Analysts have cast the maker of networking products for enterprises and ISPs as the week's most promising initial public offering.
One of Foundry's main competitors, Alteon WebSystems blasted up close to 300 percent on its first day. Both Alteon and Foundry make products that help enterprises and Internet service providers handle network traffic.
One major difference
Foundry Networks CEO Bobby Johnson just wanted to get back to work Tuesday afternoon.
"Everybody else was excited [about the IPO], but I was anxious," he told ZDNN. "We've just got a lot to do. I'm trying to keep people focused. Everyone's done a pretty good job with that ... getting back to work."
"We were really focused on having a quality IPO and what's unique is we've focused on real revenue and profitability.
"Business is healthy. We're very comfortable with analyst expectations. There's plenty of opportunity for expansion in this industry," Johnson said.
And were the company's employees, who all have stakes in Foundry, happy with the day's trading? "You better believe everybody's happy, but they're all back to work," he said.
Francis Gaskins, editor of the Gaskins IPO Desktop, said Foundry is the best IPO company he has seen this year. "This one simply can't miss," he said of the company that is the only one yet to receive an A+ rating from him.
Foundry is poised to tap a growing market. The company uses customized semiconductors, known as application-specific integrated circuits, to provide switching products that offer better performance at a lower cost than traditional routers. Its Layer 2 and Layer 3 switches provide the increasingly sought-after bandwidth. Its Layer 4-7 switching products allow enterprises and Internet service providers to direct traffic flow and offer their customers differentiated, fee-based services.
Expected growth
Foundry faces competition from Cisco, Nortel, and 3Com as well as other smaller public and private companies, according to filings with the Securities and Exchange Comission. Cisco maintains a dominant position in the networking market, and offer many products that compete directly with Foundry's.
In 1998, Foundry's biggest customer, Mitsui & Co., accounted for 21 percent of revenue. For the six months ended June 30, 1999, America Online, Hewlett-Packard and Mitsui accounted for 17 percent, 15 percent and 10 percent of revenue, respectively.
Foundry's management includes founders and management of Centillion, a LAN switch manufacturer that was sold to Bay Networks, now a part of Nortel. Since this management group is 'from the industry' it makes Foundry all the more "exceptionally hot!" according to Gaskins.
Unlike most recent IPOs, Foundry is actually profitable. The company booked more than US$24 million in sales in its latest quarter, representing growth of up over 900 percent from the same period last year. The company had net income of US$3.3 million on revenue of US$39.5 million for the six months ended June 30. In the same period a year earlier, Foundry had a net loss of US$4.2 million on revenue of US$4.2 million.
The Layer 3 LAN switching market will grow to US$3.9 billion in 2002, up from US$637 million in 1998 according to the Dell'Oro Group. The Layer 4-7 switching market will grow to US$1 billion in 2002, up from US$130 million in 1998 according to Collaborative Research.
