The price for the application delivery controller vendor was $15.55 at 2:05 p.m. ET Friday, up about 3.7% from its IPO price of $15.

Mitch Wagner, Executive Editor, Light Reading

March 21, 2014

3 Min Read
A10 IPO Sputters Off the Ground

The application delivery controller peddler A10 Networks had a tepid start to its first day of trading as a public company Friday.

As of 2:05 p.m. ET, the stock price was $15.55, up about 3.7% from the IPO price of $15. A10 initially traded below its IPO price, starting at $13.75. A10 Networks Inc. sold 12.5 million shares in its IPO, raising $187.50 million.

How does Lee Chen, founder and CEO, feel about the pricing? "I'm more the long-term value investor, so I don't pay attention to one day trading up or down," Chen told us, dodging the question diplomatically.

Figure 1: A10 Networks founder and CEO Lee Chen rings the opening bell on the New York Stock Exchange. Given the stock's tepid performance on the first day of trading, he should have just tapped the bell gently. A10 Networks founder and CEO Lee Chen rings the opening bell on the New York Stock Exchange. Given the stock's tepid performance on the first day of trading, he should have just tapped the bell gently.

Other business software stocks with recent IPOs performed a lot better, The Wall Street Journal reports (subscription required). For example, the retail e-commerce software maker Borderfree Inc., which also started trading Friday, had gained 23% by midday, passing its IPO price of $16 to trade at about $19.50. The health plan software provider Castlight Health had gained 149%.

Financial journalists and Wall Street watchers look for rocket rides on the first day of an IPO, but spectacular first-day gains funnel most of their rewards to IPO underwriters and first-day speculators. Modest IPO gains reward the people who actually helped build a newly public company: venture capitalists, employees, and other early investors.

So what about that long-term value? A10 reported that its revenue rose 18% last year to $141.7 million last year after rising 32% the previous year.

Revenue growth over the last four years has been 37% annually, Chen said. The company has made a business decision to invest in long-term growth, and it has a three- to five-year model to achieve profitability.

A-10 is "playing at the center of four megatrends," Chen said: big data, mobility, security, and cloud computing. Its appliances provide load balancing, application delivery, quality of service, password management, and more. A10 launched a DDOS protection product in January. (See A10 Enters DDOS Protection Market.)

From 2010 through 2013, A10 was weighed down by an intellectual property lawsuit filed against the company by Brocade Communications Systems Inc. (Nasdaq: BRCD). That suit was settled in May 2013. A10 says it hurt it through the direct costs of fighting the litigation and by reducing demand for A10 products due to marketplace uncertainty. Now that the suit has been settled, A10 expects demand to pick up briskly. (See Brocade & A10 Settle.)

— Mitch Wagner, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profileFollow me on Facebook, West Coast Bureau Chief, Light Reading. Got a tip about SDN or NFV? Send it to [email protected].

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About the Author(s)

Mitch Wagner

Executive Editor, Light Reading

San Diego-based Mitch Wagner is many things. As well as being "our guy" on the West Coast (of the US, not Scotland, or anywhere else with indifferent meteorological conditions), he's a husband (to his wife), dissatisfied Democrat, American (so he could be President some day), nonobservant Jew, and science fiction fan. Not necessarily in that order.

He's also one half of a special duo, along with Minnie, who is the co-habitor of the West Coast Bureau and Light Reading's primary chewer of sticks, though she is not the only one on the team who regularly munches on bark.

Wagner, whose previous positions include Editor-in-Chief at Internet Evolution and Executive Editor at InformationWeek, will be responsible for tracking and reporting on developments in Silicon Valley and other US West Coast hotspots of communications technology innovation.

Beats: Software-defined networking (SDN), network functions virtualization (NFV), IP networking, and colored foods (such as 'green rice').

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