Newegg to Issue an IPO

Many consider the next online e-retail giant, such as the likes of Amazon.com and Buy.com, to be Newegg.com. Newegg recently submitted their filing for an IPO with the SEC. The Initial Public Offering will be used for the company to raise upwards of $175 million.

Citi, Bank of America and JP Morgan will underwrite the process. Newegg is currently looking to sell just over 14 million shares with a minimum selling price of $12.36 per share. The company plans to use the proceeds for various purposes, including $25 million for the construction of its Asian-market headquarters, as well as $8.6 million to pay down existing loans.

Newegg will also use monies generated from the IPO to build out its information technology infrastructure. It will plan on launching third party e-commerce fulfillment and marketing service platforms, and increasing its product advertisements and shipping promotions and activities.

Newegg was founded in 2001 and is the second largest online-only retailer in the U.S. With more than 12 million registered users, Newegg offers a comprehensive selection of more than 33,000 online goods, ranging from hardware and software products to peripherals.

Newegg thrives on being one of the leaders in the e-commerce industry. The company has been recognized as one of the best marketplaces on the Web offering unprecedented customer service, rapid delivery and a second-to-none shopping experience.

Newegg's motto, "Once You Know, You Newegg" has been continuously embraced by millions of customers that have consistently ranked the online company as one of the best in the industry. On Newegg.com, the company's official website, shoppers are provided with the latest high-tech products, as well as comprehensive and detailed product descriptions, product photos, customer reviews and how-to guidelines.

In the first six months of 2009, Newegg has been able to increase their overall revenues nearly 8% year-over-year, from $1.03 billion to $1.11 billion. Sales inside North America climbed nearly 3%, from $1.02 billion to $1.05 billion, with the biggest increase in revenues coming from the Asian markets, particularly China.

Thus far, sales in China have exploded, surging more than 328%, bringing in revenues of $54.4 million, a far cry from last year's six-month tally of $12.7 million. Newegg has also seen a huge jump in net profits for the first half of 2009, as net income came in at $15.8 million, up nearly 22% from the same period last year when the company recorded a profit of $13 million.

The company also managed to increase their overall active customer base from 3.3 million to 4.1 million, an advancement of more than 24%.

Along with an increase in sales and net profits, Newegg has had to increase their cost basis, with advertising and marketing expenses jumping more than 23%. Selling, general and administrative (SG&A) expenses also increased, up 4.5% in the same period a year ago.

With the company expanding exponentially, China is the target market. Newegg is looking for annual sales to exceed $80 million in China, equating to a 135%-plus gain from $34 million in overall sales in 2008.

In their filing with the SEC, Newegg commented on the company's future, "We believe the Chinese e-commerce market is positioned for tremendous growth, driven by wider availability of broadband access, rising discretionary incomes, increasing preference for consumption relative to savings, and improving payment processing, delivery and fulfillment infrastructures. China is becoming a more consumer-driven economy, and is expected to become the third largest consumer market by 2020."

The company already has more than 1,000 employees in China processing more than 3,600 orders daily from the eight distribution centers throughout the country. Newegg, upon the completion of their headquarters and distribution hub in Shanghai, stated, "We intend to leverage our early entry into the market and our core competencies to become an e-commerce leader in China. We believe our e-commerce platform and process expertise coupled with strong local relationships in China and our understanding of the culture and needs of the Chinese consumer position us for success in the Chinese e-commerce market."

The company is also expanding during their fiscal third quarter, launching www.biz.newegg.com, a Web site primarily focused on the needs of small and medium-sized businesses throughout the world. Newegg is also hopeful that the company will benefit immensely from the upcoming release of Microsoft's Windows 7 operating system, available October 22.

Newegg commented on the upcoming unveiling, "The release of Windows 7 by Microsoft may drive increased sales of new software applications and hardware components and peripherals as enterprises and consumers upgrade their personal computers, or PCs, to take advantage of the enhanced usability and capabilities of Windows 7. We believe IT spending is poised to rebound after the current recession ends as small and medium-sized businesses, which already constitute a significant portion of the market for IT products, increase IT spending levels to enhance their competitive positioning and improve business productivity."

Newegg did not specify a particular IPO date. The company is still testing the water to see if there is enough interest in the marketplace to get the price per share that they are looking for.

Company Co-founder and Chairman Fred Chang, came up with the name Newegg because the egg signifies birth and unlimited potential. The company's name is a symbol of "new hope for e-commerce during a period when e-commerce businesses were struggling to remain in existence."