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Adesto Technologies IPO Targets Internet of Things

A few years back we wrote about Adesto Technologies, a company developing a superior form of RAM memory called “conductive bridging RAM” (CBRAM) to target the non-volatile memory market. One way to get some exposure to Adesto was through owning Harris and Harris Group (NASDAQ:TINY) which has been a significant investor in Adesto to date. In a later article, we speculated that TINY’s “steadily increasing valuation of Adesto is a positive sign for this late stage investment which could be looking for an exit via acquisition or IPO“. Shareholders of TINY will be happy to hear that just a few days ago, Adesto announced a proposed IPO.

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Adesto offers the world’s lowest power memory solutions which they say will enable previously unimagined devices. Their Mavriq™ memory, built on CBRAM technology, enables 10-100 times less energy consumption than today’s leading memory technologies without sacrificing performance and reliability which they say is a perfect fit for Internet-of-Things (IoT) applications. Nonvolatile memory (NVM) is important to the Internet-of-Things (IoT) infrastructure because it can store information without a power source. The below excerpt was taken from an article on Design & Reuse regarding the use of NVM in IoT:

The explosion of information that IoT devices will gather will require huge numbers of processors to process and manage the data from these IoT devices along with lots of low-cost, secure and reliable embedded non-volatile memory (NVM) for code storage, sensor trimming, device configuration, security keys and other storage functions. Virtually every one of the projected billions of IoT devices can use some amount of one-time programmable (OTP) memory.

Adesto is clearly targeting this space as the entire marketing push behind the IPO is focused on emphasizing IoT. Even the proposed ticker symbol, IOTS, tries to convey that what the Company does is to enable IoT. The Adesto S-1 filing shows the following demand growth for IoT nonvolatile memory:

NVM_Revenues

The above growth is what Adesto hopes to take advantage of with their various memory offerings. However, it isn’t the success of CBRAM that’s enabling Adesto to IPO. The Company actually uses two technology platforms: industry-standard floating gate technology and their proprietary CBRAM technology. While Adesto has shipped more than 1.0 million CBRAM units through 2014, the revenue associated with these products has “not been material” according to the S-1 filing. As of June 30, 2015, Adesto had licensing arrangements with three semiconductor companies to include their CBRAM technology in their products or embedded applications.

What has been material was the acquisition of certain flash memory product assets of Atmel Corporation made in September 2012. These assets are what Adesto used to generate $41.5 million in revenues in 2014 with a net loss of around $8 million. The growth appears to have stalled though with 2014 revenues actually falling -17% compared to the year prior. Revenues for the first 6 months of 2015 are at $20.3 and at that rate they aren’t likely to even surpass last year’s revenues. So where’s all the IoT growth?

The answer may lie in Adesto’s business model. The Company sells their products directly to leading original equipment manufacturers (OEMs) and original design manufacturers (ODMs) that manufacture products for end customers. Adesto works with these manufacturers to design their NVM into devices which they refer to as “design wins”. The number of design wins for Adesto has grown from 32 in 2013 to 65 in 2014 and to 88 in the six months ended June 30, 2015. Growth in “design wins” shows that Adesto’s technology is being adopted by manufacturers and those future product revenues will eventually be realized. With more than 500 end customers, 59 of which are large multi-national companies, Adesto should have the proper channels in place to accelerate the adoption of their technologically superior CBRAM offering.

Adesto will trade under the ticker IOTS.

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