Intellon IPO: Second Attempt For Conexant Rival

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Includes: CNXT-RETIRED, ITLN
by: Abbi Adest

Intellon (ITLN) is making a second attempt at an IPO this week. The company, which design ICs for broadband communications over electrical wiring, initially tried in 2001.

All quotations are from the company's most recent S-1 filing with links provided.

INTELLON (ITLN)
Business Overview (from prospectus)

We are a leading fabless semiconductor company that designs and sells integrated circuits (ICs) for high-speed communications over existing electrical wiring. Our ICs enable home connectivity, which is the sharing and moving of content among personal computers and other consumer electronics products in the home. For example, products containing our ICs allow consumers to share video content that has been downloaded to a personal computer from the Internet with a television in another room. Consumer demand for broadband services and the proliferation of digital video, audio and data content are driving the rapidly growing market for home connectivity. We believe our solutions are particularly well-suited to address the challenges of sharing entertainment content throughout the home. Products using our ICs are easy to install and use, and deliver connectivity through electrical outlets across the home. Our newest ICs also meet the performance demands required for the delivery of high-definition video content.

Offering: 7.5 million shares at $9.00 - $11.00 per share. Net proceeds of approximately $67.8 million will be used for general corporate purposes, which may include working capital, capital expenditures, other corporate expenses and acquisitions of complementary products, technologies or businesses. The company currently has no agreements or commitments with respect to any such acquisitions.

Lead Underwriters: Deutsche Bank, Jefferies

Financial Highlights:

Revenue was $36.6 million in the nine months ended September 30, 2007 and $24.8 million in the same period in the prior year, an increase of $11.8 million, or 47.7%...Cost of revenue was $20.3 million in the nine months ended September 30, 2007 and $14.3 million in the same period in the prior year, an increase of $6.0 million, or 42.1%...Gross profit was $16.3 million, or 44.6% of revenue, in the nine months ended September 30, 2007 and $10.5 million, or 42.4% of revenue, in the same period in the prior year...Research and development expense, including the amortization of intangibles, was $11.4 million in the nine months ended September 30, 2007 and $7.5 million in the same period in the prior year, an increase of $3.9 million, or 52.9%.

Competition:

As several technologies are capable of enabling communications for high bandwidth home connectivity applications, we compete with suppliers of ICs based on powerline, other wireline and wireless technologies. Our primary powerline competitors include Afa Technologies, Inc., Arkados Group Inc. (OTCPK:AKDS), Conexant Systems, Inc (NASDAQ:CNXT-RETIRED). and Maxim Integrated Products Inc. (NASDAQ:MXIM), which build HomePlug-based ICs, and Design of Systems on Silicon (DS2) and Panasonic (NYSE:MC), which build ICs based on incompatible non-HomePlug powerline communications technologies. We compete with most of these companies in the use of powerline communications technology over coaxial cable and telephone wiring as well as powerlines.

We also face competition from a large number of companies that offer other wireline and wireless communications ICs based on various technologies, including Atheros Communication Inc. (NASDAQ:ATHR), Broadcom Corporation (BRCM), Conexant Systems Inc., Coppergate Communications, Ltd., Entropic Communications, Inc. (NASDAQ:ENTR), Intel Corporation (NASDAQ:INTC), Marvell Technology Group Ltd., (NASDAQ:MRVL) Pulse-Link, Inc., Realtek Semiconductor Corp. and Texas Instruments Incorporated (NYSE:TXN).

We also face competition from companies that provide enabling technology for utility smart grid and broadband over powerline applications. Our primary competitor for sales of ICs for utility applications is DS2. We also face competition from systems providers who have developed proprietary utility communications technology including fixed wireless over private and public networks, powerline, other wireline and hybrid networks. These competitors include Esco Corporation, Echelon Corporation (NASDAQ:ELON), and Cellnet Technology, Inc. We expect to face competition from new and emerging companies that may enter our existing or future markets and from companies that acquire our competitors and may have financial, sales, marketing, manufacturing, distribution, technical and other resources that exceed our own.

Additional Resources:

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