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Security software firm AVG files for U.S. IPO

AVG Internet Security 2012

Following on the heels of competitor Avast, security and antivirus developer AVG has announced it has filed with the U.S. Securities and Exchange Commission to make an initial public offering to raise up to $125 million, which it plans to use to continue and expand its operations—potentially through acquisitions. The IPO will be managed by Morgan Stanley & Co, J.P. Morgan Securities, and Goldman Sachs & Co., although AVG has not announced how many shares will be sold or their expected price. The company plans to be listed on the New York Stock Exchange as simply “AVG.”

AVG is based in the Netherlands and is backed by the likes of Grisoft Holdings (the company that founded AVG back in the early 1990s), private equity firm TA Associates, and Intel Capital. AVG says it had 106 million active users at the end of the third quarter of 2011; however, AVG’s problem is that the vast majority of those customers are users of its free antivirus product. Only 15 million customers pay for AVG’s subscription security and antivirus services, generating about $130 million revenue during the first three calendar quarters of 2011.

AVG also has an uphill battle to climb in that, while most computers ship with antivirus and security solutions pre-installed, essentially none ship with AVG pre-installed. AVG currently has to work hard to convince users to switch from one security solution to another. As a result, nearly a third of the company’s revenue comes from Yahoo and Google via AVG’s secure search services, which pre-fetch items users click in search results to scan for malware and other threats. Nonetheless, AVG seems to have found a balance, generating almost $100 million in net income on revenue of $198.1 million during the first nine months of 2011.

The announcement comes a few weeks after competing antivirus and security company Avast announced plans for a $200 million IPO.

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