Packet inspection/traffic management

Sandvine Leaps on London Listing

As expected, Canadian IP traffic management specialist Sandvine Inc. debuted on the London Stock Exchange 's Alternative Investment Market (AIM) this morning under the ticker SAND, and saw its share price rocket by a third in the first few hours of trading to value the company at nearly $200 million. (See Sandvine AIMs for IPO.)

Sandvine issued nearly 26.7 million new shares at 75 pence ($1.31) each to raise £20 million ($35 million) before expenses, which the company says it will use to expand its sales and customer support teams, fund ongoing R&D, and for general working capital. It also placed nearly 6.9 million shares on behalf of existing investors, raising £5.1 million ($8.9 million) for them.

With almost 30 percent of its equity floated on the London exchange, the listing gave Sandvine a market capitalization of £86 million ($150 million).

But within hours the price had shot to 100 pence, a rise of 33 percent, valuing the firm at £114 million ($200 million).

That's likely because the company is ramping its revenues at a very fast rate, and is one of a small number of specialist firms active in the key growth area of broadband traffic management. Using Sandvine's technology, service providers can identify specific types of IP traffic and then deal with it accordingly. For example, they might choose to block peer-to-peer (P2P) traffic that is eating up valuable network capacity. (See Tut Reports Q4 and Sandvine Warns of Threat Within.)

The increasing importance to network operators of such technology is shown in Sandvine's sales growth. In its filing with the London exchange, the company said that in the year to 30 November 2005, its revenues were C$15.8 million (US$13.6 million), a year-on-year increase of about 390 percent from C$3.2 (US$2.7 million) during the previous 12 months.

Its loss before interest, tax, depreciation and amortization in 2005 was C$3 million (US2.6 million), down from $6.2 million (US$5.3 million) a year earlier.

Sandvine is banking on the ongoing uptake of broadband connections, and service provider demand for traffic management capabilities, to continue growing and reach profitability. And there's certainly still an appetite for broadband. According to the latest statistics from the Broadband Forum , 41 million new homes and businesses signed up for DSL service in 2005 globally, taking the total worldwide to nearly 140 million, a 42 percent rise over 2004.

But early interest in a hot technology stock and a sharp rise in price can soon fade, as another AIM-listed telecom equipment vendor discovered. Session border controller vendor Newport Networks plc (London: NNG) saw its share price leap 30 percent on its first few days of AIM trading in May 2004, rising from its initial price of 71 pence to more than 90 pence. (See Session Controller IPO Scores Success.)

By April 2005 it had reached 160 pence as the VOIP equipment market really started to take off, but today it trades at just 23 pence, less than a third of its original value, as anticipated contracts continue to remain elusive. (See Newport Needs Another $27M.)

— Ray Le Maistre, International News Editor, Light Reading

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