IPO filing activity has been fairly light in the tech sector so far this year … though given the stock market’s continued winning ways, this might change soon.
Helping spice things up this week, though, is a new filing from Rally Software. The company operates a cloud platform that helps improve coding software. Essentially, it adopts the so-called “agile” approach, which tends to reduce errors and increase the speed of development.
Amid the growth in smartphones, tablets and social networking, many companies have realized that they need to develop their own apps, as they help businesses get closer to customers and even find new market opportunities. Thus, Rally should benefit from a powerful secular trend for software development; according to Gartner, this global market stands at about $372 billion.
Rally currently has more than 1,000 customers, including 36 Fortune 100 companies, which helped power 39% revenue growth year-over-year to $41.3 million in fiscal 2012.
However, the company still is losing money — Rally’s net loss increased from $9.9 million to $11.6 million YOY. Investors shouldn’t be too alarmed, though, as losses should be expected from most companies during their growth phase.
Rally’s competition includes a who’s who of blue chips — just in the Dow Jones Industrial Average alone, the company is squaring off against the likes of Hewlett-Packard (NYSE:HPQ), IBM (NYSE:IBM) and Microsoft (NASDAQ:MSFT).
However, by being cloud-based, Rally has some big advantages. Simply put, this is the kind of approach that appeals to programmers because of the low costs and centralization of data, which allows for better analytics and collaboration. Rally also has a big opportunity in foreign markets, especially in Asia. So far, only 13% of the company’s revenues come from outside the U.S.
Lead underwriters on the Rally IPO include Deutsche Bank (NYSE:DB) and Piper Jaffray (NYSE:PJC). The terms of the deal — such as the price range and number of shares to be issued — have yet to be disclosed.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.”Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.