Gigamon soars on debut

Contact: Tejas Venkatesh, Christian Renaud

A year after first filing its IPO papers, Gigamon finally debuted on the public markets Wednesday. The network traffic monitoring vendor sold 4.5 million shares at $19 each, raising $85.5m and creating $560m in market value. By midmorning, the stock changed hands at $25, up more than 35% from its debut price. Goldman Sachs & Co, Bank of America Merrill Lynch and Credit Suisse acted as lead joint book-running managers for the offering, with Gigamon trading under the ticker symbol GIMO on the NYSE.

The rapid growth of cloud computing and the move to dynamic virtual environments has created the need for increased visibility and control over network traffic. Gigamon’s revenue growth reflects that potential: sales have more than doubled since 2010, hitting $106m for the fiscal year ended in March. The company has managed that impressive growth while running solidly in the black, netting $7.6m in 2012.

Gigamon’s traffic visibility fabric combines hardware and proprietary software, offering independent traffic visibility across multivendor networks. Last year, the company also unveiled a software-only product, GigaVUE-VM, for cloud-based applications. This new release allows Gigamon to provide network managers with integrated visibility into their physical, virtual and cloud traffic. The nine-year-old company raised $23m in funding from Highland Capital Partners, which owns about one-quarter of Gigamon following the IPO.

The network monitoring sector has also seen a fair bit of M&A activity. For instance, Danaher acquired Gigamon rival VSS Monitoring last summer for an estimated $180m, or 5.1 times trailing sales. Around the same time, Ixia reached for Anue Systems, paying $145m, or 3x sales. Gigamon is currently trading at a market cap of $760m, or 7.2x trailing sales. Its larger size and impressive growth almost certainly helped garner a premium valuation compared with the trade sales in the market.

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