IPO Look: Vocera Communications

Based in San Jose, California, Vocera Communications (VCRA) scheduled a $75 million IPO with a market capitalization of $282 million at a price range mid-point of $13 for Friday, March 30, 2012. Managers: J.P. Morgan; Piper Jaffray.

VCRA is one of nine new IPOs scheduled for the week of March 26. For a summary see our IPO calendar.

SUMMARY
VCRA provides mobile communication solutions for hospitals. Its solutions are employed in 9% of the U.S. hospitals. VCRA was founded in 2002.

In-building wireless competitors include Cisco Systems (CSCO), Ascom and Polycom (PLCM). New smartphone features are also expected to add a layer of competition.

CONCLUSION
Pass on the VCRA because it isn't making money and technology advances are bringing in new competitors.

BUSINESS
VCRA is a provider of mobile communication solutions focused on addressing critical communication challenges facing hospitals today.

VCRA believes it helps customers improve patient safety and satisfaction, and increase hospital efficiency and productivity through our Voice Communication solution and new Messaging and Care Transition solutions.

VCRA's Voice Communication solution includes a lightweight, wearable, voice-controlled communication badge and a software platform; and enables users to connect instantly with other hospital staff simply by saying the name, function or group name of the desired recipient.

VCRA's Messaging solution securely delivers text messages and alerts directly to and from smartphones, replacing legacy pagers. VCRA's Care Transition solution is a hosted voice and text based software application that captures, manages and monitors patient information when responsibility for the patient is transferred or "handed-off" from one caregiver to another, or when the patient is discharged from the hospital.

As of December 31, 2011, VCRA solutions were deployed in approximately 9% of U.S. hospitals. As of December 31, 2011, there were over 6,900 hospitals in the United States.

CUSTOMERS
VCRA's solutions are deployed in over 800 hospitals and healthcare facilities, including large hospital systems, small and medium-sized local hospitals, and a small number of clinics, surgery centers and aged-care facilities.

VCRA sells its solutions to healthcare customers primarily through a direct sales force in the United States, and through direct sales and select distribution channels in international markets.

PLATFORM
At the core of VCRA's Voice Communication solution is a patent-protected software platform that VCRA introduced in 2002. VCRA has significantly enhanced and added features and functionality to this solution through ongoing development based on frequent interactions with our customers.

VCRA's software platform is built upon a scalable architecture and recognizes more than 100 voice commands. Users can instantly communicate with others using the Vocera communication badge or through Vocera Connect client applications available for BlackBerry, iPhone and Android smartphones, as well as Cisco wireless IP phones and other mobile devices.

Communication solutions can also be integrated with nurse call and other clinical systems to immediately and efficiently alert hospital workers to patient needs.

INTERNATIONAL
VCRA believes that non-U.S. customers could represent an increasing share of revenue in the future. During 2010 and 2011, VCRA obtained 9.7% and 7.3% of our revenue, respectively, from customers outside of the United States, including Canada, the United Kingdom, Australia, the Republic of Ireland and New Zealand.

INTELLECTUAL PROPERTY
VCRA has been granted 15 U.S. patents, including patents on many capabilities of its software platform and communication badge. The expiration dates of these patents range from 2018 through 2024. VCRA has six patent applications pending in the United States, and one or more utility patent applications are pending in Canada and at the European Patent Office

COMPETITION
The market for in-building wireless phones is dominated by large horizontal communications companies such as Cisco Systems, Ascom and Polycom. In addition, while smartphones and tablets are not at present direct competitors, their proliferation may make them a de facto standard for hospital workflow, thereby making VCRA's solution less attractive to customers.

USE OF PROCEEDS
VCRA expects to net $58 million from its IPO from sale of 5 million shares. Selling stockholders intend to sell 750,000 shares. VCRA intends to repay debt of $8.3 million, with the balance for general corporate purposes, including working capital.