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Danger Inc – IPO: ‘S-1’ on 12/19/07

On:  Wednesday, 12/19/07, at 5:22pm ET   ·   Accession #:  1193125-7-268313   ·   File #:  333-148187

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

12/19/07  Danger Inc                        S-1                   36:10M                                    RR Donnelley/FA

Document/Exhibit                   Description                      Pages   Size 

 1: S-1         Registration Statement on Form S-1                  HTML   1.97M 
 2: EX-3.1      Amended and Restated Certificate of Incorporation   HTML    100K 
 3: EX-3.3      Bylaws of the Registrant                            HTML     66K 
10: EX-4.10     Series E Preferred Stock Warrant of the Registrant  HTML     54K 
                          Isued to Atel Ventures, Inc.                           
11: EX-4.11     Series E Preferred Stock Warrant of the Registrant  HTML     68K 
                          Issued to Silicon Valley Bank                          
 4: EX-4.3      Amended and Restated Investors' Rights Agreement    HTML    222K 
 5: EX-4.4      Series B-1 Preferred Stock Warrant of the           HTML     86K 
                          Registrant                                             
 6: EX-4.5      Form of Series D Preferred Stock Warrant of the     HTML     50K 
                          Registrant                                             
 7: EX-4.6      Series D Preferred Stock Warrant of the Registrant  HTML     85K 
                          - December 4, 2003                                     
 8: EX-4.7      Series D Preferred Stock Warrant of the Registrant  HTML     85K 
                          - September 24, 2004                                   
 9: EX-4.8      Form of Series D' Preferred Stock Warrant of the    HTML     50K 
                          Registrant                                             
20: EX-10.12    Restircted Stock Agreement - Matthew J. Hershenson  HTML    114K 
21: EX-10.13    Restricted Stock Agreement - Joe F. Britt, Jr.      HTML    113K 
22: EX-10.14    2000 Stock Option/Stock Issuance Plan, as Amended   HTML     77K 
23: EX-10.15    Form of Stock Option Agreement                      HTML    116K 
12: EX-10.2     Executive Employment Agreement - Henry R. Nothhaft  HTML    119K 
24: EX-10.20    Master Manufacturing and Dsistribution Agreement    HTML    352K 
25: EX-10.21    Master Services Agreement - Registrant and          HTML    571K 
                          T-Mobile Usa, Inc.                                     
26: EX-10.22    Master Services Agreement - Registrant and          HTML    286K 
                          Motorola, Inc.                                         
27: EX-10.23    Lease, Dated as of March 14, 2006                   HTML    173K 
28: EX-10.24    Lease, Dated as of April 1, 2006                    HTML    285K 
29: EX-10.25    Lease Agreement, Dated as of October 1, 2006        HTML    157K 
30: EX-10.26    Lease, Dated as of January 23, 2007                 HTML    222K 
31: EX-10.27    MCI Service Agreement, Originally Dated October     HTML    833K 
                          14, 2004                                               
32: EX-10.28    Turn Key Datacenter Lease Agreement                 HTML    384K 
33: EX-10.29    License for Use of Asmec Facilities                 HTML     47K 
13: EX-10.3     Severance Agreement - Joe F. Britt, Jr.             HTML     20K 
34: EX-10.30    Loan and Security Agreement                         HTML    216K 
14: EX-10.4     Severance Agreement - Matthew Hershenson            HTML     20K 
15: EX-10.5     Offer Letter - Nancy J. Hilker                      HTML     27K 
16: EX-10.6     Offer Letter - James L. Isaacs                      HTML     27K 
17: EX-10.7     Offer Letter - Leslie Hamilton                      HTML     30K 
18: EX-10.8     Offer Letter - Mark W. Fisher                       HTML     27K 
19: EX-10.9     Offer Letter - Donn Dobkin                          HTML     24K 
35: EX-21.1     Subsidiaries of the Registrant                      HTML     12K 
36: EX-23.1     Consent of Independent Registered Public            HTML     13K 
                          Accounting Firm                                        

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As filed with the Securities and Exchange Commission on December 19, 2007

Registration No. 333-            

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

Under

THE SECURITIES ACT OF 1933

DANGER, INC.

(Exact name of registrant as specified in its charter)

3101 Park Blvd.

Palo Alto, CA 94306

(650) 289-5000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Henry R. Nothhaft

Chairman and Chief Executive Officer

Danger, Inc.

3101 Park Blvd.

Palo Alto, CA 94306

(650) 289-5000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. ¨

CALCULATION OF REGISTRATION FEE

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

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Subject to Completion, dated                     , 2007

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS

            Shares

Danger, Inc.

Common Stock

This is our initial public offering of shares of our common stock. No public market currently exists for our common stock. The initial public offering price of our common stock is expected to be between $             and $             per share.

We have applied to list our common stock on the NASDAQ Global Market under the symbol “DNGR.”

Investing in our common stock involves risks. See “ Risk Factors” beginning on page 10.

We have granted the underwriters a 30-day option to purchase up to an additional              shares from us on the same terms and conditions as set forth above if the underwriters sell more than              shares of common stock in this offering.

Neither the Securities and Exchange Commission nor any state securities regulator has approved or disapproved of these securities nor determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares on or about                      , 2008.

                    , 2008

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You should rely only on the information contained in this prospectus or any related free writing prospectus we may authorize to be delivered to you. We have not, and the underwriters have not, authorized anyone to provide you with information different from, or in addition to, that contained in this prospectus or any related free writing prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We are offering to sell, and are seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus or any related free writing prospectus is accurate only as of its date, regardless of its time of delivery, or of any sale of the common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

Until and including                     , 2008 (25 days after the date of this prospectus), all dealers that buy, sell or trade our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

For investors outside of the United States: neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.

