Money Will Pay Down Debt, Possibly Fund Acquisitions
Tangoe to Go Public with $75 Million IPO
April 22, 2010 (Vol. 31, No. 8) Telecom expense management firm Tangoe intends to make itself a publicly held company by selling $75 million in shares, according to a filing the Orange, Conn.-based company submitted to the Securities and Exchange Commission on April 16. Going public is rare in the TEM industry, which is dominated by firms funded through private and venture capital. Pittsford, N.Y.-based Veramark is public, for example, but Ontario-based Avotus transitioned from a public to private company in pursuit of better financing opportunities in 2005. Tangoe would use the proceeds from its stock offering to pay down debt and for working capital and other corporate expenses. It could also use some of the money for acquisitions or future investments in services or technologies, the company says in its SEC filing. The number and price of Tangoe’s shares haven’t been determined. Tangoe applied to have its common stock listed on the NASDAQ Stock Market under the symbol “TNGO.” Enterprises Benefit from Quarterly View into Financials The impact to enterprises of Tangoe’s initial public offering (IPO) is mixed, experts say. Enterprises can get a better idea of the financial stability of a TEM company if it is publicly traded, because results have to be filed quarterly with the SEC, notes Phillip Redman, research vice president at Stamford, Conn.-based IT research and advisory firm Gartner Inc. For example, Tangoe’s SEC filing reveals the company’s total revenue increased to $55.9 million in 2009 from $37.5 million in 2008 and $21 million in 2007. The revenue gains are a result of organic growth and three acquisitions: Traq Wireless in March 2007, Information Strategies Group (ISG) in July 2008 and InterNoded in December 2008. Tangoe has been not profitable in any fiscal period since the company was formed; it booked net losses of $9.7 million in 2007, $7.0 million in 2008 and $2.6 million in 2009. Though the increased visibility into financials might be appreciated by enterprises, the SEC filing obligation and pressure from shareholders to grow revenues could also distract executives who have to put a lot of time into financial and strategy reporting, agree Redman and Hyoun Park, research analyst for telecom and unified communications at Boston-based Aberdeen Group. IPO Could Position Tangoe for Future Growth Tangoe was incorporated in 2000 and lists its limited operating history and intense competition (especially on price) among the risks for potential investors in its more-than-200-page prospectus. But Tangoe’s IPO is evidence that there’s a promising future for pure-play TEM companies if they meet market demands, Park says. While the IPO will help Tangoe get rid of debt, it could also help build Tangoe’s profile. The company will have to prove its aggregated approach to landline TEM, wireless expense management, mobile device management and managed services will allow it to scale and be cash-flow positive, he says. Tangoe’s solution aims to help enterprise communications pros manage the fixed and mobile communications lifecycle including contract sourcing, asset procurement, services provisioning, invoice processing, expense allocation, bill payment, policy enforcement, usage management, inventory tracking and device decommissioning. The company sells its on-demand software primarily on a subscription basis through contracts with terms that range from two to five years; it also provides strategic consulting services. Tangoe has done a good job of anticipating enterprise demand – evidenced by its move into mobile device management with its InterNoded acquisition, for example – and will have to do more in the future to retain its reputation in the market, Park adds. Tangoe had more than 350 customers at the end of 2009. Its future growth strategy includes a focus on international operations, leveraging strategic alliances (like its relationship with IBM) to complement direct selling efforts, pursuing acquisitions and adding new customers. ( | 
