Meru Files for Enterprise Wi-Fi IPO

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Enterprise wireless LAN vendor Meru Networks has filed for an IPO (initial public offering), looking to raise as much as US$86.25 million that will help it prepare for what is expected to be rapid growth in the industry.

The company, founded in 2002 and based in Sunnyvale, California, filed a Form S-1 with the U.S. Securities and Exchange Commission on Friday. Meru didn't estimate how much its shares would cost or how much the IPO would raise, but for purposes of calculating a registration fee, it listed a proposed maximum aggregate offering price of $86.25 million.The IPO, which would be under the ticker symbol MERU, would take place "as soon as practicable" after the registration became effective, the form said.

The filing came at the end of a relatively slow year for IPOs, held down by the gloomy economy for much of the year, though S-1 filings appear to have picked up recently. Despite slower sales of many enterprise IT products in 2009, wireless LAN sales are on the upswing and analysts expect more growth next year.

Meru's products pool wireless LAN resources into a single Virtual Cell that can span a whole office or campus. It's one of several companies specializing in enterprise wireless LANs, including Aruba Networks and Trapeze Networks, which compete against the dominant Cisco Systems.

In its filing, Meru revealed it had total revenue of nearly $16 million in 2007 and close to $55 million in 2008. In the first nine months of this year, revenue totaled more than $50 million. However, the company also warned it has had a long string of losses, including a $26.8 million loss in 2008 and $9.4 million in the first nine months of 2009.

The filing stated the company couldn't specify how it would use the proceeds but intended to expand its sales and marketing efforts, make capital investments and continue to put money into research and development. The capital could help Meru hire more employees as well as acquire complementary businesses or other assets, it said.

Analysts say the final approval of the IEEE 802.11n specification in September helped release pent-up demand for wireless LANs in enterprises. Sales to enterprises rose about 20 percent between the second and third quarters of this year and continued to rise into the current quarter, according to Dell'Oro Group.

Enterprise wireless LAN sales should rise between 30 percent and 40 percent in 2010, due to the combination of 802.11n and companies looking to increase productivity amid a still challenging economy, according to Farpoint Group analyst Craig Mathias. In addition, a series of technology advances has removed all the major barriers to corporate adoption of wireless, he said. Security, reliability and performance for price are all now in line with what most enterprises demand, he said.

"There's no reason today why any enterprise shouldn't be able to take advantage of wireless LANs," Mathias said.

The wireless LAN industry is showing both strong growth and continued innovation, so large-scale consolidation among vendors probably remains a few years off, he said. Hewlett-Packard's acquisition of Colubris Networks in 2008 was an exception, according to Mathias.

In this environment, more wireless LAN vendors may follow Meru into the stock market, Mathias believes. An IPO should bring in capital that will help Meru bulk up for selling into the growing market, he said.

"Filing for an IPO at this time is probably a very good move," Mathias said.

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