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RISK FACTORS

You should carefully consider the risks described below, which we believe are the material risks of our business, our industry and this offering, before making an investment decision. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. If any of the following risks actually occurs, our business, financial condition and results of operations could be harmed. In that case, the trading price of our common stock could decline and you might lose all or part of your investment in our common stock. In assessing these risks, you should also refer to the other information contained in this prospectus, including our consolidated financial statements and the related notes.

Risks Related to Our Business

We have a history of net losses, may incur substantial net losses in the future and may not achieve profitability in the future.

We have incurred significant losses since inception, including net losses of $6.6 million and $12.4 million for the fiscal years ended September 30, 2006 and 2007, respectively. As of September 30, 2007, we had an accumulated deficit of $188.1 million. We expect to continue to increase our costs and expenses as we implement initiatives and take other actions designed to continue to grow our business, including, among other things:

Additionally, we may encounter unforeseen difficulties, complications and other unknown factors that require additional expenditures. If our revenues do not increase to offset these expected increases in our costs and expenses, we will continue to incur significant losses and will not become profitable. Our revenue growth in recent periods should not be considered indicative of our future performance. In fact, in future periods, our revenues could decline and we may not be able to achieve profitability in the future.

We are substantially dependent on T-Mobile USA for our revenues.

Substantially all of our revenues to date have been derived from one customer, T-Mobile USA, Inc., or T-Mobile USA, and we expect to be dependent on T-Mobile USA for a substantial majority of our revenues for the foreseeable future. During the years ended September 30, 2005, 2006 and 2007, we derived approximately 92.1%, 88.5% and 92.0% of our revenues from T-Mobile USA, respectively. During the years ended September 30, 2006 and 2007, our mobile operator customers in the T-Mobile International group, which include T-Mobile USA, T-Mobile Deutschland GmbH, T-Mobile (UK) Limited and T-Mobile Austria GmbH, represented 90.9% and 94.5% of our revenues, respectively. Our current agreement with T-Mobile USA will expire on December 31, 2008. T-Mobile USA has the right, but not the obligation, to renew our current agreement for a single additional period of up to three years, unless we notify T-Mobile USA of our intent not to renew. In addition, T-Mobile USA has the right to terminate the agreement in the event of certain breaches by us, including the right to immediately terminate the agreement if we improperly disclose information about T-Mobile USA’s subscribers. Our failure to renew or renegotiate this agreement on favorable terms or at all, or to otherwise maintain our relationship with T-Mobile USA, would materially reduce our revenues and harm our business, operating results and financial condition. In addition, if T-Mobile USA reduces its expenditures for

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marketing our mobile data services, alters the data plan pricing under which it offers our mobile data services, or offers and promotes competing mobile data services, such as those as may be developed under the Open Handset Alliance discussed below, in lieu of, or to a greater degree than, our mobile data services, our revenues would be materially reduced and our business, operating results and financial condition would be materially and adversely affected.

We currently rely on two OEM partners to manufacture Danger-enabled mobile devices. If our OEM partners have difficulties manufacturing or shipping Danger-enabled mobile devices, our business will suffer.

The mobile data services we provide run exclusively on Danger-enabled mobile devices manufactured and sold by our OEM partners. If our OEM partners delay the development of, elect not to develop or fail to ship mobile devices that run our mobile data services, our business, operating results and financial condition would be materially harmed. Our OEM partners are not contractually obligated to ship Danger-enabled mobile devices that they develop.

In April 2004, we established our first OEM relationship with Sharp Corporation, or Sharp, under which Sharp manufactures and sells Danger-enabled mobile devices. From April 2004 until September 2006, Sharp was our only OEM partner. If Sharp delays or ceases manufacturing current Danger-enabled mobile devices and/or delays or discontinues its development of future Danger-enabled mobile devices, our business, operating results and financial condition would be materially harmed.

In September 2006, we established our second OEM relationship with Motorola, Inc., or Motorola. Motorola’s first Danger-enabled mobile device launched in November 2007 with T-Mobile USA. If this or any future Danger-enabled mobile devices manufactured by Motorola are not purchased in volume by mobile operators or are not adopted by consumers in the marketplace, our business, operating results and financial condition would be materially harmed.

We have a limited operating history in an emerging industry, which may make it difficult to evaluate our business.

We were incorporated in December 1999 and the first Danger-enabled mobile device was launched in October 2002. Under our initial mobile operator customer contracts, we were responsible for the manufacture, sale and after-market support of Danger-enabled mobile devices. In April 2004, we changed our business model by licensing the reference design for our Danger-enabled mobile device to Sharp and allowing Sharp to assume direct responsibility for the manufacture and sale of Danger-enabled mobile devices to our mobile operator customers. We expect our OEM partners to continue to be responsible for the future manufacture of Danger-enabled mobile devices that run our mobile data services. As a result, we have a limited history of generating revenues solely as a provider of a mobile data services solution, and the future revenue potential of our business in the emerging mobile data services industry is still uncertain. Any evaluation of our business and our prospects must be considered in light of our limited operating history and the risks and uncertainties encountered by companies in our stage of development. As a relatively early stage company in the emerging mobile data services industry, we face increased risks, uncertainties and difficulties related to:

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Failure to achieve any of these objectives could harm our business. In addition, the costs to overcome these risks may be more expensive than planned, which could adversely impact our operating results and financial condition.

