. Arista's customers include six of the largest cloud services providers based on annual revenue, including Facebook, Microsoft and Yahoo! Others include Barclays, Citigroup, Morgan Stanley, Comcast, Equinix, ESPN and Rackspace.
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With growth and a client list like that, Arista is obviously doing something right in low-latency data center switching. But there are some obvious and not so obvious risks, besides being dwarfed by the dominant Cisco.
One is a licensing dispute with Optumsoft, a provider of software runtime libraries and other development tools included in Arista's EOS operating system. David Cheriton, an Arista founder who resigned from the company board on March 1, is believed by Arista to be the largest stockholder and a director of Optumsoft, according to the S-1. Arista's largest stockholder is the David R. Cheriton Irrevocable Trust, a trust for the benefit of the minor children of Cheriton.
Arista received a letter from Optumsoft in November 2013 in which Optumsoft asserted ownership of certain components of EOS and breaches of certain confidentiality and use restrictions in a 2004 agreement between the companies. According to the S-1, Optumsoft requested that Arista cease all conduct constituting the alleged confidentiality and use restriction breaches, including the distribution of any of their software in source code form and the unauthorized access or disclosure of their source code to third parties. Optumsoft also requested that Arista assign certain components of its software to Optumsoft that they believed to be improvements of their software tool.
To date, Optumsoft has not filed any legal action against Arista. But in the S-1, Arista states that it intends to "vigorously defend" against any action brought against it by Optumsoft though it cannot ensure that any claims would be resolved in its favor:
For example, if it were determined that Optumsoft owned components of our EOS network operating system, we would be required to transfer ownership of those components and any related intellectual property to Optumsoft. If Optumsoft were the owner of those components, it could make them available to our competitors, such as through a sale or license. In addition, if Optumsoft were to bring actual litigation, it could assert additional or different claims against us, including claims that our license from Optumsoft is invalid.
A ruling against Arista could result in a significant damages, including the possibility of the termination of its license with Optumsoft. If Arista was then not able to negotiate a new license with Optumsoft on "reasonable terms," it could be prohibited from selling products that incorporate Optumsoft intellectual property.
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