Contact: Tejas Venkatesh, Christian Renaud
In its first quarter as a public company, Gigamon beat both revenue and earnings expectations, pushing the company’s market value to $1bn. The network traffic visibility vendor reported on Monday revenue growth of 44% year over year. In mid-Tuesday trading, the stock was changing hands at $34, up more than 70% since its IPO six weeks ago. The strong growth shows the rising importance of network monitoring, which could make players in this sector hot properties for larger companies.
Network monitoring and analysis has become more important as networks – whether traditional, virtualized or hybrid – increasingly employ some component of public/private cloud technology. Virtualized and cloud-based networks are often ‘dark traffic’ to network monitoring tools, and Gigamon has announced offerings for both virtualized and cloud environments that will help address the dark traffic issue.
Network monitoring is still pegged as a relatively small market. (Gigamon management estimated the total addressable market to be $2-3bn during their analyst call.) However, we have seen public and private players such as NetScout, WildPackets and cPacket Networks continue to put up strong growth.
The continued growth of network traffic visibility providers could draw acquisition interest from deep-pocketed suitors such as Cisco, Juniper Networks and Brocade. The sector has already seen a fair bit of M&A activity: Danaher acquired Gigamon rival VSS Monitoring last summer for an estimated $180m, and Ixia paid $145m for Anue Systems around the same time. We would note that those deals went off at about 5x and 3x trailing sales, respectively. In comparison, Gigamon trades at more than 8x trailing sales, and that’s without any acquisition premium.
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