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Based in Orange, Connecticut, Tangoe [proposed symbol (NASDAQ:TNGO)] scheduled an $88 million IPO with a market capitalization of $314 million at the price range mid-point of $10 for Wednesday, July 27, 2011. The full IPO calendar for the week of July 25th includes 12 IPOs scheduled to raise $2 billion.

SUMMARY -- TNGO sales were up 38% to $22 million for the March 2011 quarter compared to the March 2010 quarter. Losses continued. Gross margins, however, rose from 46% in 2008 to 60% for the March 2011 quarter.

On a year-to-date basis, TNGO has made several acquisitions that contribute to an increasing customer base. Nevertheless, TNGO has never made a net profit.

CONCLUSION -- It may be better for investors, in the current economic climate, to wait until TNGO demonstrates it can become profitable.

TNGO Valuation Metrics

BUSINESS -- TNGO is a leading global provider of Communications Lifecycle Management, or CLM, software and services to a wide range of enterprises, including large and medium-sized businesses and other organizations.

CLM encompasses the entire lifecycle of an enterprise's communications assets and services, including planning and sourcing, procurement and provisioning, inventory and usage management, invoice processing, expense allocation and accounting, and asset decommissioning and disposal.

TNGO’s on-demand Communications Management Platform is a suite of software designed to manage and optimize the complex processes and expenses associated with this lifecycle for both fixed and mobile communications assets and services.

RECENT DEVELOPMENTS -- On January 25, 2011, TNGO acquired substantially all of the assets of HCL Expense Management Services Inc., a provider of telecommunications expense management, invoice processing and mobility management solutions, for $3.0 million in cash plus potential earnout payments of up to $3.4 million based on revenues derived from providing selected services to former HCL customers over the two years following the acquisition.

On March 16, 2011, TNGO acquired substantially all of the assets of the telecommunications expense management division of Telwares, Inc. and its subsidiary Vercuity Solutions, Inc. for $4.5 million in cash (excluding working capital adjustments) plus deferred cash of up to an additional $2.5 million payable over the two years following the acquisition.

Through these acquisitions TNGO added to its customer base more than 100 telecommunications expense management customers of HCL and Telwares with aggregate annual telecommunications expense under management in excess of $3.0 billion as of March 31, 2011. TNGO is currently integrating and migrating the operations and customers of these acquired businesses into our business.

COMPETITION -- Competition includes:

  • Technology providers of TEM solutions, including Emptoris, MDSL, Symphony SMS, Vodafone and XIGO;
  • Technology providers of MDM point solutions, including AirWatch, BoxTone, Good Technology, MobileIron, Sybase and Zenprise;
  • Outsourced service providers selling TEM solutions, including ProfitLine and Vodafone;
  • Other enterprise software providers, including Ariba and PAETEC; and
  • Solutions developed internally by enterprises.

USE OF PROCEEDS -- Shareholders intend to sell 1.27 million shares. TMGO intends to sell 7.5 million shares to net $67 million allocated to the following:

Twenty-five point five million to pay down in full the outstanding balances on a senior secured term loan and revolving credit facilities, which mature on January 21, 2015 and September 30, 2011, respectively, of which $20.0 million and $5.5 million in principal were outstanding as of March 31, 2011, accruing interest at rates of 9.75% and 4.3%, respectively, as of March 31, 2011.

The balance for working capital and other general corporate purposes, which may include financing our growth, developing new solutions and funding capital expenditures, acquisitions and investments.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: IPO Preview: Tangoe