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Based in Mountain View, California, Audience (NASDAQ:ADNC) scheduled a $79 million IPO with a market capitalization of $290 million at a price range mid-point of $15 for Thursday, May 10, 2012. [S-1]

ADNC is one of 12 IPOs scheduled for the week of May 7 (Full IPO calendar here).

Manager, Joint Managers: J.P. Morgan; Credit Suisse; Deutsche.


  • ADNC provides intelligent voice and audio solutions that improve voice quality and the user experience in mobile devices.
  • Apple is the largest customer. In the March 2012 quarter ADNC shifted to licensing the product to Apple and received $19mm in revenue.
  • On page 11 in the S-1 fling ADNC said "For the new generation processor IP, the royalty this OEM is required to pay us is subject to a lifetime maximum." S-1, page 11
  • But the 'lifetime maximum' is not specified in the SEC filing. It could be low or high relative to ADNC's market capitalization of

Because we don't know the 'lifetime maximum' it is impossible to value ADNC. On the IPO, therefore, ADNC is a speculative gamble that may be worth taking if you 'want to believe.' If on the other hand you are a more conservative investor, you may want to pass on ADNC's IPO because not enough investor information is disclosed in its SEC filing.

Apple (NASDAQ:AAPL) can cancel in 30 days, and "Our future royalties may also be at risk with respect to future mobile device releases if the OEM to which we have licensed our processor IP exerts pricing pressure on us, expends resources to develop an internal solution or considers a solution that is incorporated in other audio components such as a baseband processor." Page 11 S-1.

ADNC's revenue has been significantly concentrated in a small number of OEMs, contract manufacturers and distributors.

ADNC expects that concentration to continue for the foreseeable future. In 2010 and 2011. Sales to contract manufacturers for Apple, the largest OEM, represented 82% and 75% of revenue, respectively, and Samsung Electronics Co., Ltd. represented 7% and 20% of revenue, respectively.

In the three months ended March 31, 2011 and 2012, ADNC's largest OEM and its contract manufacturer represented 95% and 62% and Samsung represented 5% and 36% of revenue, respectively.

ADNC is undergoing a transition in its sales model with Apple and licensed semiconductor intellectual property (processor IP) to the OEM for its latest generation of mobile phones, and is continuing to sell processors to its contract manufacturers for older generations of mobile phones.

ADNC expects that total revenue from Apple and its contract manufacturers to decline as ADNC receives a lower royalty per mobile device than the selling price of a stand-alone processor.

As of March 31, 2012, ADNC held seven U.S. patents expiring between July 19, 2019 and December 8, 2030 and also had 87 U.S. patent applications pending. As of March 31, 2012, ADNC also had 37 pending foreign patent applications. Each of the foreign patent applications is related to a U.S. patent or a pending U.S. patent application.

ADNC currently faces competition from a number of established companies that produce components for the mobile device audio subsystem, including companies that produce dedicated voice and audio solutions.

Competitors include Maxim Integrated (NASDAQ:MXIM), ON Semiconductor (ONNN), Qualcom (NASDAQ:QCOM), Texas Instruments (NASDAQ:TXN), Wolfson Microelectronics plc (WLF) and Yamaha Corporation.


  • Entities affiliated with New EnterpriseAssociates, Inc., 30%
  • Entities affiliated with Vulcan Capital Venture Capital, 25%
  • Entities affiliated with Tallwood Venture Capital, 32.5%

As of March 31, 2012, ADNC had 206 employees.

ADNC expects to net $66 million from its IPO, with proceeds allocated for working capital and other general corporate purposes.

ADNC itself intends to sell five million shares. Selling stockholders intend to sell 270,000 shares.

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

Disclaimer: This ADNC IPO report is based on a reading and analysis of ADNC's S-1 filing which can be found here, and a separate, independent analysis by There are no unattributed direct quotes in this article.