We operate in a highly competitive industry, and many of our competitors have significantly greater resources than we do.

The markets for development, distribution and sale of mobile devices and mobile data services are highly competitive. This competition could make it more difficult for us to sell our mobile data services solution, and could result in increased pricing pressure, reduced profit margins, increased sales and marketing expenses and failure to increase, or the loss of, market share or expected market share, any of which would likely cause serious harm to our business, operating results and financial condition.

Many of our competitors have greater name recognition, larger customer bases and significantly greater financial, technical, marketing, public relations, sales, distribution and other resources than we do. Our primary competitors include integrated mobile data service providers such as Research in Motion Limited, which markets BlackBerry wireless devices, as well as smartphone software providers such as Microsoft Corporation and Symbian Software Limited. We also face competition from mobile device manufacturers and mobile virtual network operators, or MVNOs, that market devices and services that compete with Danger-enabled mobile devices and our mobile data services. These include OEMs such as Palm, Inc., Nokia Corporation, Samsung Electronics, Apple, Inc., Sony Ericsson Mobile Communications AB, LG Electronics and Kyocera Corporation, original design manufacturers such as HTC Corporation, Chi Mei Communication Systems, Inc. and Compal Electronics, Inc., and MVNOs such as Helio, Inc. In addition, consumers use or may use products and services from Internet companies, such as Google Inc., or Google, that may compete with Danger-enabled mobile devices and our mobile data services. We also compete broadly with a significant number of firms that market single elements of our solution, including mobile platform companies such as Motricity, Inc. and wireless messaging solutions companies such as Good Technology Inc. (owned by Motorola), Openwave Systems Inc., Seven Networks, Inc. and Visto Corporation.

Some of our competitors’ and our potential competitors’ advantages over us, either globally or in particular geographic markets, include the following:

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If we are unable to compete effectively or we are not as successful as our competitors in our target markets, our sales would decline, our margins would decline and we would lose market share, any of which would materially harm our business, operating results and financial condition.

New entrants and recent developments in the mobile device and mobile services markets may harm our competitive position.

The markets for development, distribution and sale of mobile devices and mobile data services are rapidly evolving. New entrants seeking to gain market share by introducing new technology and new products may make it more difficult for us to sell our mobile data services solution, and could result in increased pricing pressure, reduced profit margins, increased sales and marketing expenses or the loss of market share or expected market share, any of which may significantly harm our business, operating results and financial condition.

For example, Google recently announced the formation of the Open Handset Alliance, a consortium of mobile operators, mobile handset manufacturers and software and mobile computing companies focused on developing an open source software platform for mobile devices. Google’s announcement indicated that more than thirty companies had joined the Open Handset Alliance and that mobile devices based on the open source software platform developed by the Open Handset Alliance would be available in the second half of 2008. T-Mobile USA, our largest customer, and Motorola, one of our two OEM partners, are both founding members of the Open Handset Alliance and have each publicly expressed an intention to leverage the software platform developed by the Open Handset Alliance. If the Open Handset Alliance’s software platform is widely adopted, we may not be able to attract new OEM partners to manufacture mobile devices based on our mobile data services platform, our existing OEM partners may cease developing mobile devices that operate our mobile data services platform, and mobile operator customers, including T-Mobile USA, may not purchase Danger-enabled mobile devices or our mobile data services solution. These developments would significantly harm our business, operating results and financial condition.

In addition, many mobile operators have also started to develop, internally or through managed third parties, their own mobile devices and mobile data services for distribution. Verizon Wireless also recently announced that it will open its network to wireless devices, software and applications that are not sold by Verizon Wireless in an effort to expand its customer base. As mobile operators invest in their own mobile devices and mobile data services and, like Verizon Wireless, choose to open their networks to a variety of devices, applications and services, they might refuse to distribute Danger-enabled mobile devices or some or all of our mobile data services. In addition, to the extent that we license our technology to enable additional device manufacturers to equip their mobile devices with our mobile data services platform, such action may impact demand for Danger-enabled mobile devices sold with our current OEM partners and mobile operator customers.

Our success is strongly tied to the popularity of our mobile data services platform and Danger-enabled mobile devices with subscribers and is subject to risks associated with unpredictable and continuously changing consumer tastes. If we fail to develop new mobile data services or our OEM partners fail to develop mobile devices that achieve market acceptance by consumers, sales of our mobile data services and our revenues would decline.

Our business depends on developing mobile data services and supporting the launch of Danger-enabled mobile devices manufactured by our OEM partners that mobile operators sell to subscribers. We must invest significant resources in research and development, engineering and software development to enhance our mobile data services platform and introduce new data services, and we must bring them to market in a timely manner.

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Even if our mobile data services and Danger-enabled mobile devices are successfully introduced and initially adopted, a subsequent shift in the requirements of our mobile operator customers, market dynamics or the preferences of consumers could cause a decline in the popularity of Danger-enabled mobile devices or our mobile data services. For example, to date, our mobile operator customers have marketed Danger-enabled mobile devices primarily to young adults, teenagers and socially-oriented consumers. We believe that the current popularity of social networking and instant messaging has contributed to sales of Danger-enabled mobile devices among this demographic. The tastes of these consumers are unpredictable and subject to rapid change, based in part on changing trends within the popular culture. In addition, these consumers are strongly influenced by the pricing structure and branding success of our mobile operator customers, over which we have no control. As the tastes and preferences of consumers change, we cannot assure you that our Danger-enabled mobile devices will continue to be popular with these consumers or whether our mobile operator customers will be able to structure product offerings that successfully market to them or other demographic groups. Competitors may also offer new mobile devices and services that have greater appeal to our core consumer demographic. If we and our mobile operator customers are not able to successfully market Danger-enabled mobile devices and our mobile data services to these and other consumers, our revenues would decline and our business, operating results and financial condition would be harmed.

