Wi-Fi equipment vendor Ruckus Wireless, now known as RKUS on the New York Stock Exchange, jumped into the weak IPO market on Nov. 16 with an aggressively priced offering that saw share prices fall after the market debut. However, CEO Selina Lo contends the company's fundamentals will keep it strong in the long term.
Ruckus went public at the high end of its estimated price range, offering 8.4 million shares at $15 per share for a valuation of $126 million. The company's stock closed at $12.34 on its first day of trading.
"The market wasn't cooperating today, but overall our stock price has held up well," Lo told FierceBroadbandWireless. "At the end of the day, the macro environment is not something we can control," she added.
"The market we are pursuing, and our company's growth and track record, are totally solid," said Lo.
Rough market conditions scuttled expected IPOs this week from Radius Health and Silvercrest Asset Management Group, according to the Wall Street Journal.
Lo said Ruckus execs were on the road for two weeks prior to the IPO, meeting with investors that "are believers in this carrier-class Wi-Fi market." She said comments earlier this week from John Chambers, CEO of Ruckus rival Cisco, who singled out service provider Wi-Fi as a high-growth segment for Cisco, "really validated what we are doing."
Ruckus indicated the proceeds would be used for general corporate purposes, but Lo acknowledged acquisitions could be in the company's future as well. Ruckus has acquired three companies since its founding in 2004.
Lo said she would not shy away from acquiring a company that would help Ruckus expand its market or revenue, "but I don't have any firm plans today on exactly what I want to acquire."
Ruckus' prospects are being boosted by mobile operators' expanding HetNet strategies, which often involve a mix of Wi-Fi access points, small cells and distributed antenna systems that work together to complement existing macrocell networks.
Earlier this month, AT&T Mobility (NYSE:T) unveiled a multibillion-dollar initiative, called Project Velocity IP (or VIP), that calls for the company to expand its LTE network to 300 million covered POPs by the end of 2014 and deploy more than 10,000 new macrocells, 40,000 small cells and 1,000 distributed antenna systems (DAS) throughout its network. The operator did not specify suppliers for the project.
AT&T is one of Ruckus' customers, and Ruckus collaborates with the operator's hospitality arm. "Given AT&T's focus on small cells, and given that Wi-Fi is the most reliable, mature and cost-effective small cell technology today, we do expect that we'll do more things with AT&T," said Lo.
Ruckus does not sell small cells per se, though its SmartCell 8800 gear will support collocated small cell radios. Telefonica UK's O2 business unit has deployed the Ruckus equipment around London.
Lo said it is not essential for Ruckus to supply its own small cells because operators will likely prefer to buy those from traditional large infrastructure suppliers. "Small cell is not yet a mature technology where you can just plug and play. So today our small cell strategy of partnering really makes sense," she said, adding,"I wouldn't rule out long term that Ruckus will have its own small cell solution."
Lo declined to discuss Ruckus' current small cell partners. However, the company has a global partnership for sales and service with Nokia Siemens Networks and has a similar partnership with Arris to address cable MSO customers.
Ruckus reported annual revenue of $120.02 million in 2011 and has already generated $152.49 million in revenue during the first nine months of 2012. The company became profitable in 2011, when it tallied annual net income of $4.19 million. The company's net income for the first three quarters of 2012 is already $29.83 million.
In its prospectus, Ruckus noted that Infonetics Research predicts the market for Wi-Fi solutions for carriers will grow from $296 million in 2011 to $2.8 billion in 2016, representing a 57 percent compound annual growth rate. Further, Gartner forecasts the market for Wi-Fi networking solutions for enterprises will expand from $3.4 billion in 2011 to $6.9 billion in 2016, representing a 15 percent CAGR.
Early this year, Fierce cited Ruckus as one of several wireless companies likely to issue an IPO in 2012 or beyond. Ruckus has raised $72.7 million in private funding since opening its doors in June 2004. Venture-capital backer Sequoia Capital still holds about a quarter of the company's shares after the offering, and Google's (NASDAQ:GOOG) Motorola Mobility will hold a roughly 5 percent stake, said the Wall Street Journal.
Goldman Sachs and Morgan Stanley were lead joint book-running managers for the offering. Deutsche Bank Securities acted as a book-running manager. Needham, Oppenheimer, William Blair and Craig-Hallum Capital Group were co-managers.
For more:
- see this Wall Street Journal article (sub. req.)
- see this Reuters article
- see this Bloomberg article
- see this Venture Beat article
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