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Silver Spring Networks to Light Up IPO Market

Smart-grid energy company should steal most attention this week


Two IPOs that were supposed to come public last weekProfessional Diversity Network (NYSE:APAM) and Artisan Partners Asset Management (NYSE:APAM) — are now scheduled for this week. Both deals are fairly small, though, and probably will not get much attention.

Instead, the deal that will probably get most of the attention is Silver Spring Networks (NYSE:SSNI). Founded just over a decade ago, the company operates a networking platform that is turning the power grid into a smart grid. The system uses sophisticated cloud-based technologies, RF mesh and cellular connections to automate the metering process for homes and businesses, which results in huge cost-savings for utilities. After all, the industry is quite labor-intensive.

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Silver Spring’s platform has other key advantages as well, allowing more efficient distribution of electricity, improved power outage detection and restoration, plus demand-side management (including incentives to deal with peak hours).

At the end of 2012, Silver Spring delivered services to 15.8 million homes and businesses via its pioneering IPv6 networking platform. Some of the customers included Pacific Gas & Electric, Pepco Holdings (NYSE:POM), CPFL Energia (NYSE:CPL) and Exelon Corp. (NYSE:EXC).

From 2010 to 2012, revenues grew from $70.2 million to $196.7 million. Still, that 2012 number was less that the total sales for the year before, and the company has been a money-loser. Last year, the net loss was a hefty $89.7 million.

Going forward, though, there should be a nice growth ramp in theory. The total backlog is $745 million and Silver Spring’s target market is expected to grow an average of 23% per year until 2015, reaching about $19.5 billion.

Plus, one area of strong growth potential is to expand into global markets. Smart-grid technologies are becoming a must-have and Silver Spring is the leader in the industry. The capital from the IPO should be a big help for cashing in on this trend, especially in Europe and Asia.

As for the IPO, Silver Spring expects to issue 3.7 million shares at a range of $16 to $18. The lead underwriters include Goldman Sachs (NYSE:GS) and Credit Suisse (NYSE:CS). Silver Spring plans to list on the NYSE under the symbol “SSNI.”

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.

Article printed from InvestorPlace Media,

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