Net Processors Await an IPO

The chip world will have to wait just a little longer for the first network processor IPO.

Wintegra Inc. was going to claim that honor this week, selling 4.89 million shares at $12 to $14 apiece, but the company has decided to postpone its plans. Meanwhile -- should Wintegra get postponed a lot -- Bay Microsystems Inc. is in the wings mulling a potential IPO for 2007 or early 2008, partly on the strength of a newly released 40-Gbit/s processor called Chesapeake.

Wintegra's IPO was delayed because the market for chips was looking bleak on Tuesday, the scheduled launch day, says Robert O'Dell, vice president of marketing.

That was the day Marvell Technology Group Ltd. (Nasdaq: MRVL) announced the purchase of cellphone processors from Intel Corp. (Nasdaq: INTC). Tough luck for Wintegra; Marvell stock plummeted 15 percent and took the rest of the chip sector with it. (See Marvell Takes a Bit of Intel.)

"We could have IPO'd on Tuesday. We simply didn't like the price," O'Dell says. In other words, investors -- seeing the carnage in chips that day -- were offering less than $12 for the IPO shares. Since that was outside the set range, Wintegra had the option to decline the offers, delaying the IPO.

Other IPOs this week were launched at less than the projected price. Wintegra, though, figured it could hold out for a better day; O'Dell notes the company is profitable. Moreover, Wintegra had already lowered its price range once, down from the original $14 to $16.

Companies usually wait a couple of months before reanimating a delayed IPO. "You can pull things together in a few weeks once you see things improve -- as long as you keep your numbers current," O'Dell says.

Wintegra, numbering 107 employees according to its Securities and Exchange Commission (SEC) S-1 filing, had talked about going public in 2005 but didn't file until February of this year. (See Chip Startups Process Profitability.)

The filing confirms Wintegra made it to profitability. For its first quarter, which ended March 31, Wintegra reported net income of $762,000, or 4 cents per share, on revenues of $7.2 million, compared with losses of $673,000, 16 cents per share, on revenues of $3.4 million for the same quarter a year ago.

Wintegra's customers, according to the S-1, include Cisco Systems Inc. (Nasdaq: CSCO), ECI Telecom Ltd. , Fujitsu Ltd. (Tokyo: 6702; London: FUJ; OTC: FJTSY), Lucent Technologies Inc. (NYSE: LU), Motorola Inc. (NYSE: MOT), RAD Data Communications Ltd. , Siemens AG (NYSE: SI; Frankfurt: SIE), Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA), and Zhone Technologies Inc. (Nasdaq: ZHNE).

An IPO would be a welcome change for the beleaguered network processor sector, which saw most of its privately held companies die out during the telecom downturn. (See Fast-Chip Flees the Market and Cogni-Gone?) Most of the surviving players are public companies, such as Agere Systems Inc. (NYSE: AGR.A), Applied Micro Circuits Corp. (Nasdaq: AMCC), and Intel.

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