Redknee Bends Toward IPO
The company, estimated by one analyst to have about $50 million in annual revenue, is looking to float on London's Alternative Investment Market (AIM) exchange, the newly fashionable place to stage your technology IPO. (See Where Are the IPOs? )
So, is it possible?
Dan Baker, research director with Dittberner Associates Inc. , thinks so. "They are one of the top companies in the billing market," he says. "They are pioneering deep-packet inspection."
That is, Redknee is pioneering the use of a software-based approach to deep-packet inspection for billing, and specifically for mobile carriers. Here's how it works: Say a mobile provider wants to offer a high-quality video service, and bill for it. The Redknee software will be able to monitor which packets crossing the airwaves are video -- so that it can prioritize the service and bill the customer at the same time.
This is a function that hasn't really been integrated by other billing providers such as Amdocs Ltd. (NYSE: DOX), says Baker. "Redknee appears to be the only billing vendor focused on deep-packet inspection. Amdocs is behind -- they should buy them [Redknee]."
Another competitor with Redknee in the mobile world is Comverse Inc. (Nasdaq: CNSI) .
So how does it differ from deep-packet inspection by the likes of the Cisco Systems Inc. (Nasdaq: CSCO) P-Cube division, Sandvine Inc. , and Ellacoya Networks Inc. ? Those companies are primarily focused on the cable and wireline world, and they aren't major billing software providers -- they are simply enabling deep-packet inspection in the hardware.
How much would an IPO raise? One might look at Sandvine, a similar company that floated on AIM in March of this year. Sandvine raised $30 million in the IPO and achieved a market valuation of about $200 million in its first week of trading. (See Sandvine Leaps on London Listing)
Redknee is reportedly profitable and larger than Sandvine was at the time of its IPO. If Redknee could achieve a valuation of say, six times revenue, it might be worth $300 million to $400 million in a public flotation, to judge from revenue estimates. If it floated 30 percent of the company, it could raise up to $100 million. What would the company use the money for? According to Jeff Popoff, vice president of marketing for the company, it would like to be a "consolidator" in the industry. In other words, it wants to make acquisitions. "We are in a position to roll up market share," he says.
The company has more than 300 employees and counts 26 service provider customers, including Telefónica Europe plc (O2) , Cingular Wireless , and T-Mobile International AG .
— R. Scott Raynovich, Editor in Chief, Light Reading