Inrange talk....
IPO Outlook: Inrange Technologies will perform well in early trading
By Scott Reeves, BridgeNews New York--Sept. 15--The networking sector has produced a steady stream of winning IPOs. Inrange Technologies will be another winner, but it won't be as big a hit as some recent deals. Sector choppiness and erratic revenues will limit early response to the deal. Inrange Technologies designs, manufactures, markets and services switching and networking products for storage, data and telecommunications networks. The company's products are designed to provide rapid and reliable connections among computer networks and related equipment. The company, a spin-off from SPX Corp., plays into a continued theme in IPO investing: Bet the communications backbone, companies that build network or provide the hardware, and leave individual Web sites to retail investor who is just discovering that the new issues market is no longer gripped by "dot.com" mania. Two similar IPOs, McData and Brocade Communications Systems, have been huge hits. But Gadzoox Networks now trades below its offer price. Inrange's equipment is designed to be compatible with a range of products made by competitors and meets multiple communication standards and protocols. The company's market includes Fortune 1000 businesses and others that operate large-scale systems that demand continuous availability. Storage networks are used to handle vast amounts of information. Inrange's switches, channel extenders and optical products are designed to handle the transfer of data between storage devices, computers and other networks. The company's products, marketed under the IN-VSN brand name, are compatible with widely used storage network communication standards, including Escon and Fiber Channel. Data networks are used for data transmission and processing. Inrange makes switches, control systems and management applications. The company says its Mega-Matrix switch, which has 24,000 ports, is the industry's largest switch.
BIG NAME CUSTOMERS -- AND PROFITS
Inrange's customers include AT&T, Electronic Data Systems, IBM, Ford, Sprint, Storage Technology, U.S. Department of Defense, and Wells Fargo.
In 1999, Inrange Technologies generated about 50% of its revenues from the sale of storage networking products, 19% from the sale of data networking, 14% from telecommunications networking products and about 17% from consulting and product support.
For the six months ended June 30, 2000, Inrange Technologies reported pro forma net income of $9 million on revenues of $111.8 million. For the six months ended June 30, 1999, Inrange Technologies reported actual net income of $6.1 million on revenues of $102.4 million.
For the year ended Dec 31, 1999, Inrange reported net income $22.3 million on revenues of $200.6 million compared with net income of $7.4 million on revenues of $225.7 million in 1998. Inrange Technologies faces stiff competition in each of its product sectors. In networking, IBM is the principal competitor for its Escon storage switch. In wave division multiplex products, major competitors include IBM, Finisar and ONI Systems. In the channel storage area network switches, competitors include Brocade Communications, IBM, and McData. Inrange also competes against the manufacturers of fiber channel hubs, including Gadzoox Networks and Vixel.
THE PLANNED OFFER Inrange Technologies Inc. plans to offer 7.7 million Class B shares at $12 to $14 each through underwriters led by Salomon Smith Barney. The proposed Nasdaq symbol is INRG. The deal is tentatively scheduled to be priced the week of Sept. 18. The company plans to use net proceeds raised in the IPO for general corporate purposes and possible acquisitions.
Inrange Technologies is based in Mount Laurel, N.J. On June 30, the company had 751 employees, including contract workers. Prior to the IPO, Inrange Technologies is a wholly-owned subsidiary of SPX Corp. Upon completion of the IPO, SPX will hold about 90.8% of the company's outstanding shares, or about 89.5% if the over-allotment option is fully exercised. Inrange Technologies will be a solid IPO. The deal won't explode on the opening because it's coming late in the cycle and investors now know how to accurately value such companies. Despite some choppiness in the networking sector, Inrange Technologies will perform well in early trading. While solid, Inrange's stock yet isn't a candidate for your kid's college fund. It's probably wise to pocket profits from this deal and move on. End
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