Our success depends on significantly increasing the number of subscribers that use Danger-enabled mobile devices to access our mobile data services.

Our revenues are derived primarily from payments that we receive from our mobile operator customers for each subscriber that uses a Danger-enabled mobile device to access our mobile data services and, to a lesser extent, from revenue share arrangements associated with purchases of premium applications, content and services by subscribers. To date, only a relatively small number of consumers use Danger-enabled mobile devices compared to the total number of mobile device users. Our near-term operating and financial results depend heavily on achieving significant use by consumers of Danger-enabled mobile devices. Our operating and financial results also depend on achieving widespread deployment of our mobile data services by attracting and retaining additional mobile operator customers. The use of our mobile data services platform will depend on the quality of those services and subscriber expectations for those services, which may vary by market, as well as the level of subscriber turnover experienced by our mobile operator customers. If subscriber turnover increases more than we anticipate, our financial results could be adversely affected. For example, during the three month period ended September 30, 2007, subscriber turnover increased as compared to the prior three-month period, which we believe was due to the commercial introduction of Apple Inc.’s iPhone in June 2007.

If our current and future mobile operator customers are not able to successfully market Danger-enabled mobile devices and our mobile data services, if we are not successful in maintaining and expanding relationships with mobile operator customers, or if we are not able offer a compelling mobile data and Internet solution for consumers, we will not be able to increase the number of consumers that use our mobile data services, and our business prospects, operating results and financial condition will be materially adversely affected.

There is a limited number of mobile operator customers for our mobile data services solution.

Our success is highly dependent upon establishing and maintaining successful relationships with mobile operator customers. There is a limited number of mobile operator customers that may use our mobile data services solution on their networks due to a number of factors, including:

Many of our mobile operator customer agreements provide the mobile operator customer with rights of first refusal or exclusive rights to sell our mobile data services in a particular territory. For example, pursuant to our

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agreement with T-Mobile USA, T-Mobile USA has certain exclusivity rights and rights of first refusal for new mobile data services and mobile device designs owned or controlled by us. The exclusivity and first refusal rights in our agreements with our mobile operator customers may inhibit our ability to establish relationships with other mobile operator customers, and therefore may limit our growth in particular territories. In addition, our OEM partners’ agreements with our mobile operator customers may prevent our OEM partners from selling Danger-enabled mobile devices to other mobile operators, and, consequently, would limit us from establishing new relationships with mobile operator customers.

Our mobile data services platform is not currently compatible with the networks of certain mobile operators and may not support future network technologies implemented by mobile operators. For example, our technology does not currently support devices that are based on code division multiple access, or CDMA, technology which represents a significant portion of the total mobile device market in the United States and certain Asian countries, and we have no current plans to support such devices. Our inability to develop or deliver a mobile data services platform that supports the technologies of multiple mobile operators will limit the number of mobile operator customers that may employ our solution. In addition, we are limited as to which subscriber markets we can access through mobile operators as a result of inadequate infrastructure within certain territories, the existence of entrenched or localized mobile operators with which we have no relationship, and differences in consumer trends and public tastes in certain geographies. For example, in Europe, we believe that the popularity of text messaging among mobile device consumers has inhibited the adoption of other mobile data messaging services, such as instant messaging, which are widely used by subscribers of our mobile data services in the United States. If we are not able to establish or maintain relationships with mobile operators or obtain access to additional subscribers, our operating results and financial condition will be adversely impacted.

We are substantially dependent on our mobile operator customers to market and distribute Danger-enabled mobile devices and our mobile data services to subscribers and to generate our revenues.

We rely on our mobile operator customers for substantially all of the marketing of Danger-enabled mobile devices and our mobile data services to subscribers. None of our mobile operator customers are contractually obligated to introduce, market or promote mobile devices that run on our mobile data services platform. Moreover, our mobile operator customer agreements do not prevent our mobile operator customers from offering mobile data services supported by internally-developed technologies or technologies developed by one or more of our competitors. If mobile operator customers do not introduce, market and promote Danger-enabled mobile devices, our mobile data services solution will not achieve widespread acceptance and we may not be able to grow as fast as anticipated, or at all. In addition, our mobile operator customers are responsible for the structure and pricing of mobile data service plans that they offer, as well as marketing strategies and customer service programs. Any modifications to these pricing structures could affect the demand for Danger-enabled mobile devices by consumers.

Our success depends on a number of factors controlled by our mobile operator customers.

In addition to the marketing and promotion of our mobile data services by our mobile operator customers, our success depends on a number of factors that are largely controlled by our mobile operator customers, including:

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Any or all of these factors could negatively impact our business, which could have a material adverse effect on our financial condition and results of operations.

If our mobile operator customers, particularly T-Mobile USA, change their branding strategies, our potential revenues could be limited and our business, operating results and financial condition could be harmed.

