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Optical/IP

Trapeze Swings for IPO in 2007

Enterprise WiFi startup Trapeze Networks Inc. could follow in the footsteps of long-time rival Aruba Networks Inc. (Nasdaq: ARUN) and file for an initial public offering in 2007, according to industry sources.

Insiders tell Unstrung that the Pleasanton, Calif.-based firm has plans to go public in 2007 as it tries to build own-brand sales and rely less on revenue from its OEM partnerships with Nortel Networks Ltd. , 3Com Corp. (Nasdaq: COMS), and others. "I think it’s completely possible," says one source familiar with the corporate WiFi market. "Trapeze is becoming the 3Com of enterprise wireless."

Trapeze says that it is keeping its options open on an IPO. "Clearly, there is significant interest in Trapeze, as evidenced by our strategic relationships with Motorola, Nortel, Juniper, 3Com, and Enterasys, as well as a major electronics company that have yet to be announced," says Jim Vogt, Trapeze CEO, in an email reply to questions. "Recent industry events also indicate that the public markets are interested in participating in the WLAN opportunity. We have many options available to us, and we are keeping them all open."

As Vogt suggests, there has been some stirring in the wireless IPO market recently after several years of very limited activity. Most relevant to any potential Trapeze IPO is how well Aruba does when it goes public, likely be in the first half of 2007. The third-ranked enterprise WiFi supplier has filed for a $100 million IPO. The success or failure of this offering will be a barometer of the likely outcome of a Trapeze public offering. (See Aruba Files for IPO and Wireless IPOs Are Like Buses.) It's difficult to quantify exactly where Trapeze stands in terms of market share compared to leaders Cisco Systems Inc. (Nasdaq: CSCO), Symbol Technologies Inc. (NYSE: SBL), and Aruba. Unlike many other vendors, the firm does not release sales figures to research firms such as Synergy Research Group Inc. , which compiles a quarterly WiFi market sales snapshot. (See Enterprise WLAN Market Up 19%.)

3Com, one of Trapeze's key OEM partners, does, however, report its WiFi sales figures. 3Com made $13.13 million on overall enterprise WLAN sales in the third quarter of 2006, according to Synergy, compared to Cisco, which made $238 million in the same period -- a whopping 60.9 percent of the overall market. It should also be stressed that there is no way to tell from the bald figures exactly how of 3Com's WiFi sales came from re-badged Trapeze equipment. Nonetheless, industry murmurs suggest that Trapeze, which has raised $102.5 million in funding since it was founded in March 2002, is growing sales rapidly and has a strong presence in the European market.

"We saw a dramatic acceleration in our business over the last 12 months, with revenues more than doubling in 2006, and we are well positioned to continue growing the business at a rapid rate in 2007," asserts Trapeze's Vogt. "We experienced significant growth not only in our OEM business, but we also increased market share through our Trapeze-branded business."

One industry figure, however, suggests that Trapeze's OEM partnerships could be a curse as well as a blessing for the startup. "Trapeze's OEM agreements, from everything I've heard and understand, are very tough financial deals," he says. "They are very, very aggressive on price."

This source says that any IPO talk may actually be intended to get a larger company interested in buying the startup. "They may show signs of filing to flush out a buyer," says the source. "I just don't see how they could do this [IPO] successfully unless we've truly returned to late 1990s bubble days."

— Dan Jones, Site Editor, Unstrung

lrmobile_strungup 12/5/2012 | 3:17:06 PM
re: Trapeze Swings for IPO in 2007 WiFi-flyonthewall wrote:
> I heard Aruba plans to buy Trapeze with its IPO money.

That would put Trapeze's valuation at 100M. Briiliant.

lrmobile_aristotle 12/5/2012 | 3:17:09 PM
re: Trapeze Swings for IPO in 2007 Any guesses on
- when the IPO happens
- outlook
WiFi-flyonthewall 12/5/2012 | 3:17:09 PM
re: Trapeze Swings for IPO in 2007 I heard Aruba plans to buy Trapeze with its IPO money.
joset01 12/5/2012 | 3:17:09 PM
re: Trapeze Swings for IPO in 2007 Not yet. Naturally as soon as I get any more clues I'll write it up. So, watch this space I guess!

-- DJ
freetoair 12/5/2012 | 3:17:14 PM
re: Trapeze Swings for IPO in 2007 As with Aruba, Trapeze, will be in need of more funding at the same time investors would like an exit strategy and everyone would like to avoid further dillution. So like Aruba why not get the public markets to fund it? As long as there is a reasonable pipeline any good investment banker can ipo it -- the trick is pumping it up and holding it long enough so investors and institutions can flip and make some money.
lrmobile_strungup 12/5/2012 | 3:17:17 PM
re: Trapeze Swings for IPO in 2007 I have wonder how far Trapeze can really take the company, given the low margins on its oem business. With the amount of sales Trapeze do through partnerships, trying to establish direct sales is sure to sour already strained relationships.

Think about it. Who really wants to be the sales of an organization that has to bow out to OEM partners on lucrative deals.

Sounds like a big 'me too' to keep the employees happy.
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