Netgear Jumps in Trading Debut

To be sure, Netgear can boast of solid revenue growth, with sales up 23% between 2001 and 2002. But to translate that into earnings leverage, the company will need to boost sales volume without spending too much on R&D and marketing.

That may be difficult, Bard says: "They're spending a lot on promotions and advertising, basically because the competition's really intense." In 2002, spending on sales and marketing grew by 34%, outpacing the 23% rise in annual sales.

Hands in Pockets

Leery of the fight shaping up in Wi-Fi, fund managers aren't exactly queuing up for Netgear shares -- even though they expect a decent reception to the IPO.

"I think it's going to be a hot deal," says Gil Knight, manager of the (ARPEX Quote)ARK Small Cap Equity Institutional fund. "The IPO market's been picking up. Netgear is also growing like topsy." But Knight isn't in any hurry to buy; he says he would want to see how Netgear trades before considering an investment.

Netgear is "not something I'm extremely excited about. It's not something I'd want to hold for the long term," says Vincent Colicchio, manager of the All-American Equity Fund. "But I would get excited for a trade, because there's a lot of [positive] sentiment right now for the Web."

He might look to pick up some shares if, for example, one of the bigger Internet names "had a poor earnings number and they all traded down on sentiment. If there was a crack in tech, I may look to pick them up as a short-term trade if I see them becoming cheap."