Today: Another Silicon Valley enterprise software company finds eager investors on Wall Street, but the rest of the market continues to struggle.
The Lead: Milpitas-based Gigamon is latest valley software firm to go public
The first half of 2013 has been kind to Silicon Valley software startups looking to go public, as Milpitas-based Gigamon followed in the footsteps of Model N, Marin Software and Marketo on its profitable path to Wall Street.
The company, which makes software that helps manage and monitor network traffic, sold an initial batch of 6.75 million shares at $19 apiece, the middle of its $18-$20 proposed range, for a total take of more than $128 million. The company will take home more than $80 million of that cash, with selling stockholders -- including the founders and venture capital firm Highland Capital -- pocketing the rest.
Once shares hit the open market, they shot higher, then steadily rose all day -- the stock closed at its highest price of the session, $28.47, 49.8 percent higher than the IPO price.
If that sounds familiar, it's because the refrain for Silicon Valley's previous IPOs this year has been the same -- millions gained, and a booming stock price on the first day of action. Model N sold shares started at $15.50 in March, then finished its first day of trading at $20.15, a gain of 30 percent; Marin went public at $14 a couple days later and gained mor than 40 percent, but closed its first day at its lowest price of the session, $16.26, 16.1 percent higher; and Marketo charged $13 a share for its initial shares in May, then saw that price shoot 77.7 percent higher to $23.10 on its first day of trading.
"There is continued buy-side demand for newly public technology companies with fast-growing revenue, as recent tech deals have rewarded investors," Deutsche Bank managing director of equity capital markets Ted Tobiason told the Wall Street Journal.
Those gains have not always stuck around: Marin Software has fallen below its IPO price, closing Wednesday at $10.70. Model N has actually improved on its first-day performance, however, closing Tuesday at $20.34, and Marketo is still trading nearly 70 percent higher than its IPO price, closing at $21.96.
Investors could be betting on some of the companies to get taken off the public markets, as cloud software has also been a hot area for acquisitions in the past few years. Marketo, for instance, just saw competitor ExactTarget swallowed up in a huge Salesforce deal that cost nearly four times Marketo's market cap; The Journal pointed out that Gigamon rival Anue Systems was purchased for $145 million by a larger peer, and that networking-equipment makers such as San Jose's Cisco Systems (CSCO) or San Francisco's Riverbed Technology could be looking to add data-visualization software such as Gigamon's to its enterprise offerings.
"Investors view the application performance management space as a really hot growth area," Mizuho Securities analyst Joanna Makris told the Journal. "Network traffic is becoming much more complex. Companies in this space give (customers) visibility into traffic flows across their network and help them optimize their network."
Gigamon, however, told CRN that it will use the money from its IPO to concentrate on growing its independent business.
"We plan to continue to invest in strengthening our existing relationships with channel partners and expanding our network," J.T. Eger, manager of corporate communications for Gigamon, said in a statement.
SV150 market report: HP hits new 52-week high, but Google and Apple weigh on indexes
The rest of Wall Street was not as fortunate as its newest member, as indexes continued a miserable week with declines ranging from 0.8 percent to 1.1 percent. Tech stocks were some of the biggest losers, as the Nasdaq index fell the most among the three major indexes and the SV150 wasn't far behind with a 1 percent decline.
One of the few success stories on the day was Hewlett-Packard (HPQ), which led the 30 Dow Jones components with a 2.8 percent gain at $24.91. HP shares hit a new 52-week intraday high of $25.49 after CEO Meg Whitman went on CNBC to proclaim that revenue growth could still be possible despite the decline in personal-computer demand and HP's pullback on research and development spending.
Google (GOOG) dropped 0.9 percent to $871.98 after spearheading Tuesday's drive for more transparency in government requests for user data, and Apple (AAPL) dropped 1.2 percent to $432.19 as its share price has been dragging since the WWDC keynote that showed off the Cupertino company's new wares. Facebook fell 1.1 percent to $23.77 while opening its first server farm outside the United States and introducing clickable hashtags to its social network. Yahoo (YHOO) dropped 1.9 percent to $25.89 while making yet another acquisition and introducing a program to redistribute inactive account names to new users.
eBay (EBAY) continued to fall in the wake of a negative report about e-commerce growth, with the San Jose company declining 2.5 percent to $50.75, completing a two-day slide of 4.7 percent. Netflix (NFLX) dropped 3.2 percent to $207.64 as it announced new user profiles, which will help families who have multiple Netflix watchers but could also improve the experience of pirating the service.
Success stories included Sunnyvale's Rambus, which shot up 6.5 percent to $8.55 after a big win in a patent-infringement lawsuit; and Tesla, which gained 3.5 percent while continuing to fight for access to North Carolina.
Up: Tesla, HP, Symantec, Juniper, NetApp, Applied Materials, Workday
The SV150 index of Silicon Valley's largest tech companies: Down 11.98, or 0.95 percent, to 1,244.99
The tech-heavy Nasdaq composite index: Down 36.52, or 1.06 percent, to 3,400.43
The blue chip Dow Jones industrial average: Down 126.79, or 0.84 percent, to 14,995.23
And the widely watched Standard & Poor's 500 index: Down 13.61, or 0.84 percent, to 1,612.52
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.