Mavenir Systems IPO Is Not Calling At Proposed Range

| About: Mavenir Systems (MVNR)

Mavenir Systems, Inc (NYSE:MVNR), a provider of software-based telecommunications networking solutions, plans to raise $77 million in its upcoming IPO on Wednesday, November 6th. The Richardson, Texas-based firm will offer 4.8 million shares, including 3% insider shares, at an expected price range of $15-$17 per share. If the IPO can find the midpoint of that range at $16 per share, MVNR will command a market value of $412 million.

See S-1 at

MVNR filed on October 4, 2013.
Lead Underwriters: Morgan Stanley, BofA Merrill Lynch, Deutsche Bank
Underwriters: Needham & Co LLC

MVNR designs solutions for mobile service providers to deliver Rich Communications Services - IP-based voice, video, rich communications and enhanced messaging services - over existing 2G, 3G and 4G networks. MVNR seeks to provide solutions related to the increased consumer use of a combination of services including messaging, IP voice, traditional voice, and texting to communicate, rather than relying heavily on traditional voice.

The firm's solutions also address the far heavier data loads that consumers now generate; the February 2013 Cisco Visual Networking Index report noted that the average smartphone generates 50 times more data traffic than an average basic-feature cell phone, while the average tablet generates 120 times more data traffic than an average basic-feature cell phone. MVNR provides solutions to over 120 mobile networks around the world, including AT&T (NYSE:T), T-Mobile (NASDAQ:TMUS), Vodafone (NASDAQ:VOD), Tele2, Deutsche Telekom AK (DT) and Telstra.

MVNR offers the following figures in its S-1 balance sheet for the six months ending June 30, 2013:

Revenue: $48,190,000
Net Loss: ($7,935,000)
Total Assets: $79,999,000
Total Liabilities: $74,328,000
Stockholders' Equity: ($98,887,000)

MVNR has shown booming revenue growth in recent years, with total revenues of $8,251,000, $49,504,000, and $73,840,000 for 2010, 2011, and 2012, respectively. However, it has yet to translate its revenues into profits, posting net losses of $10,394,000, $21,758,000, and $15,569,000 for 2010, 2011, 2012, respectively.

MVNR faces intense competition from two sources: major network infrastructure providers and specialty solution providers. Major network infrastructure competitors include Alcatel-Lucent (ALU), Ericsson (NASDAQ:ERIC), Nokia Siemens Networks (NYSE:NOK) and Huawei. Specialty solution competitors include Broadsoft (NASDAQ:BSFT), Sonus Networks (NASDAQ:SONS), Metaswitch, Comverse (CNSI), and Acision. Some of these competitors are better capitalized than MVNR and have access to superior resources.

MVNR is exposed to some risk by its dependence on the adoption of 4G LTE technology by mobile carriers. MVNR has focused much of its recent development on 4G LTE solutions, and may see significant damage to revenue growth if carriers do not push to adopt 4G.

Moreover, should competitors develop superior 4G technology, MVNR's developments may not generate as much revenue as expected.

President and CEO Pardeep Kohli has held his positions since joining MVNR in 2006. Mr. Kohli has over 20 years of experience in the wireless industry, having previously founded and served as the President and CEO of Spatial Communications Technologies, Inc. He has worked in various roles with NEC Corporation of America, DSC Corporation, Pacific Bell Mobile Services and Alcatel USA.

Though MVNR is well-positioned to take advantage of the massive increases in data traffic projected for the coming years, we remain cautious and do not plan on participating in this IPO at the proposed range of $15 to $17. If the deal price is decreased to the $12 to $13 range, we would reconsider this IPO.

The firm has not yet shown an ability to convert impressive revenue streams into profitability. MVNR's numerous better-established competitors are also a cause for concern.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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