Acacia Communications Inc.: Then and Now
Acacia Communications is a company that designs, manufactures and markets products for optical networking. This company’s mission statement is “to deliver high-speed coherent optical interconnect products that transform communications networks, relied upon by cloud infrastructure operators and content and communication service providers, through improvements in performance and capacity and a reduction in associated costs.” The company was founded in 2009 and is under current Chief Executive Officer Murugesan Shanmugaraj.
Acacia Communications went public on May 13th last year. The company sold 4.5 million shares in its public release. Each share was sold at $23, generating a revenue of $103.5 million. Investors were mainly interested in this company because it had already demonstrated profitability in previous years as well as because of expansion. In 2014, Acacia had been ranked fifth in Inc.’s list of 5000 fastest growing companies. This was due to its generated revenue of $77.7 million up from $374000 in 2010. The company has about 25 major clients. The largest come from China, where there is increasing demand for high-speed and consistent computer networks in businesses.
On the first day being traded in the market, Acacia’s stock closed the day at about $31. An incredible $8 increment from its issuance price. The day’s trading had Acacia yield a market cap of over $1 billion. When commenting on Acacia’s release, CEO Raj said, “The IPO market has been pretty stagnant and has been a challenging environment.” However, he also said that going public “gives us the scale to go after bigger opportunities.” Some of Acacia’s investors include Matrix Partners, Summit Partners, Commonwealth Capital Ventures, OFS and Egan Managed Capital. Matrix Partners has the highest stake in the company amongst these investors standing at 39.2%.
With highly-successful network products, Acacia has seen a steep growth rate from its issuance. This was climaxed to highs of over $100 per share in the final quarter of 2016. As of Feb 28th, 2017, Acacia’s stock was trading at $51.95, down by $1.05. This price was a drop of 1.98%. For the fourth quarter of 2016, Acacia generated a revenue of $142.4 million. The income translated to a growth of 108% year-over-year. For the full year of 2016, Acacia made $478.4 million which was a 100% increase year-over-year.
The company also has no current debts. Analysts have predicted that Acacia’s revenue, cash flow, and profit will grow by over 50% in the next two years. Furthermore, its current price stocks are still trading way better than most tech companies.
Acacia expects to earn a significant profit in the first quarter of 2017. Its Return on Equity for the fourth quarter of 2016 was 61.82%. Furthermore, its annualized Return on Equity was 43.04% for 2016. These figures show an exemplary improvement from the time of its IPO to the end of February 2017.
Ignoring the volatility of the markets, Acacia Communications are set to improve in the long term substantially. There are high expectations from investors for this company to do well over the coming years. Provision of quality hardware for its customers is paramount to its success.