On December 20, Avast Software filed with the SEC for an initial public offering (IPO) of $200 million in common shares. UBS Limited and Deutsche Bank Securities Inc. are acting as joint bookrunning managers and Pacific Crest Securities LLC, Morgan Keegan & Company, Inc. and Macquarie Capital (USA) Inc. are acting as co-managers for the proposed IPO. Avast promotes that they are protecting over 146 million active users and 189 million registered users. Nice installed based to talk about for an initial public offering The freemium model covers a substantial number of these users.
A Quick But Often Used Valuation Methodology for an IPO
In the interest of brevity, methods of valuing a company for IPO purpses include - Book Value, Internal Rate of Return (IRR) Profit/Sales Multiple, P/E (Price/Earnings ratio), Dunn-Rankin formula, free cash flow. In the link to the attached article, the author also talks about the asset approach, the earnings approach, and the market comparison approach. Discounted cash flow analysis would be great, but does involve a fair amount of conjecturing.
So, let’s use the price multiple approach for an Avast IPO. For the six months ended June 30, Avast reported a profit of $23 million. This was an increase from $4.4 million during the same period last year. Revenue increased 87% to $37.9 million. Double that revenue to annualize it, and assume a little growth over the second half of the year. Instead of $75.8 million, let’s say $80 million. Their total 2010 revenue was $48.5 million. This is probably still conservative since their first halve 2010 revenue was $20.2 million.
From an earlier blog, Symantec paid a revenue multiple of 5x and 4.8x for PC Tools and Message Labs, respectively in 2008. In 2009, McAfee paid a revenue multiple of 4.9x for its acquisition of MX Logic. These were all security acquisitions.
Different industries have different price multiples. The risk is different. Margins are different. A software company isn’t a steel com company, nor is it an appliance company.
Intel’s acquisition of McAfee wouldn’t be a valid comparison because McAfee obtains a substantial portion of its revenue from appliances. Ditto for any multiple that could be back calculated from the Thomas Bravo December 8 $1.3 billion proposed acquisition of Blue Coat Systems. Blue Coat obtains a substantial amount of revenue from its appliances. Bravo paid a 48% premium over the previous day’s stock closing price and about 19 percent off the highs of Blue Coat’s share price in January. http://dealbook.nytimes.com/2011/12/09/thoma-bravo-acquires-blue-coat-systems-for-1-3-billion/
And the Answer is
Using the 5x figure for Avast Software, suggests a total valuation of $400 million. This may not be unreasonable give their rapid growth. The paperwork filed with the SEC lays out a number of potential risks. But that's what this paperwork is for.
Again, the above is crude. There are multiple better methods. It does provide a rough estimate. The company is generating cash. They are profitable. As of June, they had about $85 million in the bank. Let the underwriting number crunching continue.
For a May update
To view Avast’s F-1 form filed with the SEC, go to http://www.sec.gov/Archives/edgar/data/1537133/000104746911010159/a2206699zf-1.htm
http://kensek.blogspot.com/2011/12/avast-software-files-for-200-million.html
Showing posts with label Intel. Show all posts
Showing posts with label Intel. Show all posts
Monday, January 02, 2012
Thursday, January 27, 2011
European Commission (EC) Approves Intel Acquisition of McAfee
Five weeks after the FTC gave Intel approval of its $7.68 billion (US) acquisition of McAfee, the European Commission, watchdog for the European Union (EU, ) did the same.
"The commitments submitted by Intel strike the right balance, as they allow preserving both competition and the beneficial effects of the merger. These changes will ensure that vigorous competition is maintained and that consumers get the best result in terms of price, choice and quality of the IT security products," said Commission Vice-President in charge of competition policy Joaquin Almunia.
Among the commitments Intel made to the European Commission:
• McAfee competitors will have access to all necessary information to use functionalities of Intel's CPUs and chipsets in the same way as those functionalities used by McAfee.
• Intel will not to actively impede competitors' security solutions from running on Intel CPUs or chipsets.
• Intel will avoid hampering the operation of McAfee's security solutions when running on personal computers containing CPUs or chipsets sold by Intel's competitors (AMD, etc).
http://europa.eu/rapid/pressReleasesAction.do?reference=IP/11/70
It will be interesting to read any comments McAfee’s internet security competitors (Symantec, Trend Micro, Kaspersky, Sophos, etc) regarding this decision. They have to be happy that they will have access to the same functionalities on the chip that McAfee will have. Whether McAfee will have any sort of early access is an interesting question.
Intel has had disagreements with the EC before. In 2009, Intel was fined $1.45 billion for engaging in illegal anticompetitive practices to exclude competitors from the market for X86 computer chips.
http://venturebeat.com/2009/05/13/intel-slapped-with-145-billion-fine-for-antitrust-violations/
Let the monitoring begin.
Meanwhile, on Tuesday, Intel’s chief technology officer Justin Rattner announced that scientists at Intel are working on security technology that will stop all zero-day attacks*. The technology could be ready this year. He stated that the technology won’t be signature based. This could mean that heuristic or behavior based capabilities will be put on Intel’s chips. McAfee’s contribution to this project (if any) wasn’t mentioned.
http://www.computerworld.com/s/article/9206366/Intel_developing_security_game_changer_
*One definition of a zero day attack - A zero day attack capitalizes on vulnerabilities right after their discovery. Thus, zero-day attacks occur before the security community or the vendor of the software knows about the vulnerability or has been able to distribute patches to repair it.
"The commitments submitted by Intel strike the right balance, as they allow preserving both competition and the beneficial effects of the merger. These changes will ensure that vigorous competition is maintained and that consumers get the best result in terms of price, choice and quality of the IT security products," said Commission Vice-President in charge of competition policy Joaquin Almunia.
Among the commitments Intel made to the European Commission:
• McAfee competitors will have access to all necessary information to use functionalities of Intel's CPUs and chipsets in the same way as those functionalities used by McAfee.
• Intel will not to actively impede competitors' security solutions from running on Intel CPUs or chipsets.
• Intel will avoid hampering the operation of McAfee's security solutions when running on personal computers containing CPUs or chipsets sold by Intel's competitors (AMD, etc).
http://europa.eu/rapid/pressReleasesAction.do?reference=IP/11/70
It will be interesting to read any comments McAfee’s internet security competitors (Symantec, Trend Micro, Kaspersky, Sophos, etc) regarding this decision. They have to be happy that they will have access to the same functionalities on the chip that McAfee will have. Whether McAfee will have any sort of early access is an interesting question.
Intel has had disagreements with the EC before. In 2009, Intel was fined $1.45 billion for engaging in illegal anticompetitive practices to exclude competitors from the market for X86 computer chips.
http://venturebeat.com/2009/05/13/intel-slapped-with-145-billion-fine-for-antitrust-violations/
Let the monitoring begin.
Meanwhile, on Tuesday, Intel’s chief technology officer Justin Rattner announced that scientists at Intel are working on security technology that will stop all zero-day attacks*. The technology could be ready this year. He stated that the technology won’t be signature based. This could mean that heuristic or behavior based capabilities will be put on Intel’s chips. McAfee’s contribution to this project (if any) wasn’t mentioned.
http://www.computerworld.com/s/article/9206366/Intel_developing_security_game_changer_
*One definition of a zero day attack - A zero day attack capitalizes on vulnerabilities right after their discovery. Thus, zero-day attacks occur before the security community or the vendor of the software knows about the vulnerability or has been able to distribute patches to repair it.
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