RGB Still Gunning for an IPO

Digital video specialist RGB Networks Inc. remains eager to go public once market conditions and valuations improve, two stars that could align as early as 2010. That's what RGB CEO Jef Graham tells Cable Digital News, even as MSOs trim capital spending this year by 25 percent or more.

The Sunnyvale, Calif.-based company has just hit an economic milestone of $100 million in shipped products. That's not the same as $100 million in revenues for any given year, though. RGB, founded in 2001, shipped out $40 million last year and expects to do $60 million in 2009. (See RGB Hits Milestone .)

RGB flirted with an IPO filing in the spring of 2008 but opted to hold back and instead raise another round of cash. (See RGB Gets More Green and RGB Raises $20M More.)

Graham says RGB's status today reminds him of when he helmed Peribit Networks in 2005 and the company had "switched on the landing lights for the IPO." In that case, an IPO never happened. Instead, Peribit got bought by Juniper Networks Inc. (NYSE: JNPR) for $337 million. (See Juniper Takes Two: Peribit & Redline.)

Graham isn't planning the same fate for RGB and its 160 employees.

"If the market had been anywhere close to normal, we'd have been preparing our IPO right now," he says. "The question is why... rush it if you can't get a decent valuation? You might as well just accumulate cash as a private company. We're not desperate to get an exit."

RBG has raised $57 million so far, with $20 million of that still in the bank; Comcast Interactive Capital is among its investors. It turned a profit in the fourth quarter of 2008, as it did in the fourth quarter of 2007, Graham says.

The company expects to chalk up a slight loss in the current quarter, but "after that, we think we will sustain profitability."

Cable's still king
About 70 percent of RGB's revenues come from products that free up bandwidth for high-definition services, and another 20 percent is from products that let MSOs cram more video-on-demand streams per channel. A third product area, ad insertion, makes up the remaining 10 percent. (See RGB Takes Aim at Imagine and RGB Takes On Terayon .)

Nearly all that money (like 99 percent) comes from the cable industry. Overall, RGB has shipped 6,000 units to a total of 140 customers, but Time Warner Cable Inc. (NYSE: TWC) is the vendor's largest customer, taking up about 30 percent of sales.

"In the financial markets, they have a saying that the bad thing about cable is it's a club. Of course, the good thing about cable, is that it's a club." Graham says. "It's hard to get in this market, but once you're in it, it's a good market to be in."

Still, RGB wants to branch out. It's starting to get into trials in the telco market, particularly in the area of ad insertion and with smaller operators that are starting off with MPEG-4. Although RGB's entry into the telco TV market has taken a bit longer to ramp up than anticipated, the vendor still expects 10 percent of its revenues to come from there this year.

— Jeff Baumgartner, Site Editor, Cable Digital News