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Optical/IP

Sources: Force10's Prepping Its IPO

Force10 Networks Inc. is just a few days away from filing its S-1 paperwork with the SEC and declaring to the world that it wants to be a public company, sources familiar with the situation say.

What's not yet clear is how big an offering Force10 will make, but sources say the company expects to file papers in less than a month and the lead underwriter is expected to be Morgan Stanley .

Force10 was called for this story but declined to comment.

The Ethernet switching firm is hoping to ride the carrier Ethernet buzz all the way to the bank, say Wall Street sources. The company has revenues somewhere north of $60 million and has been rumored to be on the block in recent years. Sources close to the company say an IPO looks to be a more likely exit, given the acquisition price it would need to fetch to pay dividends on the $284 million in venture funding it has raised in its lifetime. (See Force10 Takes $40M, Talks IPO and LR Names Top Ten Privates.)

Sources expect that the company will tout its wins at more cutting-edge communications companies –- like Google (Nasdaq: GOOG) and Vonage Holdings Corp. (NYSE: VG) –- as proof that it can offer superior technology at a competitive cost, versus established router and switch vendors like Cisco Systems Inc. (Nasdaq: CSCO) and Juniper Networks Inc. (NYSE: JNPR).

"Google is using Force10 Ethernet switches at its core and Juniper routers at the edge," says one financial analyst who watches the Ethernet switching and routing market. "We definitely expect Force10 to play up the fact that they beat Juniper in the core." (See Force10 Gets Dense.)

Others expect the company to play up the claim that its big switches offer 90 percent of Juniper's core routing functionality at about 15 percent of the cost.

And it doesn't hurt that Force10 was picked by Light Reading last year as a Leading Lights winner in the category of Top M&A or IPO Candidate, Private Company. (See LR Names 2005 Leading Lights Winners.)

Analysts agree the carrier Ethernet market is experiencing a surge that could help Force10 make its pitch to investors.

"Chief amongst the drivers for broadband investment is the advent of IPTV services, a potential portfolio of IP-based, TV-centric services which could include broadcast TV, video-on-demand, HDTV, networked PVR, online gaming, music download, video telephony, and home security services," according to Infonetics Research Inc. 's November 2005 report on the Ethernet switch market.

Likewise, Heavy Reading projects that global carrier Ethernet switching and routing (CESR) revenues will break the $1 billion mark in 2006. The firm cites more network activity related to enterprise Ethernet services and residential triple-play, IPTV, and video-on-demand services as the catalysts for the CESR market. And, by 2008, the CESR market will hit revenues of $2.2 billion, Heavy Reading says.

Of course, carrier-related business is only about one third of Force10's sales. The rest of its business is split evenly between research networks, data centers, and enterprise customers. And competition is tough all around as Force10 squares off against Cisco, Juniper, Extreme Networks Inc. (Nasdaq: EXTR), Nortel Networks Ltd. , Foundry Networks Inc. (Nasdaq: FDRY), Huawei Technologies Co. Ltd. , and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763), to name a few.

— Phil Harvey, News Editor, Light Reading

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Stevery 12/5/2012 | 4:03:17 AM
re: Sources: Force10's Prepping Its IPO I'm only saying that the folks who helped on this were in a position to know that the company is prepping an IPO.

If those folks are in the financial community, are they with investment banks?

If so, they would also profit from an acquisition/merger. (They take a % of the total deal in either case.)

I will say it is also quite suspicious that Force 10 would be prepping an S-1 but not willing to comment on that fact. I can't imagine why a company prepping an IPO would want to do anything other than make noise, especially to LR.

Regardless, thanks for the info about the sources. I think it put the story in better context.
DCITDave 12/5/2012 | 4:03:16 AM
re: Sources: Force10's Prepping Its IPO re: "I will say it is also quite suspicious that Force 10 would be prepping an S-1 but not willing to comment on that fact. I can't imagine why a company prepping an IPO would want to do anything other than make noise, especially to LR."

In 1999, I'd agree. But these days, it really depends on the company. Some are okay with talking. Others just don't want to rock the boat.
Alpine 12/5/2012 | 4:03:12 AM
re: Sources: Force10's Prepping Its IPO Actually not only is it entirely normal to not hype in front of an ipo but it would be illegal. The sec imposes a quiet period on companies leading up to and post filing an s-1. While they are permitted to continue normal marketing and advertising efforts they are not permitted to do anything special as it relates to the IPO.
zher 12/5/2012 | 4:02:55 AM
re: Sources: Force10's Prepping Its IPO "If you think that little of our reporting ability, then don't read the site."

This doesn't look professional at all, lightreading provides the forum for networking guys to discuss here, if you don't want to listen to the different voice, then just please simply close the discuss function in any of your article.

Again, ppl here are for the credit of lightreading.com, not for yours or any single reporter's.

We appreciate the service, but we also need respection from lightreading.com.

Period.
FiberWorld05 12/5/2012 | 4:02:52 AM
re: Sources: Force10's Prepping Its IPO LOL...a guy with CCIE in his name talking about latency!

The only reason I wont bash Cisco for their latency problems is because I cant get IOS stable enough to really test it!!!

Are we sure Bill Gates does not write the IOS code? Bringing me to my favorite saying...a network with Cisco and Windows has more crashes than a NASCAR race :P

FiberWorld05
OpticOm 12/5/2012 | 4:02:50 AM
re: Sources: Force10's Prepping Its IPO Neither do I.
F10 was/is a political sweatshop...
startup_shutup 12/5/2012 | 4:02:50 AM
re: Sources: Force10's Prepping Its IPO I for one WILL NOT buy stocks in force10 IPO....
tymax 12/5/2012 | 4:02:48 AM
re: Sources: Force10's Prepping Its IPO I am amazed how many people voice opinions with no data to back anything up. Tell me more than three other start-ups in the infrastructure space that are better than force 10??
russ4br 12/5/2012 | 4:02:47 AM
re: Sources: Force10's Prepping Its IPO "Are we sure Bill Gates does not write the IOS code? "

oh yeah, sure ... the guy is a complete idiot! ... ha, ha, ha ...

never mind he start programming in mainframes when he was a teenager ... never mind DOS or Windows ... by far the standard for personal computer operating systems in our world ... never mind being founding Microsoft and being the wealthiest man in the world for what? ... the umpeteenth year in a row ... this Bill Gates fella is really an idiot.

"I cant get IOS stable enough to really test it!!!"

ha, ha, ha ... how funny ... I imagine they don't let you get anywhere close to the routers in the production network, do they?

If you really want to bring to your company alternatives to Microsoft/Cisco ... you'll need to focus on what the new proposed vendors can bring in terms of positives (at a device, system, network, business) level.

-russ

startup_shutup 12/5/2012 | 4:02:47 AM
re: Sources: Force10's Prepping Its IPO >> F10 was/is a political sweatshop...

I like this kind of TRUTH coming out ... keep them coming ... thanks
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