By Stephen Phillips
Networking company, Foundry Networks Inc roared onto Nasdaq and into the IPO record books, yesterday, racking up the second-largest ever share price gain for a stock market debutante. Shares in Sunnyvale, California-based Foundry, which makes low- cost switchers and routers enabling internet service providers and other businesses to manage higher network traffic, closed up 525% at $156.25. They had been offered to investors at an opening price of $25. In the all-time stakes Foundry nestled in behind web portal, The globe.com, which saw its shares rise 606% on its opening day in November 1998.
Foundry is that rare beast, a profitable internet company, though the firm’s new $8.69bn market capitalization dwarves its $3.3m profit for the six months to June 30. Revenue rose more than nine-fold on the year-ago to $39.5m.
Foundry was incorporated in May 1996 and is finding its services, which manage internet traffic and make web sites less susceptible to outages, at a premium. Its client roster includes America Online Inc, the number-one internet service provider; Telewest Communications Plc, the UK’s second-largest cable company; computer hardware giant, Hewlett-Packard Co; and Korean memory chip maker, Samsung Electronics Co.
So-called Infrastructure firms laying the plumbing for the internet and e-commerce are arguably the hottest item in computing at the moment. Cisco Systems Inc’s $6.86bn acquisition of networking outfit, Cerent, last month, crystallized current market valuations for such firms. Cisco is one of Foundry’s arch competitors in the large corporate area networking market. Santa Clara, California-based Extreme Networks Inc, which like Foundry makes switches for local area networks has quadrupled its share price since its initial public offering in April. Its shares climbed 10% yesterday to close at $66.62. A tangential competitor to Foundry, Alteon WebSystems Inc has also quadrupled its share price since staging an initial public offering at $19 a share last Thursday, athough its shares fell more than 16% yesterday to close at $93.25. San Jose, California-based Alteon makes switches and software to manage traffic at web sites
Foundry sold five million shares in yesterdays’ offering, priced at $25, $9 above the upper limit of a raised price range filed with the Securities and Exchange commission last week. The sale represented a 9% stake in the company and raised $125m for increased spending on sales and marketing, customer support and research and development.
Foundry is backed by several Silicon Valley venture capital firms. Following yesterday’s sale, Crosspoint Venture Partners’ stake stands at 14.6%; Institutional Venture Partners holds 8.2%; Accel Partners, 6.3%; and Vantage Point Venture Partners, 6.1%.
