Aruba Networks (ARUN): Solid IPO
3-29-07: Aruba Networks (ARUN): The recent IPO of ARUN sparked our attention since it has been awhile since we have seen a decent tech IPO. This company provides the software technology that allows employees within a corporate environment to connect wirelessly and securely. In its debut last week, the stock climbed 20% over its IPO price. Trading now at $14.00 per share, we believed this company has what it takes to become a major player in the enterprise wireless software business.
Wireless is the way of the future. No doubts about it. Companies are now equipping employees with laptops rather than desktop computers. This has created a demand for solutions that allow companies to safely transmit their corporate data. Without going into detail on the technical aspect of Aruba Networks, this is primarily what their solutions are about. Imagine being able to have the flexibility of being connected from anywhere within the office. You can be in the cafeteria having lunch and still able to do your work. Essentially, this technology should help improve productivity.
What is interesting about Aruba Networks is their growth rate. Since launching in 2003, the company has been able to sign up more than 2000 customers. Companies such as Yahoo!, Google, Microsoft and SAP are some of their major customers. According to Aruba’s IPO filing, the company recorded $51 million in revenue in the last six months. In comparison to prior year, this represents 84% growth. While the company posted a lost $11 million in the last 6 months, the growth prospect is huge as Aruba Networks appears to have the momentum. Being able to sign up 2000 customers in a period of 4 years is quite impressive, to say the least.
The future outlook is great; the wireless market will continue to grow. Depending on which study you read, it is projected in the upwards of $3-$4 billion by 2010. While there are a lot of players in this space, there is still no one company that has been dominant. Cisco is probably the biggest threat, but based on Cisco’s (CSCO) history, they will likely buy ARUN if their technology continues to grow. In our view, ARUN is worth tracking. Yes, the company is not yet profitable, but we firmly believed with the growth rate we are seeing, profitability would not be that far.
