Force10 Round Hits $113M

Force10 Networks, just two weeks after bringing in over $50 million in Series F funding, has racked up an additional $60 million as part of the same round, according to documents filed with the SEC. (See Force10 Takes $51 Million.)

The 10-Gbit/s Ethernet switch specialist quietly clinched the first slice of funding a couple of weeks ago, raising over $50 million in an equity offering to 43 investors. A document filed with the SEC a few days ago reveals that the firm has significantly extended the scope of this offering, bringing in more than $113 million from a total of 63 investors.

Execs at Force10 refused to comment on the round, which brings the vendor's total funding to north of $400 million and once again casts a spotlight on its IPO plans. (See Force10 Orders One More Round and Force10: Where's the Exit? .)

There has been speculation that Force10, which saw its initial plans for a public offering stalled by the bugaboo of Sarbanes Oxley compliance back in 2005, was planning to go public within the next few months. (See Force10 IPO Still Hanging.)

At least one analyst thinks the cash influx may be a sign that Force10 intends to postpone its IPO. "My understanding is that the initial $50 million was to tide them over until their IPO and do some market expansion," says Joe Chiasson, equity analyst for telecom equipment at Susquehanna Financial Group. "Unless they have aspirations of doing a small M&A deal, south of $100 million, the only other explanation is that the S-1 is further out than we thought."At this stage, specific details on the vendor's strategy remain a mystery, thanks largely to the fact that Force10 continues to keep its financial performance well under wraps. The last insight into the vendor's finances was in 2005, when Force10 was said to be anticipating revenues of $60 million, up from $27 million in 2004. (See Force10 Revs Revenues.)

That said, the vendor has been picking up customers at a clip, and numbers the European Organisation for Nuclear Research (CERN), Indiana University, NASA, Penn State, and the Korean National Supercomputing Center amongst its clients. (See CERN Uses Force10 Switches, IU Deploys Force10 , Korean Grid Uses Force10, NASA Deploys Force10, and Penn State Deploys Force10 E-Series.)

Susquehanna Financial Group's Chiasson told Byte & Switch that the firm needs to break out of its traditional niche in high-performance computing if it wants to make its presence felt. "I think their challenge really is expanding beyond that high end of the switch market and to get their revenues up to above $150 million in annual business," he says.

Certainly, the vendor is looking more and more to the enterprise market. Last year, for example, Force10 unveiled a low latency switch aimed at firms building large server and storage clusters. (See Force 10 Fires Up Low Latency Switch and Force10 Intros S2410.) The vendor has also teamed up with Sun, offering its TeraScale switch/routers within Sun's Grid Compute Utility service. (See Force10 Anchors Sun Grid.)

Force10 has also been touting its wares as a high-bandwidth, low-latency alternative to InfiniBand, although 10-Gbit/s Ethernet is yet to establish itself as a mainstream data center offering. (See The War of Words, InfiniBand of Brothers, IBM's Cluster Bluster, InfiniBand Natives Stirring, and Is It Time for 10-Gig?.)The other possibility is that Force10's bulging coffers are part of an anti-acquisition strategy. Last year, Nortel was said to be sniffing around the firm in an attempt to boost its own 10-Gbit/s Ethernet story. (See Sources: Nortel Could Get Force10.)

Storage IPOs are much more common than they were a few years ago. After a lean spell for S-1s, a growing number of hardware vendors have recently taken the plunge. (See Omneon Preps for $115M IPO, Double-Take, Isilon Go Public, CommVault Swims in Public Pool, and Riverbed Comes Out at $9.75.)

James Rogers, Senior Editor Byte and Switch