Aruba Plots Imminent IPO
Aruba is consistently ranked amoung the top-selling enterprise wireless LAN vendors, generally number three to Cisco Systems Inc. (Nasdaq: CSCO) and Symbol Technologies Inc. (NYSE: SBL)'s respective first and second places. (See Cisco's WLAN Stranglehold.) Former Alteon head Orr says that going public would help Aruba with "branding" and name recognition so that the company wouldn't have to prove itself when going after big deals.
"We don't have a pressing need to IPO," Orr tells Unstrung. "Its all about branding. We spend more time justifying the validity of the company than we do the products."
Roger Cass, CTO at healthcare firm MediSync, says that it doesn't actually make that much difference to him if a company is public or private. He prefers to work with larger suppliers for everyday infrastructure and smaller companies for kit that will have a major impact on productivity, because then MediSync has more of a say in product developoment.
"With Aruba, it is an interesting idea to validate the company by going public," says Cass. "To me it makes no difference or, if anything, lowers my desire to deal with them. "Now, not only are they an unknown or an underdog, but they are strapped to merciless VCs and ignorant shareholders. I would prefer to stick with small private companies, or small public companies that have weathered several years of storms."
Nonetheless, Aruba's Orr reckons the company is 80 to 90 percent ready to go public. "We're on the eve," elucidates Keerti Melkote, Aruba co-founder and VP of product management and marketing.
Despite the fact that some recent big-ticket IPOs -- such as the Vonage Holdings Corp. (NYSE: VG) float in May -- have ended up backfiring on the companies involved, Orr is confident that Aruba can buck the trend. (See Vonage Misses the Mark.) "I want to emphasize that we can demonstrate that we have a very profitable business model," he says.
Orr has set targets to be met before the IPO that he says the company is "on track" for. These include a gross profit margin of "over 65 percent" and an 18 percent operating profit margin. These tend to be some of the figures that investors look to when trying to gauge the financial health of a company. "That's in the Cisco or Juniper range," Orr says.
Orr also claims not to be fazed by the need for Aruba to comply with tighter Sarbannes-Oxley financial regulations as part of the requirement for going public: "We're taking a positive mental attitude... using this exercise to fine-tune our administration."
Aruba has long been bullish about its IPO prospects. The company has said for a couple of years that going public is its intention. (See Aruba Swaps Heads, Aruba Plucks Ex-Peribit CFO, and 'Switch' CEOs Sound Off .)
Some analysts, however, remain cynical about Aruba's IPO dreams. "I think this is not a good idea for them, and rather a way to up their attractiveness for an acquisition," says Ellen Daley at Forrester Research Inc.
— Dan Jones, Site Editor, Unstrung