--Silver Spring Networks will the coming week's lone IPO
--Company's platform connects utilities to 'smart grid'
--Deal is just the second this year from the technology sector
By Chris Dieterich
NEW YORK--Energy-technology company Silver Spring Networks Inc. looks to bring its initial public offering in the coming week, a deal from a once-hot sector that has been largely dormant this year.
The IPO market in 2013 has produced big trading gains from companies in the financial, industrial, health-care, consumer and energy sectors. But technology, typically the domain of growth-oriented and high-profile new flotations, has been quiet. Silver Spring's modest $66.7 million offering will be the sector's second, and largest, of the year, according to Ipreo, a market-intelligence firm.
Silver Spring operates a hardware and software network designed to help utility companies tap the "smart grid"--a responsive electrical infrastructure designed to help lower costs and optimize energy usage. Customers including PG&E Corp. (PCG) and Pepco Holdings Inc. (POM) distribute the company's two-way transmitting equipment close to homes and businesses. The devices are connected to the energy grid and send energy-consumption data back and forth between consumers and utilities.
Utility companies can use the platform to monitor usage, automating services like meter reading, or shutting off service at homes after someone moves. These plugged-in utilities can pinpoint and address outages more quickly, among other things.
The smart grid allows utilities to offer incentives to consumers to expend electricity more efficiently, including flexible pricing programs to lessen the strain during times of peak demand. For example, utilities could alert customers they will pay more to run a dishwasher during peak hours.
Silver Spring will be the latest test for technology IPOs, which have experienced rocky performance recently.
It has been nearly two years since Silver Spring revealed its IPO plans in July 2011. Since then, high-profile firms like solar-panel installer BrightSource Energy Inc. have pulled their IPOs. The solar-thermal company dropped its plans in April 2012, citing market conditions. A month before that, solar-panel component-maker Enphase Energy Inc. (ENPH) slumped in its IPO. It remains well below its offer price.
Short-term money flows have been cautious. The amount of venture-capital funds to flow into clean technology dropped 33%, to $6.5 billion, in 2012, according to the Cleantech Group, a consulting firm in San Francisco.
SolarCity Corp. (SCTY) Chief Executive Lyndon Rive told The Wall Street Journal in December his company felt a pushback from investors before the solar- panel installer's IPO. The company had to sharply cut the price of the offering to bring the deal to market, he said, but shares have doubled since the IPO.
Greg Chin, corporate partner in the Silicon Valley office of law firm Jones Day, said it isn't productive to lump all clean-tech deals together. Venture- capital dollars into the sector last year were still far higher than just five years ago.
"Clean tech is going to continue to be an important part of the U.S. venture- capital landscape--venture dollars in the sector still constitute perhaps 20-25% of all U.S. venture-capital investment, depending on how you calculate the figures. It's also clear that clean tech, which actually touches many areas of the overall U.S. economy, will continue to drive innovation and great companies, " Mr. Chin said.
Michael Porter and Jan Rivkin, co-leaders of Harvard Business School's U.S. Competitiveness Project, recently identified updating the country's infrastructure as one prong in an eight-part plan to address competitiveness. Analysts said Silver Spring's model could carry broader appeal from investors looking for exposure to the broad infrastructure modernization.
But the company's path to profitability could be a question mark for some investors. While Silver Spring has a history of strong sales, its revenue declined to $197 million in 2012, down about 17% from the year earlier. It has yet to post a profit since its founding in 2002.
Early investor Foundation Capital will retain a roughly 28% stake in the company after the offering, according to documents filed with the Securities and Exchange Commission. Venture-capital firm Kleiner Perkins Caufield & Byers will own about 13%.
The stock is expected to begin trading Wednesday on the New York Stock Exchange under the ticker SSNI.
Write to Chris Dieterich at firstname.lastname@example.org
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