Foundry Networks, Inc. surprised Wall Street yesterday by closing up 525 percent and grabbing the number two spot for all-time first day IPO percentage gainers. The Sunnyvale, California-based company produces switches that make the Internet and e-commerce more efficient.
Industry analysts from the Monument Internet Fund and others attributed Foundry’s success to the growing need for technology to help build the Internet’s infrastructure. Foundry’s Gigabit Ethernet switches and other networking products are designed to improve performance of ISP clients such as AOL, MindSpring and others.
Foundry Soars on a Down Day
On a day when the Nasdaq fell 5.50, Foundry opened at $25 (US$) and closed at a whopping 156-1/4 — an increase of 131-1/4, or 525 percent. Only theglobe.com has made a stronger debut, with a 606 percent gain in November 1998. The previous second-place spot-holder was Marketwatch.com, which climbed 474 percent last January. Foundry raised $125 million with its IPO.
Other debuts also closed up, including voice and fax service ITXC Corp., which raised $75 million, and wireless communications provider, AirGate PCS, Inc., raising $113.9 million. Also up were Medscape, a physician Web site, and FreeShop.com, a site that gives consumers access to hundreds of free, trial and promotional offers.
E-Commerce Infrastructure Worries
Internet retailers and business-to-business players have been concerned with the burden that rapid growth has placed on the Internet’s infrastructure. Internet “plumbers” such as Foundry make the Internet and e-commerce work more efficiently. These plumbers are growing fast as the Internet explodes.
“Foundry continues to develop leading solutions for the rapidly growing Layer 4-7 switching market,” said Drusie Demopoulos, Vice President of Marketing for Foundry. These switches are essential to high performance e-commerce as speed and reliability become increasingly important.
Foundry Actually Makes Money
Another likely reason for Foundry’s strong performance is that it delivers black ink. In a world where Internet companies soar to dizzying heights while booking years of losses, Foundry has demonstrated the ability to turn a profit. For the six months ended June 30th, Foundry returned $3.3 million on revenue of $39.5 million.
Foundry manufactures, markets and distributes its high-performance switches, routers, server load balancers and transparent caching switches to AOL, MindSpring, LTV Steel, Incyte Pharmaceuticals and others.
Prior to its IPO, Foundry Networks was a privately held company funded by Accel Partners, Crosspoint Venture Partners, Dixon Doll, Institutional Venture Partners, Mitsui & Co., Ltd. and Vantage Point.
The company launched in 1996 and has received $30 million in three rounds of funding.