It's beginning to look a lot like 1999. On Wednesday, networking hardware vendor Netgear Inc. floated an initial public offering, joining a small number of tech businesses that have gone public in the wake of the dot-com and technology collapse.
Netgear sold 7 million shares of common stock, at an offering price of $14, to raise $98 million. The stock, which trades on the Nasdaq exchange under the ticker symbol NTGR, quickly surged more than 25% by midday.
IPOs have generally been considered risky territory in the last few years, tainted by a flurry of offerings from dot-coms in the 1990s that lacked earnings, products, or realistic business plans. The daily storm of IPOs that blew through the boom has slowed to a trickle in the last 12 months, with only 18 IPOs occurring this year.
But analysts figure Netgear may have what it takes to help shake off any of the negative connotations lingering from the tech bust that took place in 2000. The company makes networking products for homes and small businesses, including wireless cards and access points, cable-modem routers, hubs, and switches. That's an area showing some strong growth, In-Stat/MDR analyst Mike Wolfe says. Besides, there's something else setting Netgear apart: It's turning a profit. In the first quarter of the year, the company posted net income of $1.6 million on sales of $67.7 million.
Netgear is one of a handful of companies that may herald an end to the IPO drought; of the 18 IPOs this year, eight came out in the last month. A few of those companies are even tech vendors; virtual network provider iPass Inc. debuted at $14 a week ago and is now trading around $18.
Netgear is a 7-year-old company and for a period from 1998 to 2000 was a subsidiary of Nortel Networks Ltd. This is the second time the company has tried to go public; in September 2000, Netgear filed the appropriate papers but didn't follow through with the IPO.
Lehman Brothers was the lead underwriter of the IPO, assisted by co-managers Merrill Lynch and UBS Investment Bank.