Entropic Wires Up an IPO
Although the company hasn't announced a price range or number of shares it plans to offer, Entropic hopes to raise up to $100 million for general corporate purposes, according to the filing.
That makes two digital-home-chip IPOs filed this month -- the other being Intellon Corp. (Nasdaq: ITLN), which develops chips that run the HomePlug Powerline Alliance standard for networking on power lines. (See Intellon Plugs Into IPO Market and Intellon Files for IPO.)
By contrast, Entropic is a founding member of the Multimedia over Coax Alliance (MoCA) , which aims to run home networks over cable TV wiring at speeds up to 270 Mbit/s.
Entropic also happens to be the only high-volume supplier of MOCA-compliant chipsets. Its 55 customers include Actiontec Electronics Inc. , Jabil Circuit Inc. (NYSE: JBL), and Motorola Inc. (NYSE: MOT).
Although Comcast Corp. (Nasdaq: CMCSA, CMCSK) and EchoStar Satellite LLC helped to develop the MOCA standard, Verizon Communications Inc. (NYSE: VZ) is the leading deployer, as it has adopted the technology for use in its FiOS fiber-to-the-home (FTTH) rollout. (See Entropic, Verizon Serve Up MOCA and Verizon Hones Home Networking .)
Entropic has been active in the merger and acquisition market recently, acquiring fellow chip developer RF Magic Inc. and packet processing specialist Arabella Software earlier this year. (See Presto! Entropic to Merge With RF Magic.)
Entropic and RF Magic have raised $81 million and $43 million in VC funding respectively. Key Entropic investors include CMEA Ventures , which holds a 12.7 percent stake in the company; Redpoint Ventures (10.3 percent); Focus Ventures (6.5 percent); Granite Ventures LLC (5.6 percent); and Mission Ventures (5.1 percent). Other major shareholders include Cisco Systems Inc. (Nasdaq: CSCO), Motorola, and the Dow Employee Pension Plan.
For the quarter ended March 31, 2007, Entropic incurred net losses of $1.1 million on revenues of $20 million. For the same quarter, RF Magic posted a profit of $756,000 on revenues of $9.2 million. But neither Entropic nor RF Magic has been profitable on an annual basis.
Entropic posted losses of $11.7 million, $12.2 million, and $7.7 million for fiscal years 2004, 2005, and 2006, respectively. RF Magic, meanwhile, had net losses of $11.6 million, $5.3 million, and $1.5 million for the same periods.
But both companies have grown rapidly. Revenues at Entropic jumped from $3.7 million in 2005 to $41.5 million in 2006, while revenues at RF Magic grew from $14.5 million to $26.5 million in the same period.
A large portion of those revenues came from a small number of customers, however. In the quarter ended March 31 and the full year 2007, 10 customers accounted for more than 91 percent of sales at Entropic and RF Magic. Three companies -- Actiontec (31 percent), Motorola (23 percent), and CalAmp Corp. (Nasdaq:CAMP) (11 percent) -- accounted for about two thirds of sales in 2006.
And products based on the company's technology were linked to only two major service providers. Products purchased by Verizon and EchoStar accounted for substantially all of the pro forma sales at Entropic and RF Magic.
Entropic's IPO is being underwritten by Credit Suisse , Lehman Brothers , Thomas Weisel Partners , JMP Securities , and ThinkEquity LLC . The company hopes to trade on Nasdaq under the symbol "ENTR."
— Ryan Lawler, Reporter, Light Reading