Danger-enabled mobile devices are most popularly recognized and sold in the United States and certain other geographies under the T-Mobile Sidekick brand. Deutsche Telekom, AG, the parent company of the group of T-Mobile mobile operators, owns the trademark “Sidekick” in the United States and in international territories, and T-Mobile mobile operators have spent a significant amount of money during the last several years promoting and marketing Danger-enabled mobile devices and our mobile data services under the Sidekick brand in the United States and internationally. As such, the marketplace and consumers popularly know Danger-enabled mobile devices and our mobile data services by the Sidekick trademark. Although the T-Mobile mobile operators have not marketed a competitor’s device or mobile data services under the Sidekick brand, we cannot guarantee how T-Mobile mobile operators will use the Sidekick trademark in the future. If T-Mobile mobile operators do not market future Danger-enabled mobile devices under the Sidekick brand or begin marketing competitors’ products under the Sidekick brand, our business, operating results and financial condition could be harmed.

We rely on network infrastructures provided by our mobile operator customers for the delivery of our mobile data services to consumers.

Our future success will depend on the availability and quality of our mobile operator customers’ wireless networks in the United States and internationally to run our mobile data services and to provide us access to their subscribers. This includes deployment and maintenance of reliable 3G networks with the speed, data capacity and security necessary to provide reliable wireless communications services. We do not establish or maintain these wireless networks and have no control over interruptions or failures in the deployment and maintenance by mobile operators of their wireless network infrastructure. In addition, these wireless network infrastructures may be unable to support the demands placed on them if the number of subscribers continues to increase, or if existing or future subscribers increase their bandwidth requirements. Market acceptance of our mobile data services platform will depend in part on the quality of these wireless networks and the ability of our mobile operator customers to effectively manage their subscribers’ expectations. Wireless communications have experienced a variety of outages and other delays as a result of infrastructure and equipment failures, and could face outages and delays in the future. These outages and delays could reduce the level of wireless communications usage as well as our ability to provide our mobile data services successfully. In addition, changes by a mobile operator to network infrastructure may interfere with the delivery of our mobile data services and may cause subscribers to lose functionality in Danger-enabled mobile devices that they have already purchased. Any of this could harm our business, operating results and financial condition.

The failure of our OEM partners to keep pace with technological and market developments in mobile device design may negatively affect the demand for Danger-enabled mobile devices and our mobile data services.

Our future success will depend on our OEM partners’ ability to manufacture Danger-enabled mobile devices that meet the technological and design demands of mobile operator customers and their subscribers. Our OEM

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partners will have to invest in developing mobile devices that are compatible with the advanced network technology, such as 3G technology, that mobile network operators are deploying to increase network capacity and speed for mobile data delivery. For example, we are currently planning to work with Sharp and Motorola to develop Danger-enabled mobile devices that are compatible with 3G technologies from Qualcomm Corporation. If our current or future OEM partners fail to adopt 3G technology or other advanced technologies, future sales of Danger-enabled mobile devices may suffer. In addition, if our OEM partners adopt 3G technology that is incompatible with our mobile data services platform development, there will be fewer Danger-enabled mobile devices available to consumers and sales of our mobile data services will suffer.

Successful sales of Danger-enabled mobile devices also depend on our OEM partners keeping pace with changing consumer preferences for mobile devices. If our OEM partners do not develop Danger-enabled mobile devices with the design attributes attractive to consumers, such as thin form factors, high-resolution screens and attractive plastics and colors, sales of Danger-enabled mobile devices may decline and, consequently, our business will be harmed.

We have experienced, and may in the future experience, delays or interruptions in the manufacturing and delivery of Danger-enabled mobile devices by our OEM partners, that may harm our business.

Our OEM partners’ ability to timely manufacture and ship Danger-enabled mobile devices in large quantities and at competitive prices depends on a variety of factors. Our OEM partners may experience design or development delays due to hardware or software defects, problems with their contract manufacturers, difficulties in obtaining required industry or regulatory certifications, or difficulties in passing mobile operator handset qualification tests. Any such delays would adversely impact the timing of Danger-enabled mobile device launches and would consequently negatively impact our future revenues. For example, in November 2007, following the initial launch of the Sidekick Slide, T-Mobile suspended sales and removed devices from retail store shelves due to reports that some devices were irregularly powering off. After diagnosing the problem, our OEM partner’s contract manufacturer implemented a fix at the factory and our OEM partner repaired the defective units that had already shipped. The defect resulted in approximately a three week delay in sales of Sidekick Slide devices. In addition, our OEM partners rely on a limited number of sources for the timely supply of functional components, such as displays, semiconductors, batteries, printed circuit boards, plastics, tooling equipment and flash memory. Functional component supply shortages or delays could prevent or delay the manufacture and shipment of Danger-enabled mobile devices by our OEM partners. For example, in 2005, a fire at a component supplier’s factory limited the supply of camera modules for Sharp’s Danger-enabled mobile devices, resulting in an inventory shortage and production and shipment delays until an alternative source was located. Cost increases in such components could also result in our OEM partners refusing to commercially offer or continue to support Danger-enabled mobile devices. In addition, contractual restrictions or claims for infringement of intellectual property rights may restrict our OEM partners’ use of certain components. These restrictions or claims may require our OEM partners to utilize alternative components or obtain additional licenses or technologies, and may impede our OEM partners’ ability to manufacture and deliver Danger-enabled mobile devices on a timely or cost-effective basis. Any of these occurrences could ultimately have a material adverse effect on our business, operating results and financial condition.

Changes to the economics of our relationships with our OEM partners could have a material adverse impact on our business, operating results and financial condition.

