Wi-Fi Networker iPass Debuts in Solid IPO

By Mark Berniker

July 24, 2003

A bubble-esque debut for the Wi-Fi networking provider -- or just solid demand for a solid company?

IPass is the latest Silicon Valley company to test the public equity markets with the issuing of its initial public offering on Thursday.

The company was able to raise close to $98 million for its IPO, a significantly higher valuation than originally anticipated.

By midday during its first full day of trading, shares of the company had risen by over 30 percent to $18.35 after debuting at $14. They later closed up by $4.67, or 33 percent at $18.67.

Redwood Shores-based iPass said it provides remote and mobile employees the ability to access their enterprise networks through any of more than 18,000 access points, including: 16,000 dial-up POPs, 1,500 Wi-Fi hotspots and 500+ Ethernet-enabled venues. iPass integrates networks of more than 200 providers into an enterprise-ready, policy-managed service for safe and simple connectivity in approximately 150 countries.

IPass said the seven million shares that launched at $14 per share Wednesday night were a premium over its expected range of between $11 and $13 per share. The lead underwriter of the offering is Morgan Stanley, while Credit Suisse First Boston, SG Cowen, and Thomas Weisel Partners LLC are also involved in the iPass IPO.

Based on its current share price, iPass started out with a market value of close to $822 million, but had skirted past a $1 billion valuation on its rise Thursday, based on the 58.6 million shares that are expected to be outstanding, according to its filing with the Securities and Exchange Commission.

The enterprise networking company has posted impressive financial results, prompting its confidence to take the IPO plunge. While iPass incorporated back in 1996, it tried to go public in both 2000 and 2001, but the dismal climate for technology IPO's at the time made it more difficult to take a gamble on the public markets.

Nevertheless, iPass's recent financial results are giving it and investors more confidence in its future. The company's revenue increased to $92.8 million in 2002, up from $53.2 million in 2001, and only $35.3 million in 2000, according to the company's filing with the SEC. The company said it posted a profit in 2002, after consecutive losses in 2000-2001.

IPass's technology allows corporate employees to connect to their company's networks at airports, hotels and conferences around the world.

"iPass provides software-enabled enterprise connectivity services for mobile workers. iPass' primary service is designed to enable enterprises to provide their employees with secure access from countries around the world to the enterprise's internal network through an easy-to-use interface," the company said in a press release.

As investors become more interested in public companies involved with Wi-Fi technology, iPass says its recent deals with Intel positions it to link its iPassConnect software to Banias-based mobile network computers equipped with an Intel WLAN Network Interface Card, expected to hit the market in the near future.

On June 23, the iPass reiterated its commitment to mobile enterprise networking and Wi-Fi technology through a deal with Fremont-based ARESCOM.

The companies said they have a deal to integrate high-speed Wi-Fi and Ethernet Internet Access at hundreds of hotels across the "ARESCOM Hospitality Network" into the iPass Global Broadband Roaming service.

Cisco Systems and venture capital firms Crosspoint Venture Partners, Accel Partners, Jamboree Investments and APV Technology Partners are all investors in iPass.

"While at first glance the deal may be reminiscent of a late 90's technology bubble offering, a proven operating model, reasonable valuation and increased investor momentum for fundamentally strong technology IPOs sets the stage for an impressive market debut," said Renaissance Capital in its IPO of the week column about iPass.

"iPass has granted the underwriters the right to purchase up to an additional 1,050,000 shares of common stock to cover over allotments, if any," the company said in a release.

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