Friday, March 16, 2012

Procera Files Shelf Prospectus for $100M; Market Hype or Opportunity?

Encouraged by the rally of DPI shares this week (see chart below) Procera Networks filled a shelf-prospectus for $100M (here). Last year, Allot Communications went through the same process, eventually issuing new shares for close to $80M on November.

While many expect the DPI market to grow significantly (here), with LTE deployments, extensive video consumption on fixed and mobile networks and even due to the new iPad, there are many risks to the pure players of standalone DPI devices (Allot Communications, Procera and Sandvine).

This includes offering from TEMs with integrated devices (see posts about  - Ericsson, Alcatel-Lucent, Cisco), new offering from new competitors (F5, Bytemobile) changes in traffic composition (streaming video vs. P2P downloads - here) and new business models for DPI and more. The DPI vendors should respond to these challenges quickly to justify the current high valuations (see "DPI Market - Allot Insiders Sell Shares" - here).

As a reminder, the 3 players generated $211.6M in revenues during the FY2011, compared to $167M in 2010 (+26.7%) (here).

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