We license our client software to our OEM partners on a royalty-free basis. However, our client software includes certain technology or intellectual property that we license from third parties for which royalties are due on the sale of Danger-enabled mobile devices. Such third parties include, but are not limited to:

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We anticipate that the addition of new features and functionality to our mobile data services and Danger-enabled mobile devices will require us to obtain licenses that involve the payment of additional per unit royalties to third parties. Under our agreements with our OEM partners, our OEM partners agree to either reimburse us for any such per unit royalties that we may be required to pay, or agree to pay these royalties directly to the rights holders. If, in the future, our OEM partners do not agree to pay these third party royalties or do not agree to reimburse us for our royalty payments, we would incur increased expenses, which would have a material adverse impact on our business, operating results and financial condition. In addition to these technologies for which we obtain licenses, if third parties claim that we, our OEM partners or our mobile operator customers infringe upon their intellectual property rights, we may be required to make significant payments or obtain additional licenses, which may not be available on terms acceptable to us, or at all.

If our third-party developers cease development of new premium applications, content and services for us or the mix of premium applications, content and services that we offer to consumers changes, our business may be adversely impacted.

We rely on third-party developers to develop a majority of the games, ringtones and other premium applications, content and services that our mobile operator customers sell to subscribers that access our mobile data services. During the fiscal years ended September 30, 2006 and 2007, sales of premium applications, content and services represented 7.6% and 8.3% of our service revenues, respectively. Because we rely on third-party developers to develop the majority of the premium applications, content and services that we offer, we are subject to the following risks:

If our developers terminate their relationships with us or negotiate agreements with terms less favorable to us, we may have to reduce the number of premium applications, content and services that we intend to introduce, delay the introduction of some premium applications, content and services or increase our internal development staff, which would be a time-consuming and potentially costly process, and, as a result, our business, operating results and financial condition could be harmed.

Some of our mobile operator customers source their own premium applications, content and services and we have lower margins on sales of these mobile operator customers’ premium applications, content and services. Our agreements with certain mobile operator customers also allow the mobile operator customer to control the mix of premium applications, content and services that are offered to subscribers. If the mix of premium applications, content and services sold to subscribers changes and our margins are reduced, our business, operating results and financial condition could be harmed.

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We may not be able to enhance our mobile data services platform to keep pace with technological and market developments, or develop new mobile data services in a timely manner or at competitive prices.

The market for mobile data services is emerging and is characterized by rapid technological change, evolving industry standards, frequent new product introductions and short product life cycles. To keep pace with technological developments, satisfy increasing customer requirements and achieve product acceptance, our future success depends upon our ability to enhance our current mobile data services platform and to continue to develop and introduce new mobile data services offering compatibility, enhanced performance features and functionality on a timely basis at competitive prices. For example, our mobile data services platform does not currently support video services or Wi-Fi interoperability, and our failure to address these or other technological advances may limit our growth and harm our competitive position. In addition, our mobile data services platform is not compatible with the technologies of many mobile operators, such as CDMA networks that are operated by certain mobile operators, such as Sprint Nextel Corporation and Verizon Wireless in the United States, and may not support future technologies developed by mobile operators or OEMs. Our inability, for technological or other reasons, to enhance, develop, introduce or deliver compelling mobile data services in a timely manner, or at all, in response to changing market conditions, technologies or consumer expectations could have a material adverse effect on our operating results or could result in our mobile data services platform becoming obsolete. Our ability to compete successfully will depend in large measure on our ability to maintain a technically skilled development and engineering staff and to adapt to technological changes and advances in the industry, including providing for the continued compatibility of our mobile data services platform with evolving industry standards and protocols and competitive network operating environments.

Development and delivery schedules for mobile data services are difficult to predict. If new releases of our mobile data services are delayed, mobile operators may curtail their efforts to market and promote Danger-enabled mobile devices and subscribers may switch to competing products, any of which would result in a delay or loss of revenues and could seriously harm our business. In addition, there cannot be any assurance that the technologies and related mobile data services that we develop will be brought to market by mobile operators as quickly as anticipated or that they will achieve broad acceptance among mobile operator customers or consumers.

We anticipate that the addition of certain advanced features and functionality to our current mobile data services platform will require us to obtain licenses from third parties that may not be available on commercially favorable terms, or at all.

We may not be able to upgrade our mobile data services platform to support certain advanced features and functionality, such as mobile video services or Wi-Fi, without obtaining technology licenses from third parties. Obtaining these licenses may be costly and may delay the introduction of such features and functionality, and these licenses may not be available on commercially favorable terms, or at all. The inability to offer advanced features or functionality, or a delay in our ability to upgrade our mobile data services platform, may adversely affect consumer demand for our mobile data services and, consequently, harm our business.

Our lengthy sales cycle makes it difficult for us to predict when we will generate revenues from new mobile operator customers.

We have a lengthy and complex sales process. The integration and testing of our mobile data services platform with our prospective mobile operator customers requires a substantial amount of time before launching our mobile data services with that mobile operator customer. Our sales cycles are typically longer and more problematic in new markets. Even after an initial decision to launch our mobile data services is made, the integration of our mobile data services platform with a mobile operator customer’s network and billing systems requires several months before commercial deployment. Because of this lengthy cycle, we may experience delays from the time we begin the sales process and incur increased costs and expenses to obtain a new mobile operator customer and integrate our mobile data services platform until the time we generate revenues from such mobile operator customer. These delays may make it difficult to predict when we will generate revenues from new customers.

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We operate in an industry with extensive intellectual property litigation. Claims of infringement against us, our OEM partners or our mobile operator customers may cause our business, financial condition and operating results to suffer.

