Aerohive Networks, a networking vendor that’s bullish on the convergence of enterprise wired and wireless LANs, aims to raise US$75 million through an initial public offering.
The Silicon Valley company’s access points, routers, switches and gateways are managed via cloud-based software that can oversee wired and wireless infrastructure as a single network. But Aerohive, founded in 2006, is focused primarily on Wi-Fi and riding the growth of mobile computing across enterprises.
Wireless LANs are starting to become the primary “last-mile” connection in some enterprises, according to Gartner analyst Tim Zimmerman. It’s about 30 percent less expensive to deploy Wi-Fi across an office than wired ethernet connections to each cubicle, and most companies are considering wireless-only edge networks in newly built facilities, Zimmerman said.
Aerohive builds a variety of enterprise wireless capabilities into its management software, including tools for user authentication, quality of service, security and policy management. It’s targeted the education and health care markets but also sells to retail and other industries. Last year it joined with cloud-based retail analytics provider Euclid to offer sensors that collect information about customer traffic in stores. But Aerohive isn’t alone in looking to the cloud for Wi-Fi management, with rivals including Aruba Networks and Cisco Systems’ new Meraki division also in the mix.
The company would use the proceeds of the IPO for general corporate purposes, including research and development and sales, and might use some of it for acquisitions, according to its S-1 filing to the U.S. Securities and Exchange Commission on Thursday. The date and stock price of the offering, as usual, are to be named later.
As basic wired and wireless connectivity becomes more of a commodity, most network innovation is happening in software. Aerohive is smart to focus its efforts there and on building an overall networking system rather than just Wi-Fi gear, according to Farpoint Group analyst Craig Mathias. Particularly with the arrival of IEEE 802.11ac, which is capable of gigabit speeds, the underlying technology of Wi-Fi will be the same for the next five years or more, he said.
Having a cloud-based controller saves on capital budget, which can be hard to come by in some enterprises, and means one less type of box to manage, Mathias said. Increasingly, cloud-based technology and actual outsourcing of functions will dominate IT thinking in the coming years, he said. “It’s not about a bunch of guys sitting around playing with computers anymore,” Mathias said.
Aerohive’s sales are on the rise, with the company’s filing claiming average annual growth of 114 percent since 2010. In the first nine months of 2013, its revenue totaled $77 million, up from $50 million in the same part of 2012.
However, the company also warned it has a history of increasing losses. In the first nine months of 2013, Aerohive lost $25 million, up from $15.8 million a year earlier.
Nevertheless, with a strong management team and a focus on the higher layers of networking rather than sheer hardware, the company has good prospects, the analysts said.