Netgear Jumps on IPO Bandwagon

By Mark Berniker

July 31, 2003

Networking equipment maker raises more than $90 million.

Netgear Inc. is the latest computer networking equipment company to go public.

The Santa Clara, Calif.-based company makes a variety of networking products that allow small businesses, home-offices and consumers the ability to share Internet access among several personal computers.

Like the previous high tech offerings from iPass and InterVideo, Netgear saw its stock pop higher when it finally opened for trading.

In a press release issued Thursday morning, the company said it priced its initial public offering of seven million shares at $14 per share raising net proceeds of approximately $98 million. On Wednesday, the expected price range of the shares were raised to $12-$14 from a previous level of $10-$12.

Lehman Brothers is the lead underwriter, while Merrill Lynch and UBS are acting as co-managers of the Netgear IPO.

The initial sale of shares is expected to give Netgear market value of close to $381 million, which is based on the 27.2 million shares that will be outstanding, according to Netgear's Securities and Exchange Commission filing.

"The Company has granted, to the underwriters, a 30-day option to purchase an additional 1,050,000 shares at the initial public offering price to cover over-allotments, if any," Netgear said.

According to an Netgear's amended S-1 form filed with the SEC, the company said it plans to use $20 million of the proceeds from the IPO to repay debt to Nortel Networks , the Canadian networking communications company.

NETGEAR has a "suite of approximately 100 products enables users to share Internet access, peripherals, files, digital multimedia content and applications among multiple personal computers and other Internet-enabled devices," according to the company's press release.

On July 28, Renaissance Capital issued a research note and commentary on the Netgear IPO

"Netgear started out as a networking products vendor but quickly expanded into the broadband market. It has since ramped up its research and development staff, successfully introduced new products and built a strong brand name. Today, the firm offers more than 100 ethernet, broadband and wireless networking products worldwide. Its small-business products are distributed primarily through value-added and direct-market resellers, such as CDW and Insight. Home users find the brand in traditional retail stores, such as Best Buy , Circuit City and CompUSA, as well as online vendors, including Amazon.com ."

"Demand for networking products in the small- and home-business market is driven by an increasing number of PCs and the need to deploy networks that enable users to share peripheral devices and allow them to access data and the Internet. It is estimated that, to date, network penetration among firms with less than 100 employees is only 32 percent, which leaves plenty of room for growth," Rennaisance Capital said.

Rennaisance Capital goes onto say "according to market data provided by IDC, the number of DSL and cable modem Internet connections is estimated to grow at a compound annual growth rate of 33 percent through 2006. In the wireless arena, product sales are driven by users' increasing need to access networks from outside the home or office, for example in airports or universities. According to Cahner's In-Stat/MDR estimates, shipments of local area network equipment will grow 42 percent per year through 2006."



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