Privately funded Silicon Valley software-defined networking (SDN) company Arista Networks, founded in 2004, has initiated plans for an IPO to raise funds for its growing cloud networking business.

Arista, which has a large footprint in the financial services space and cloud service providers counts Cisco – the company its founding partners hardware designer Andy Bechtolsheim and computer science professor David Cheriton came from – as one of its biggest competitors.

It claims to be one of the first off the rank with programmable networking gear for the enterprise, offering the foundations of SDN with  a product line-up that includes a Linux-based Extensible Operating System called EOS, network applications and 10/40 and 100GbE switches.

Between 2010 and 2013 Arista said its end-customer base grew from 570 to 2,340.

It now includes six of the biggest cloud service providers based on annual revenue, including Facebook and Microsoft, as its biggest users. Microsoft accounted for 225 of its US$139.8m revenue alone in 2013.

The most common use of Arista products is for Traffic Availability and Performance (TAP) analytics, network virtualization, cloud bursting, cloud elasticity and security.

Last year Arista’s CEO Jayshree Ullal told FOCUS private funding meant Arista could be much lighter on its feet in terms of innovation than traditional networking vendors, and such speed meant it was disrupting the market.

“The end idea here is to really take market share from established network players by joining the rising ‘open’ community.” Ullal said.

Arista’s lean financial set up enabled it to carry out fast innovation and boost its skills set to meet demand.

In its filing with the US Securities and Exchange Commission, however, Arista hinted that with such fast growth now means the company’s future has to be carefully thought out.

“If we do not appropriately manage any future growth or are unable to improve our systems and processes our business, financial condition, results or operations and prospects will be adversely affected,” Arista said.

It also said that continued innovation and freedom to change as the cloud industry shifts will also be crucial for Arista moving forward as it reports to a board.

Software challenges
Another risk highlighted in Arista’s IPO documents is a dispute with Optumsoft, whose main shareholder is Arista co-founder David Cheriton – who also has a large share in Arista through a trust fund set up in his children’s name.

Optumsoft has written to Arista requesting restrictions of use on some software components in Arista’s EOS operating system, which lies at the heart its network offerings.

“Optumsoft provided us with a non-exclusive, irrevocable, royalty-free license to software delivered by Optumsoft comprising a software tool use to develop certain components of EOS and a runtime library that is incorporated into EOS,” Arista said.

Optumsoft has since issued a letter to Arista in 2013 asking it to cease use of its software in source code form and that the company does not disclose the source code to third parties.

“Optumsoft also requested that we assign certain components of our software to them that they believe to be improvements of their software tool.”

The issue has not as yet gone down the legal route but Arista did list this as a key risk to investors looking to take part in the IPO.

Despite the risks, Arista is launching its IPO at a time when investment in SDN technologies is high.

Last year the company’s VP of systems engineering, Douglas Gourlay, told FOCUS Arista’s main intention was to become a big brand name in itself and he ruled out acquisition.

He did, however, admit “the barbarians are at the gate”, referring to the amount of investment being put into Silicon Valley’s SDN startups by venture capitalist firms, acknowledging the challenges of networking vendors moving towards a more software focussed market.