Glu Mobile, Aruba Networks and now Limelight Networks – we are seeing an increasing number of companies that are still deep in red tapping (or trying to tap) the public markets.
It is a dangerous trend, because it could very quickly shut the window of opportunity, here by killing the golden goose. The market is at a fragile state: the after market performance of some of the IPOS – Mellanox, Clearwire and even BigBand – is not inspiring.
Our previous coverage of Limelight Networks and IPOs
isilon has been getting hammered too
Om, a read of the S1 indicates that LLNW, while losing money by GAAP standards, is not exactly hemorrhaging. They are operating cash flow and EBITDA positive, and the only thing keeping them from FCF positive is their heavy capital spend. LLNW’s revenue’s are ramping very nicely, and their aggressive peering strategy means they can unload a reasonable amount of their traffic without settlement. LLNW will be GAAP profitable again fairly soon. FCF may take a bit longer.
ARUN only spent $850k in the 6 months ending 3/31/07. I suspect we will be content with its April quarter earnings release.
Re: Daniel Golding
It is one thing to say that LLNW’s growth will get them to the point that they can become profitable, but that doesn’t change Om’s point that they are not — and that they are dependent on additional investments (not just the IPO, but probably more beyond that) to keep running.
Being EBITDA or operating cash flow positive is a good step (and no company that isn’t should be considered a serious IPO candidate), but it the same as actually being profitable, either on a GAAP basis or a FCF basis.
More important, I’m not sure what it means to say, “the only thing keeping them from FCF positive is their heavy capital spend.” They run a network. They’re entire business is dependent on that heavy capital spend. If that spending rate declines and they generate sufficient operating profitability to fund the capital spend (and debt), they might one day generate a return for shareholders.
The key point for now is that these companies (as many did in the late 90s) are going public long before that point is reached, and with no guarantees it will ever be reached.