Intellon Plans $100m IPO

Intellon Plans $100m IPO

News Publication Date: 16 July 2007
By Brian White

Intellon, which develops integrated circuits for high-speed communications over existing electrical wiring, is seeking to raise $100m from an IPO.

The Ocala, Florida-based company, which counts Intel, Motorola, and Samsung among its early backers, said consumer demand for broadband services and the proliferation of digital video, audio, and data content are driving the rapidly growing market for home connectivity.

It said its ICs address the challenges of sharing entertainment content throughout the home, and deliver connectivity through electrical outlets. It said its newest ICs also meet the performance demands required for the delivery of high-definition video content.

Intellon, which claims industry leadership, said it has shipped more than 16 million powerline communications ICs, including over 10 million HomePlug-based ICs that have been integrated into adapters, set-top boxes, and other commercial applications. In 2006, it increased shipments of powerline communications ICs by 87% to 5.3 million.

Intellon ships its products directly to OEMs and service providers, and also sells to original design manufacturers, which include them in products they supply to OEMs and service providers.

The company said researchers at IDC forecast that total households worldwide with broadband service will increase from 206 million in 2005 to 396 million in 2010.

With increasing data rates driving demand, eMarketer predicts that the number of users in the US who download or stream video content is expected to increase from 108 million in 2006 to 157 million in 2010. IPTV alone is projected to grow at a 60.2% compound annual growth rate from 2006 to 2010.

It said powerline communications are easier to install and use than the other connectivity solutions, making them attractive for consumer retail products as well as service provider applications. However, it acknowledged that powerline communications face challenges such as limited throughput, reliance on a single channel, and potential interference on the powerline. As all connectivity technologies have relative strengths and limitations, it believes that many homes will use a hybrid network. It said powerline communications could be used to extend the range of Wi-Fi and Ethernet LANs, and can be used to connect products that need to be plugged in while Wi-Fi is used as a separate network for mobile devices.

Though the home market represents more than 90% of its revenue, Intellon is also looking at other markets. Its HomePlug-based ICs are used by electric utilities in a number of applications designed to help them provide a secure electrical distribution system that can be monitored remotely, known as a smart grid.

These smart grid technologies include advanced residential electricity meters, which enable utilities to monitor real-time electricity consumption in their customers’ homes and send signals to limit use of certain appliances during peak demand periods. Intellon said there are 144 million electricity meters in the US and it is estimated that only 6% were enabled to provide real-time, two-way communication capabilities.

Intellon’s ICs also enable utilities to use powerline-enabled security cameras and other products to monitor utility assets and the performance of transformers and other devices connected to the electric grid. It said utility companies can also use advanced residential electricity meters to serve as communication gateways that use neighborhood powerlines for last mile delivery of broadband services such as internet and VoIP telephone services. This enables the utility to enter the broadband service provider business with limited additional investment beyond the cost of the smart grid system.

Intellon is heavily loss-making but expanding rapidly. In the year to December 31, the net loss was cut from $17.4m to $13.1m on revenue that doubled to $33.7m. In the first quarter of 2007, the net loss increased from $3.2m to $3.9m on revenue that rose 32% to $9.7m.