Ruckus Wireless has filed a form S-1 registration statement for its initial public offering to raise $100M. In the S-1 the company says it is profitable. It reports a net income of $4.2M in 2011 (after a net loss of $10M in 2009 and a net loss of $4.4M in 2010).
For the first half of 2012, Ruckus had a net income of $24.4M, but $17.4M of that income is related to the release of the valuation allowance on certain net deferred tax assets, not to sales. So if you take out $17.4M, you are left with $7M.
Let’s look at revenues. They increased 98%, from $47.4M for the first half of 2011 to $93.9M for the first half of 2012.
What’s driving demand for Ruckus Wireless equipment? Increased use of mobile devices and bandwidth hungry applications on those devices in dense metropolitan areas, requiring service providers to manage capacity and increase coverage. Between 1 January 2012 and 30 June 2012, the Americas accounted for 41.8 percent of revenue, followed by 37.5 percent in APAC and 20.7 percent in EMEA. If the economic climate outside the Americas worsens, it will have a huge impact on revenues. The other major threat to Ruckus’s business is commoditization. It is clear that Ruckus is being very opportunistic in using the recent increased sales and profits to go public as soon as possible. Given that the company does not have a long track record of profitability, a prospective investor will have to believe in (a) dramatic growth in the demand for carrier class Wi-Fi offloading, outdoor Wi-Fi networks, and network capacity management; (b) Ruckus’s continued ability to elbow out other competitors.