Is Ramp Networks Ramping Up?
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Shares of Juniper Networks' gravity-defying stock have begun heading back toward Earth in recent days, a decline that has been overdue.
(JNPR) stock was selling at $186.63 early Thursday afternoon, down 22% from its Aug. 23 close of $227. The stock also was off 10% from Tuesday's closing price of $205, as investors began profit-taking before a recently announced secondary offering of 5 million common shares dilutes their holdings.
All told, though, it's been a fantastic after-market ride for Juniper and its early investors since the company's June 25 IPO, when the company offered shares at $34 and saw their value zoom to nearly $100 apiece by day's end. In a season when numerous networking and infrastructure IPOs (Rhythms NetConnections (RHTM), Efficient Networks (EFNT), Redback Networks (RBAK) have soared, Juniper has achieved the highest altitude and longest hang-time.
Ramp Networks is another networking company that launched an IPO in June, offering 4 million shares at $11 each. But Ramp's stock has had a much rougher going, closing at $16.75 on its first day of trading June 22 and then stumbling into July before a brief run-up that took it has high as $36.13. By Aug. 10, however, RAMP was below its first-day close, ending the day at $14.56.
While Juniper and Ramp both sell Internet routers, their target markets are entirely different. Juniper's high-end hardware and software is intended for use by large customers such as ISPs trying to handle huge amounts of Internet traffic. Ramp's product is geared toward the SOHO (small office/home office) market.
The company's WebRamp router allows multiple Internet users to share a 'Net connection using a number of delivery technologies, including analog phone lines, cable modems, digital subscriber lines (DSL) and ISDN.
Ramp is betting on two things: Continued growth in the SOHO market and the adoption of broadband access technologies by that market. Both seem like reasonable bets. Research firm Access Media International projects the number of small businesses using shared Internet access to rise from 400,000 in 1998 to 1.3 million by next year, according to Ramp S-1 filing from last spring.
Meanwhile, DSL and cable are in a race for market dominance. WebRamp's flexibility means it can work with customers who choose either.
After a slow Q1 (47% sales growth over Q1 '98), Ramp saw Q2 revenue hit $4.53 million, or 144% over the year-ago quarter. With $8.4 million in sales through June, Ramp is close to equaling 1998's total of $9.9 million and could end the current year with $20 million in revenue.
In the market where Ramp competes, price is critical, and smaller companies such as Ramp usually get squeezed on their margins by larger vendors such as 3Com, Lucent, Nortel and Cisco. So far that hasn't happened; gross margin rose from 25% in the first six months of 1998 to 36% through Q2 '99.
With a market cap of $416 million, Ramp is trading at about 29 times the last four quarters' revenue. Compared to Juniper's price/sales multipleof 135, that doesn't look like a bad deal.
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