So far this year, technology infrastructure IPOs have been fairly strong. Some examples include Data Domain and Aruba Networks. But as for last week's offering of Airvana (NASDAQ:AIRV), things weren't so rosy. The company planned to sell 8.3 million shares at a range of $8 to $12 yet was only able to price the offering at $7. On its first day of trading, shares in the company increased only 2% to $7.17.

Airvana develops technologies to help carriers like Verizon (NYSE:VZ) and Sprint (NYSE:S) deploy video, music, gaming, push-to-talk services, and so on. With declines in voice revenues, wireless operators are increasingly focusing on such data services. In the case of Verizon, its revenues from data services almost doubled between 2005 and 2006.

As for Airvana's financials, revenues surged from $2.3 million to $170.2 million over fiscal 2005 to 2006. Amazing, huh?

Not necessarily. Because of Airvana's OEM distribution model, a large chunk of revenue must be deferred until there are specified upgrades. This means extreme volatility. Keep in mind that first-quarter results in 2007 showed revenues of only $269,000.

Another issue is that Nortel (NYSE:NT) accounted for roughly 95% of overall revenues last year. So for some time to come, the key growth driver for Airvana will be Nortel, which is a company with a history of fumbling.

Airvana also faces grueling competition. Some rivals include Alcatel-Lucent, Hitachi, Huawei, and Samsung.

Airvana also plans to expand its technology for the fixed-mobile (FMC) market, which allows carriers to leverage their wireline broadband networks to deliver wireless services. But the market is in the early stages and already has competition from Cisco (NASDAQ:CSCO) and Ericsson (NASDAQ:ERIC).

Even though Airvana has spent nearly $200 million developing its products and is addressing a growth market, the company faces some major challenges. It's got Wall Street concerned, and Fools should be cautious as well.

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Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He is currently ranked 2,419 out of over 61,000 players in CAPS.