NetScout Systems Inc. (Nasdaq: NTCT) closed up 2 3/4, or 25 percent, to 13 3/4 in its debut Thursday. Not bad considering this summer's dwindling IPO appetite, but not great, considering the company actually has net income.
Shares were priced at $11, the bottom of its already lowered $11-12 range.
The stock moved as high as 15 in early trading.
The performance management software firm based in Westford, Massachussets, offered 3 million shares. The underwriters for the offering are Deutsche Banc Alex Brown, Bear Stearns and Dain Rauscher Wessels.
NetScout, whose software lets businesses and network service providers manage their computer networks, had said Tuesday it would offer 4 million shares, or 15 percent of its outstanding common shares, at a price of $14-16 each. The company was previously called Frontier Software Development Inc, and has said it will use the net proceeds from the IPO for general corporate purposes, including working capital.
Cisco Systems Inc. (Nasdaq: CSCO), the big Internet network equipment company, is its largest indirect channel partner and sells NetScout's products under its private label, the company's filings said. Concord Comm (Nasdaq: CCRD) and Visual Networks (Nasdaq: VNWK) are similar companies.
The company's reliance on Cisco to promote its products is cited as a risk in the company's regulatory filings. Cisco accounted for a whopping 24%, 40% and 51% of the company's total revenue for the fiscal years ended March 31, 1997, 1998 and 1999, and 44% of its total revenue for each of the three months ended June 30, 1998 and 1999.
NetScout competes with probe vendors, such as Hewlett-Packard Co., providers of network performance management products such as Concord Communications, Inc. and Micromuse, Inc., providers of application companies, such as International Network Services, and providers of portable network traffic analyzers, such as Network Associates, Inc, according to the company's regulatory filings.
Revenue for the quarter ended June 30 1999 was $19 million, compared to $15.2 million in the previous year's quarter. Net income for the quarter was 3.1 million compared to $2 million in 1998's quarter.
The company also reduced the size of its offering to 6.5 million shares from 7.5 million shares.
Lead underwriters are Donaldson Lufkin & Jenrette and co-managers are Salomon Smith Barney and Merrill Lynch. Equant (NYSE: ENT) and PSINet (Nasdaq: PSIX) are named as similar companies.
Risks cited in the company's regulatory filings include financial dependence on its parent company, IPC Information Systems, Inc, and the concentration of its revenue sources with its three largest customers, Deutsche Bank, Optimark and Reuters, which accounted for about 23%, 14% and 6% sales in fiscal 1998, respectively, and 11%, 14% and 7% for the six months ended March 31, 1999.
Current and potential competitors include interexchange carriers such as MCI WorldCom, AT&T and Cable & Wireless, specific product competitors such as EQUANT N.V., Infonet Services Corporation and GAINS, and content providers such as Bloomberg L.P., Bridge Information Systems, Inc. and Reuters Holdings Plc.