Veraz Networks, a San Jose, Calif.-based softswitch vendor became the latest Silicon Valley company to go public, but with some difficulties. The company sold 9 million shares for $7.80 each; below the offering price of $8 a share.
The weak pricing gives some credence to the naysayer theory that too many companies were being rushed to the IPO market too soon, and little to show when it came to profits. The lukewarm reception for Veraz was a surprise, for the market embraced Aruba Networks, a Wi-Fi equipment maker that is still in the red and faces a tough market environment. Perhaps, Veraz’s IPO is indicative of a sentiment change.
Veraz is an interesting story. It started out during the last bubble as IPVerse, backed by white shoe firms such as Norwest Ventures. It suffered as telecom boom sputtered, and had a near death experience. Norwest and ECI Telecom, an Israeli telecom company, later rescued it. As demand for VoIP-related gear increased, Veraz saw its fortunes turn, though company is yet to post a profit. In 2006 it had sales of $100 million in 2006, but lost around $14 million.
ECI, which owned 40% of Veraz before the IPO sold 2.25 million shares and reduced its stake to 27.5%. Norwest owns about 13% of the company. Battery Ventures owned 10.8% of the company prior to the offering.