Our commercial success depends in part upon us, our OEM partners and our customers not infringing intellectual property rights owned by others and being able to resolve claims of intellectual property infringement without major financial expenditures. We operate in an industry with extensive intellectual property litigation. Many participants that own, or claim to own, intellectual property aggressively assert their rights, and our mobile operator customers and our OEM partners, whom we indemnify for intellectual property infringement claims related to our solution, are often targets of such assertions. We cannot determine with certainty whether any existing or future third-party intellectual property rights would require us to alter our technologies, obtain licenses or cease certain activities.

We have received, and may in the future continue to receive, claims from third parties asserting infringement and other related claims. For instance, in 2005, a patent holding company filed lawsuits alleging patent infringement and trade secret misappropriation against us, T-Mobile USA, Sharp and an affiliate of Sharp. We incurred expense of approximately $2.7 million in defending ourselves, T-Mobile and Sharp before settling the litigation in November 2006. Future litigation may be necessary to defend ourselves, our mobile operator customers and our OEM partners by determining the scope, enforceability and validity of third-party proprietary rights or to establish our proprietary rights. Some of our competitors may have substantially greater resources than we do and may be able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we could. In addition, patent holding companies that focus solely on extracting royalties and settlements by enforcing patent rights may target us, our mobile operator customers or our OEM partners. Regardless of whether claims that we are infringing patents or other intellectual property rights have any merit, these claims are time-consuming and costly to evaluate and defend and could:

In addition to liability for monetary damages against us or, in certain circumstances, our OEM partners and mobile operator customers, we may be prohibited from developing, commercializing or continuing to provide certain of our mobile data services unless we obtain licenses from the holders of the patents or other intellectual property rights. We cannot assure you that we will be able to obtain any such licenses on commercially favorable terms, or at all. If we do not obtain such licenses, our business, operating results and financial condition could be materially adversely affected and we could, for example, be required to cease offering or materially alter our mobile data services in some markets.

In addition, our OEM partners and mobile operator customers may be subject to claims from third parties asserting that they are infringing patents or other intellectual property rights of these third parties. These claims may require our OEM partners or mobile operator customers to utilize alternative components, obtain additional licenses or cease the use of certain technologies, which can be time-consuming and expensive. For example, the U.S. International Trade Commission recently ruled that Qualcomm infringed Broadcom Corporation’s patent rights and issued an import ban on certain mobile devices containing Qualcomm’s technology. Broadcom also initiated two suits against Qualcomm alleging, among other things, patent infringement and antitrust violations.

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We are planning to work with our OEM partners to develop future Danger-enabled mobile devices that utilize chipsets sold by Qualcomm. If the import ban is not stayed or lifted, if these suits are resolved unfavorably for Qualcomm or if our OEM partners are otherwise unable to utilize chips sold by Qualcomm, the manufacture and delivery of Danger-enabled mobile devices by our OEM partners may be delayed or discontinued, and our business may be harmed.

Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement, damages caused by defective software and other losses.

Our agreements with our mobile operator customers and OEM partners include indemnification provisions. In these provisions, we agree to indemnify them for losses suffered or incurred in connection with our client software and mobile data services, including as a result of intellectual property infringement, damages caused by defects and damages caused by viruses, worms and other malicious software. The term of these indemnity provisions is generally perpetual after execution of the corresponding agreement, and the maximum potential amount of future payments we could be required to make under these indemnification provisions is generally unlimited.

We have received, and expect to continue to receive, demands for indemnification under these agreements, which demands can be very expensive to settle or defend, and we have in the past contributed to settlement amounts and incurred substantial legal fees in connection with certain of these indemnity demands. A number of these indemnity demands, including demands from T-Mobile USA and Sharp, relate to pending litigation and remain outstanding and unresolved as of the date of this prospectus. For example, in October 2007, T-Mobile USA demanded that we indemnify and defend T-Mobile USA against a lawsuit brought by NTP, Inc., or NTP, alleging that T-Mobile USA is infringing certain patents held by NTP relating to the use of wireless communications in electronic mail systems and seeking unspecified damages. NTP is a patent holding company that sued Research in Motion Limited, which markets BlackBerry wireless devices, for patent infringement in 2001, and settled such litigation with Research in Motion Limited in 2006 for $612.5 million. Although NTP’s lawsuit against T-Mobile USA was recently stayed pending the U.S. Patent and Trademark Office’s ongoing review of NTP’s patents, the stay could be lifted at any time. As of the date of this prospectus, we have not accepted or rejected T-Mobile USA’s indemnity demand related to this litigation. Large future indemnity payments and associated legal fees and expenses, including potential indemnity payments and legal fees and expenses relating to T-Mobile USA’s indemnity demand with respect to the NTP lawsuit, could materially harm our business, operating results and financial condition.

Although we have not agreed to defend or indemnify our mobile operator customers or OEM partners for any outstanding and unresolved indemnity demands, we may in the future agree to defend and indemnify them in connection with these demands, irrespective of whether we believe that we have an obligation to indemnify them or whether we believe that our solution infringes the asserted intellectual property rights. Alternatively, we may reject certain of our mobile operator customers’ or OEM partners’ indemnity demands, including outstanding demands from T-Mobile USA or Sharp, which rejections may lead to disputes with our mobile operator customers or OEM partners and may negatively impact our relationships with them or result in litigation against us. Our mobile operator customers or OEM partners may also claim that any rejection of their indemnity demands constitutes a material breach of our agreements with them, allowing them to terminate such agreements. If, as a result of indemnity demands, we make substantial payments, our relationships with our mobile operator customers or OEM partners is negatively impacted, or if any of our mobile operator customer or OEM partner agreements is terminated, our business, financial condition and operational results could be materially adversely affected.

