IPO VIEW-Business tech IPOs debut amid Facebook fever
April 17 |
April 17 (Reuters) - Forget Facebook. The fate of the IPO market this week could depend on the public offerings of three lower profile enterprise companies.
Data analytics software maker Splunk Inc, network-control company Infoblox Inc and business security products maker Proofpoint Inc are expected to be in great demand this week when they price their shares.
In fact, they could help turn around the IPO market, which has seen poor pricings, pulled deals and delayed offerings. Successful IPOs could also boost plans for others in the enterprise space that are also waiting to go public, such as security software company Palo Alto Networks and IT management cloud service provider ServiceNow.
These enterprise companies, which sell products primarily to businesses, come with many features that investors like - predictable revenue streams, high margins and the ability to tap into a market that topped $12.2 billion last year, according to research firm Gartner.
The market has grown with the popularity of cloud-based computing, where users can access information through the Web rather than through on-site servers. Cloud computing is thought to be less expensive and more flexible than traditional hosting methods.
Customers are also increasingly demanding sleek, aesthetically pleasing technologies in the workplace over clunky company-issued devices and software, leading to the "consumerization of the enterprise" and adding to the appeal of these companies, said Brian Gentile, CEO of business intelligence software company Jaspersoft.
"There seems to be appetite for these businesses as public companies," said Ira Cohen, a managing director at boutique investment bank Signal Hill, who specializes in IT services and software. "These companies address large concerns that corporate America has, which is making their IT departments more efficient, protecting data or analyzing data."
If the deals price at their mid-points, San Francisco-based Splunk is hoping to raise $162 million, Santa Clara, California-based Infoblox is eyeing $98 million and Sunnyvale, California-based Proofpoint is planning for $68 million.
The IPOs come on the heels of successful offerings by other companies in this space.
Enterprise-focused data security company Imperva Inc was the top performing IPO of 2011, besting consumer names such as LinkedIn Corp, Pandora Media Inc and Groupon Inc. Imperva shares closed at $39.39 on Monday, more than double the offer price of $18.
Jive Software Inc, which makes social networking software for businesses, has also seen its shares double since its December IPO. The shares closed at $25.75 on Monday.
The shares of cloud computing company Guidewire Software Inc priced at $13 during its January IPO, above the expected range of $10 to $12 a share. Guidewire shares closed on Monday at $27.09, also more than double the IPO price.
The growth of this market has also prompted tech giants to buy enterprise-focused companies whose technologies are sometimes seen to be more cutting-edge. VMWare Inc, SAP AG, Oracle Corp and Cisco Systems Inc have in turn started to make large acquisitions rather than develop the technology internally.
In December 2011, SAP acquired cloud-based business software provider SuccessFactors for $3.4 billion, while Oracle purchased cloud-based talent management system Taleo for $1.9 billion in February.
"Buzz words such as 'software as a service,' 'visualization' and 'big data' are making a big impact and you're seeing guys like Oracle and SAP start to wake up," said Matt McIlwain, a managing director at Madrona Venture Group in Seattle, who focuses on software investments. "These trends are huge, they're disruptive and changing the way that enterprises buy and use technology. It's the revenge of the enterprise here."
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