When a company goes public, its Wall Street bankers try to estimate a price range. Sometimes, as in last week's IPO of Spreadtrum
Spreadtrum develops baseband processors for wireless devices, helping to power multimedia capabilities like music and video. The company operates mostly in China, which has a large pool of talented engineers, low-cost manufacturing, and a sophisticated wireless handset supply chain.
China's also the world's biggest market for wireless goods. According to the country's Ministry of Information Industry, China has roughly 487 million wireless subscribers, and an IDC study projects that market will grow to 681.5 million by 2010.
As a result, Spreadtrum has posted stunning growth. From 2004 to 2006, its revenue spiked eightfold to $107 million. In 2006, the company posted net income of $14.3 million.
With fairly low wage rates, the company has a much easier time getting to profitability.
Lower payroll costs also leave management free to devote more cash to R&D efforts. Of its 727 employees, 514 are engineers, and about half have master's degrees or doctorates. Over the past few years, that team has produced a valuable portfolio of intellectual property.
Spreadtrum faces competition from a variety of players, including Analog Devices
However, Spreadtrum's strong technology architecture may help it fight back. The company's platform is open, making it easier to customize -- a must, given the ever-changing world of wireless tech.
While its stock may remain volatile for several months, Spreadtrum is most definitely a company to watch.
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