The news was a blow to the broader RFID technology industry, given that Alien’s offering was widely viewed as being a bellwether of Wall Street’s acceptance of the emerging market.
Alien has decided not to proceed with an IPO at this time due to market conditions, said Alien chief executive Stav Prodromou, in a statement. While we are evaluating the options for our future financing needs, we are taking prudent cost reduction actions to continue to effectively manage and grow our business and support our customers going forward.
An Alien spokesperson decline to comment on what those cost-cutting actions would involve, citing a 30-day cooling off quiet period following the withdrawal.
The company may undertake a private offering instead, said the company, in a filing with US regulators.
Morgan Hill, California-based Alien had expected to begin trading on July 28, but later delayed the deal. The maker of RFID readers and tags had planned to raise at least $99m by selling 9 million shares priced between $10 and $12 each.
When it first filed for the offering, in mid-April, Alien had initially hoped to raise $120m from the deal and with share over-allotments said it might pull in as much as $138m.
Alien is a major player in the emerging RFID industry, known for its low-cost proprietary Fluidic Self Assembly manufacturing process for RFID tags. The company has long been known for its advanced tag technology, but its larger rival Texas Instruments Inc recently announced that it too was getting into the Gen 2 tag game. TI’s tag technology has been receiving rave reviews.
Alien also makes RFID readers, for which it has struck deals with IBM and Sun Microsystems to have their RFID middleware embedded. Alien’s technology also is featured in Microsoft’s .Net offerings.
But Alien, which was founded in 1995 and employs about 235 people, has never been profitable. In fiscal 2005 it lost $53m, nearly double the $27.6m it lost in 2004. However, the company expected revenue from $6.1m to $6.6m for its most recent quarter, ended July, up from $4.4m a year ago, according to its prospectus.
Still, Alien – like all players in the RFID market – is under intensely competitive pricing pressure. The company sells its newest Gen 2 RFID tags at below cost, which drains its bottom line but has helped it become a significant market player.
Alien are one of, if not the, lowest-cost providers, said Instat analyst Allan Nogee. The hope is volume will go up and they will eventually maker money. They can manufacture a bit cheaper right now than average. The RFID market is certainly emerging and everyone’s looking for low cost.
None of this seemed to bother private financiers, which ploughed more than $200m in financing in the company.
Whether Alien will be able to tough out the cutthroat pricing of the market while it waits for it to mature remains to be seen. Its fiercest rivals, notably TI and Philips, have far deeper pockets and more diverse product markets than Alien.
Alien certainly has very good tech, Nogee said. So if something were to happen and threaten their long term viability, I think some other company would come along and try to buy them. I don’t think ultimately they would perish.
