Broadsoft Files for IPO

Hosted IP applications specialist BroadSoft Inc. , which has long talked about going public, has finally filed for an IPO, looking to raise $103.5 million from a listing on the Nasdaq exchange.

The vendor, which will use the ticker symbol BSFT, has not identified a potential range of prices for the sale of its stock.

The company has seen off most of its main independent rivals during the past few years to become one of the key players in the hosted enterprise PBX market, notching up more than 420 service provider customers in the process. And now it's looking to break into the consumer services sector, where there's a growing need for IP-based unified communications capabilities. (See Convergence for the Masses.)

But despite its dominance of its market, BroadSoft is yet to make an annual profit. According to its S-1 filing with the Securities and Exchange Commission (SEC) , it recorded a net loss of more than $7.8 million from revenues of $68.9 million in 2009, though that was better than the $11.2 million loss from revenues of $61.9 million in 2008.

It did, though, make a quarterly profit during the final three months of 2009, generating net income of $375,000 from revenues of $19.3 million.

Its main carrier customer is Verizon Communications Inc. (NYSE: VZ), which accounted for 10 percent of its revenues in 2009, while partner Ericsson AB (Nasdaq: ERIC) brought in 11 percent of BroadSoft's sales (though that was down on 17 percent and 16 percent in 2008 and 2007 respectively).

And what's clear from its filing is that its main growth area, now that it already has so many carrier customers, is in professional services and maintenance rather than product licenses. (See table below.)

Table 1: BroadSoft's Key Financials 2005-2009

Figures in millions	2005	2006	2007	2008	2009
License revenues	$21.5	$28.3	$46.3	$40.1	$37.9
Maintenance and professional services revenues	$4.9	$8.6	$15.3	$21.7	$30.9
Total revenues	$26.4	$36.9	$61.6	$61.8	$68.9
Net income (loss)	($2.9)	($8.9)	($1.7)	($11.2)	($7.8)
Source: Ketchup please!

In its S-1 document it identifies Alcatel-Lucent (NYSE: ALU), Avaya Inc. , Cisco Systems Inc. (Nasdaq: CSCO), Comverse Technology Inc. (Nasdaq: CMVT), Huawei Technologies Co. Ltd. , Metaswitch Networks , Nokia Networks , and Sonus Networks Inc. (Nasdaq: SONS) among its keenest rivals. BroadSoft also notes that customers could turn to open source rivals such as Digium Inc. as an alternative to its BroadWorks platform.

BroadSoft says in its S-1 filing that the majority of the proceeds from the IPO would be used for general corporate purposes, including potential acquisitions.

BroadSoft notes that it has made three acquisitions in the past two years, and may "undertake additional strategic transactions," though it notes there are no deals underway currently. (See BroadSoft to Buy Packet Island, Broadsoft Swallows Sylantro, and BroadSoft Buys Genband's M6.)

Broadsoft has been talking about an IPO since 2005. It's still in the pole position on our (now ageing) list of private companies most likely to go public or be acquired. (See Light Reading's Top Ten Private Companies and BroadSoft Joins VOIP IPO Rush.)

— Ray Le Maistre, International Managing Editor, Light Reading