Infrastructure Stocks Struggle

After watching so many acquisitions in the infrastructure sector occur over the past five years, it's been our hope that the IPO market for infrastructure companies would pick up so that we could get back to the good old days and have multiple exit alternatives for successful infrastructure startups. And with the infrastructure IPOs that have occurred in the past year, it looked like that was finally happening. VMware's IPO last summer seemed to be a clear indicator -- after coming out in the fifty-ish range it doubled to the $115 range by November. But VMware has seen its price tumble to the mid $50 range. And other infrastructure IPOs looked good early on too -- Sourcefire and Acme Packet each looked like IPO poster boys for success. But the market has been brutal this past fall and winter -- both companies are now trading at their lowest levels since their IPOs and have lost over half of their market value. And Riverbed Technology has been trading in the $18 range, near its IPO price, after breaking $50 last fall. Despite all of these indicators, in what you could call a daring move, ArcSight went public in mid February, priced at $9 per share, a level that it hasn't closed at since its IPO (that's got to be an ugly story when you get into the details, talk about poor timing...). Of course, when you try to read the tealeaves on how the public market treats infrastructure, you have to consider how Cisco is faring since it sets the stage for so much of the business -- CSCO is trading around $24, down about 30% since its recent high this past fall.