Netgear files $115 million IPO

Netgear, the number-two SOHO network equipment vendor behind Linksys, Thursday filed an initial public offering for $115 million. Netgear plans to trade on the NASDAQ under the ticker symbol “NTGR.”

Netgear, the number-two SOHO network equipment vendor behind Linksys, Thursday filed an initial public offering for $115 million. Netgear plans to trade on the NASDAQ under the ticker symbol “NTGR.”

The Santa Clara, Calif., company produces a wide range of products for the small office, including Ethernet, broadband and wireless gear. Netgear expects the SOHO networking market to grow from $3.0 billion in 2002 to $5.2 billion in 2005, according to the Securities and Exchange Commission filing.

Netgear isn’t commenting publicly on the announcement. 

As the wireless LAN market burns white-hot, the industry has eyed SOHO network vendors like Linksys, Netgear and D-Link, speculating on possible buyers — but less so on the likelihood of IPOs. Netgear is only the fourth technology company to go public this year. When Cisco recently bought Linksys, observers pegged Motorola as possible Netgear buyer.

“Netgear is one of the few competitors in the home gateway/router market to survive the technology downturn,” says Michael Greeson, vice president of research at research firm Parks Associates.  “Its core business is growing and its product strategy is right on the money, so I’m not surprised to see Netgear go public.”

This is actually Netgear’s second try at going public. In 2000, after the company was spun off from Nortel Networks, Netgear filed for IPO in September, just as the market tanked.  Subsequently, it abandoned the plan in February 2001. Netgear plans to use $20 million of the net proceeds of the offering to repay its debt to Nortel, and use the rest for general corporate purposes.

Netgear’s revenue is growing steadily, but the company has yet to turn a profit. According to reports, Netgear lost $9.74 million in 2002 on revenue of $237 million, compared to a loss of $19.5 million and revenue of $192.4 million in 2001. In 2002, the company posted operating income of $10.6 million vs. an operating loss of $15.3 million in 2001.

“Netgear’s taking a risk due to bumpy and unpredictable markets,” says Mike Wolf, director of enterprise and residential communications at research firm In-stat/MDR. “And the market’s more competitive than it was during its first  IPO attempt. But on the plus side, Netgear’s made significant progress in terms of profitability, and has a strong brand across target segments. A successful IPO would provide funding to allow it to compete, and given the valuation Linksys got, the target for this IPO doesn’t seem out of the realm of reality. Netgear knew it needed to do something now, since Cisco legitimized the market.”