Chip IPOs Almost Ready

News Analysis Light Reading 3/17/2005

Two chip companies that have set their sights on going public are still waiting for the right time to jump in.

Wintegra Inc. made no secret of its IPO aspirations last year, and Ikanos Communications Inc. actually filed for its IPO. Neither company has taken the big plunge, though (see Wintegra Appoints IPO Veteran, Chip Startups Process Profitability, and Ikanos Catches IPO Fever).

Both companies were happy about their prospects. Wintegra was nearing breakeven with its network processors, and Ikanos claimed to be doing great business competing with Metalink Ltd. (Nasdaq: MTLK) in high-speed VDSL chips.

But semiconductor business sagged last year compared with expectations. Inventories stacked up, most notably for industry bellwether Intel Corp. (Nasdaq: INTC), and the financial climate got colder. Some feared that a slump had been behind a sudden cluster of chip IPOs being proposed last summer, as companies tried to rush out the door before a chip slump made headlines (see Inventory Bugaboo Haunts Chips, Chip Gloom Shall Pass, and Chip IPOs: 'Tis the Season?).

Ikanos has been "monitoring the markets" since filing its IPO registration but hasn't made its move yet. "There has been a slowdown in chip sales, and the market conditions aren't ideal," says Dean Grumlose, vice president of marketing.

Wintegra, meanwhile, says it's on track to break even late this year, which would be a bit later than the company had been forecasting. Given the less-than-robust market, company officials have decided that plain profitability isn't enough to fuel an IPO.

"We want to make a bigger splash. Just breaking even isn't as good as having a really strong business story," says Cam Witt, Wintegra director of product marketing.

The lack of "big splash" potential dropped Wintegra off the Light Reading Top Ten Private Companies, nudged out by trendier security and session-controller plays.

One company did manage to get its IPO done before inventory concerns arose. NetLogic Microsystems Inc. (Nasdaq: NETL), which makes search-engine chips that complement network processors, went ahead with its IPO in July (see BayPackets Joins IBM's VOIP Program). After debuting at $12, NetLogic dipped as low as $5.92 but has rebounded, closing at $13.45 on Wednesday.

— Craig Matsumoto, Senior Editor, Light Reading

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