When Min-Liang Tan took the stage at the RISE technology conference in Hong Kong last year, his speech was one of the most popular events that week.
After the founder of PC hardware maker Razer Inc. asked how many in the audience were actually gamers, the response was revealing. "Not too many," he noted. "I believe this number will rise."
Early investors Intel Corp., Temasek Holdings Pte and Foxconn Technology Group also think this figure will increase, and now Tan and his team are about to ask public investors to join the bet.
Without a doubt, Razer has made computers, keyboards and mice cool again. Its acid-green logo with a three-headed snake is now revered among a niche consumer base that hunts for the best hardware available to play games.
As the global PC business slowly cools, the remaining consumer-focused players have hunted for pockets of warmth. Although Taiwan's Acer Inc. and Asustek Computer Inc. have elevated gaming within their marketing strategy, Razer is unique in making that sector the focus of its product catalog.
Yet financial reality hasn't kept up with the buzz.
In the past two years, Razer's revenue growth averaged a mere 11.5 percent. That's nice if you want to compare it with Acer and Asustek, which both posted declines, but isn't the kind of top-line growth investors look for in a pre-IPO tech company.
And at least those two posted operating profits last year. The same cannot be said for Razer, whose profitability is going backwards.
Massive increases in marketing -- more than double in two years -- as well as continued funding of R&D pushed Razer into the red in 2015, with that loss surging last year.
In reality, the buzz that its marketing team has managed to create is providing diminishing returns. A closer look at the income statement shows that Razer's gross margin is shrinking. One way to assess how much a brand name is really worth is by looking at how much markup a hardware company can extract above the cost of making the goods it sells. By this measure, Razer's value is falling.
And while its Razer Blade laptops get top billing on the company's product website, 76.2 percent of sales comes from peripherals such as keyboards, mice and audio devices. That makes Logitech International SA a better point of comparison.
In that regard, the Swiss company bolstered its gross margin, reined in spending growth and last year posted a 53 percent increase in operating income. The relatively staid mouse maker is doing better than the hip startup by moving into products with wider appeal.
If Razer is to convince new investors that its business has real potential, it will need to prove it can find a market beyond niche PC gamers. Its initial filing talks about developing verticals and ecosystems (including its first mobile device later this year), all still focused on gamers. Seasoned investors will have heard such keywords many times and will approach with caution.
Razer needs to spend less time creating buzz and more building a business.