PALO ALTO, Calif. (CNN/Money) -
Reading all the ink (and bytes) spilled about Wi-Fi, the wireless networking protocol, almost makes me nostalgic for the Internet era, when relentless plugging of a "theme" always preceded a slug of IPOs for companies playing the game.
In that vein, kudos to Mark Veverka of Barron's for his scoop last weekend that Wi-Fi equipment maker Netgear was close to attempting an IPO.
Barron's reported that Netgear executives are licking their chops after Cisco's recent acquisition of Netgear competitor Linksys for $500 million. They figure, Barron's suggested, that with Wi-Fi being red hot, now'd be a good time to hold out its hands to the public.
Sure enough, Netgear filed Thursday for an IPO that would raise as much as $115 million, with $20 million of that going to pay off its former owner, Nortel Networks.
Netgear -- perfect name, for what that's worth -- makes wireless routers for homes and small businesses. Its box lets you turn your home into a wireless network so one person could work on the desktop, another at the laptop, while a third transfers programs from one TiVo to the other.
People actually do these things, by the way. And the field is hot, hot, hot.
However, should you consider buying Netgear's shares, consider some sobering thoughts. First, Cisco certainly could have acquired Netgear instead of Linksys. It didn't, and it might be worth knowing why.
Also, the wireless router market is quickly becoming commoditized. In fact, it looks a lot like the dial-up modem business did a few years ago. (Remember U.S. Robotics? It cratered 3Com, which had acquired it.)
There's no question the growth is great in this sector, but Netgear's is only so-so. According to its securities filing Thursday, Netgear's revenues grew 23 percent in 2002, to $237 million.
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The gross profit margin is about 25 percent, which is nice, but nothing like the gross margins of a Cisco or an Intel. (No, it's not yet profitable.)
Netgear isn't saying yet what its valuation would be, but if it's selling about 15 percent of the company, a typical chunk for an IPO, then it'd be worth almost $800 million. So Netgear, with half the sales of Linksys, would be worth about 60 percent more than what Cisco is paying for Linksys.
Do you really want to help some venture capitalists cash out of what's about to become a blah business just because it's smoking now?
End of an era for the Concorde
I never flew on one, but I was saddened all the same to see the news that later this year British Airways and Air France will discontinue their supersonic Concorde service.
As it happens, when I boarded a San Francisco-bound United Airlines jet Wednesday afternoon at John F. Kennedy International Airport, one of British Airways' seven Concordes was sitting at the next gate over. The white, sleek, delta-winged aircraft looked like a gorgeous greyhound compared to the sheepdog of a jumbo jet I was sitting in. It truly is one of the most beautiful machines ever built.
The Associated Press quoted BA's chief executive as doubting that top executives wanted to fly the Concorde at a time they are laying off their employees. I suspect a different rationale for the slackening demand. Anyone who can afford the $9,300 round trip from New York to London on the Concorde probably also can afford to arrange for private-jet transportation.
With commercial travel having become the ultimate hassle (longer security checks, fewer flights, more connections), it's probably a better use of one's time and money to leave when you want, not put up with the madding crowd and get there just a little bit more slowly.
Adam Lashinsky is a senior writer for Fortune magazine. Send e-mail to Adam at lashinskysbottomline@yahoo.com.
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