Comms chips

Wintegra Tries This IPO Thing Again

Network processor vendor Wintegra Inc. looks ready to take another shot at an IPO, having filed its S-1 form with the Securities and Exchange Commission (SEC) on Friday.

Wintegra filed to go public in 2006 and came really, really close to pulling the trigger in June of that year. But an ill-timed Marvell Technology Group Ltd. (Nasdaq: MRVL) deal torpedoed chip stocks, prompting Wintegra to wait. (See Net Processors Await an IPO.) But by the next quarter, revenues started to flatten out -- and stayed that way for a long time. Table 1: Wintegra's Results
Revenues ($M)
Net Income (Loss) ($M)
Source: Wintegra S-1

Only now has the company started escaping Flatland. Revenues for the first quarter of 2010 were $12.1 million, with net income of $1.6 million. Founded in 2000, Wintegra was one of several network processor startups hoping to sell chips to the then-plentiful crop of telecom equipment startups. But Wintegra was different in targeting access networks, whereas most of that crowd, including survivors Bay Microsystems Inc. , EZchip Technologies Ltd. (Nasdaq: EZCH), and Xelerated Inc. , were going after core-router kinds of designs.

These days, as you might expect, Wintegra principally targets mobile networks, including base stations and radio network controllers. But the big moneymaker has been that grand buzzword of the wireline world: mobile backhaul. Table 2: Backhaul Boogie
Year % Revenues from
Mobile Backhaul
Actual Revenues from
Mobile Backhaul
(Q1 Only)
($30.4M run rate)
Source: Wintegra S-1

The company is on its third generation of the WinPath line of processors, and it's using that chip to reach into new markets including LTE base stations and microwave-based backhaul equipment, according to the S-1. (See Multicore Processors Target LTE and NEC Does LTE With Wintegra.)

Of course, that doesn't mean Wintegra is ignoring purely wireline markets such as Carrier Ethernet. (See Wintegra Targets Transport and Wintegra Tackles Carrier Ethernet.) Wintegra is able to claim some big names as customers. Alcatel-Lucent (NYSE: ALU) is its largest, accounting for 24 percent of 2009 revenues and 33 percent of revenues for the first quarter of 2010.

Wintegra got 23 percent of its 2009 sales from Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) and 10 percent from Ericsson AB (Nasdaq: ERIC), according to the S-1. And for the first three quarters of 2010, 10 percent of its sales came from Cisco Systems Inc. (Nasdaq: CSCO).

The company's largest shareholders are Concord Ventures (16.1 percent), Magma Venture Capital (13.3 percent), and Genesis Partners (10.1 percent). Fellow chipmakers hold significant stakes, too: Texas Instruments Inc. (NYSE: TXN) holds a 9.7 percent position, while the Israel subsidiary of Marvell owns 5.1 percent.

The IPO is being underwritten by Barclays Capital and Deutsche Bank AG . Which is nothing to sneeze at, but the underwriters the first time around would have included Goldman Sachs & Co. and the bank now called JP.MorganChase .

— Craig Matsumoto, West Coast Editor, Light Reading

Pete Baldwin 12/5/2012 | 4:36:35 PM
re: Wintegra Tries This IPO Thing Again

Among the network processor guys, I should note that EZchip also has an access processor, the NP-A line that was started after the higher-end NP family.

But that's one competitor among many, and by far not the biggest of Wintegra's worries, I would guess.  The prospectus points to LSI specifically -- not just for ASSPs but for their ASIC offerings -- and to the usual multicore kinds of companies - Cavium, Freescale, NetLogic. 

Intel isn't listed, which is amusing, but Broadcom, Marvell, Maxim, and Mindspeed are.

OSXman 12/5/2012 | 4:36:34 PM
re: Wintegra Tries This IPO Thing Again

Revenue pops big time in Q1:10, but gross margins take a hit.  What's going on here? 

Pete Baldwin 12/5/2012 | 4:36:33 PM
re: Wintegra Tries This IPO Thing Again

Looks like it's mostly product mix.  From the S-1 (emphasis and paragraph breaks are mine):

Our gross margin declined in the first quarter of 2010 primarily as a result of a decrease in average selling prices due to higher sales volumes and growth in sales of our WinPath2 products, which have relatively lower gross margins, and an increase in amortization costs due to our determination that we will use one of the sets of fabrication masks for a shorter period. We expect the impact of these factors on our gross margin to continue in future periods.

Gross margin in the first quarter of 2010 was also adversely impacted by increased personal costs due to an overlap between transitioning employees and payment of expediting fees to ensure timely delivery of products.

The "continue in future periods" part would be something to watch.

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