If we are unable to protect our intellectual property and proprietary rights, our competitive position and our business could be harmed.

We rely primarily on a combination of patent laws, trademark laws, copyright laws, trade secrets, confidentiality procedures and contractual provisions to protect our proprietary technology. As of September 30,

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2007, we held 34 U.S. patents and eight foreign patents expiring between August 16, 2021 and April 20, 2024, and have 40 U.S. and 47 pending foreign patent applications. We also have filed corresponding foreign applications pursuant to the Patent Cooperation Treaty for many of our patents and patent applications. However, our issued patents and any future patents that may issue may not survive a legal challenge to their scope, validity or enforceability, or provide significant protection for us. The failure of our patents to adequately protect our technology might make it easier for our competitors to offer similar products or technologies. In addition, patents may not issue from any of our current or any future applications.

Monitoring unauthorized use of our intellectual property is difficult and costly. The steps we have taken to protect our proprietary rights may not be adequate to prevent misappropriation of our intellectual property. Further, we may not be able to detect unauthorized use of, or take appropriate steps to enforce, our intellectual property rights. Our competitors may also independently develop similar technology. In addition, the laws of many countries do not protect our proprietary rights to as great an extent as do the laws of the United States. Any failure by us to meaningfully protect our intellectual property could result in competitors offering products that incorporate our most technologically advanced features, which could seriously reduce demand for Danger-enabled mobile devices and our mobile data services. In addition, we may in the future need to initiate infringement claims or litigation. Litigation, whether we are a plaintiff or a defendant, can be expensive, time-consuming and may divert the efforts of our technical staff and managerial personnel, which could harm our business, whether or not such litigation results in a determination favorable to us.

Our financial results could vary significantly from quarter to quarter and are difficult to predict.

Our revenues and operating results could vary significantly from quarter to quarter because of a variety of factors, many of which are outside of our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful. In addition, we may not be able to predict our future revenues or results of operations. In the event that we enter into an agreement, or amend an existing agreement, with a particular mobile operator customer that requires us to provide specified deliverables, the generally accepted accounting principles governing our recognition of revenue and expenses may require us to defer all revenues and certain direct and incremental expenses related to that particular mobile operator customer until such specified deliverable is provided. This could result in a deferral of a substantial portion of our revenues in future periods as well as significant variations in our results from quarter to quarter, and therefore makes it very difficult for us to adequately forecast our revenues and expenses in future periods. In addition, revenues and expenses related to our premium applications, content and services and non-recurring engineering fees are required to be amortized over the longer of the applicable mobile operator contract or the expected period of performance under the applicable mobile operator contract. As a result, our amortization of these revenues, and, consequently, our margins, may change materially from quarter to quarter, particularly in connection with any extension to an applicable mobile operator customer contract. Any significant variations in our results of operations as a result of these accounting policies could adversely impact the price of our common stock.

We base our current and future expense levels on our internal operating plans and sales forecasts, and our operating costs are to a large extent fixed. As a result, we may not be able to reduce our costs sufficiently to compensate for an unexpected shortfall in revenues, and even a small shortfall in revenues could disproportionately and adversely affect our financial results for a particular quarter. Our relationship with T-Mobile USA represents a substantial majority of our revenues and will influence our net income or loss in any quarter, as will our relationships with other mobile operator customers. We may also incur significant or unanticipated expenses if we need to acquire licenses to third party technology and/or develop new mobile data services based on new and emerging technologies. For instance, we recently licensed technology from Qualcomm Corporation at a significant cost for the development of our mobile data services platform to support higher speed, 3G mobile devices. These engineering development efforts may take longer than anticipated, which could delay or prevent the commercial introduction of new or enhanced Danger-enabled mobile devices or mobile data services, which would have an adverse impact on our business and operating results.

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In addition to other risk factors discussed above, factors that may contribute to the limited visibility and variability of our quarterly results include:

As a result of these and other factors, our operating results may vary and not meet expectations. If we fail to meet market expectations, the trading price of our common stock would decrease.

We may be required to reduce our prices to compete successfully, or we may incur increased or unexpected costs, which could have a material adverse effect on our operating results and financial condition.

The intensely competitive market in which we conduct our business may require us to reduce our prices, which could negatively impact our operating results. For example, competition could result in price reductions due to competing solutions that are provided at little or no cost as part of a bundled offering or competitors offering deep discounts on mobile data services in an effort to recapture or gain market share or to sell other mobile data services. In addition, rates charged by our mobile operator customers for mobile data services could decline significantly, resulting in pricing pressures that negatively impact our operating results. Moreover, we may experience cost increases or unexpected costs which may also negatively impact our operating results, including increased or unexpected costs related to:

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Network failures, disruptions or capacity constraints in our third-party data center facilities or in our hosted service delivery engine, or SDE, could affect the performance of our mobile data services platform and harm our reputation and our revenues.

Our mobile data services are provided through a combination of our hosted SDE and the wireless networks of our mobile operator customers. Our operations rely to a significant degree on the efficient and uninterrupted operation of our hosted SDE. Our hosted SDE is currently located in third-party data center facilities located in San Jose, California and is now operated by Verizon Business Network Services, Inc., or Verizon, following its acquisition of MCI Communications Services. In October 2007, we entered into an agreement with Digital Realty Trust, or DRT, for additional hosted data center facilities located in Phoenix, Arizona to accommodate the anticipated growth of our mobile data services. Unlike our Verizon facilities, our hosting facilities with DRT are not full service hosting facilities. Therefore, we must separately contract for and manage the supply of internet connectivity, power, equipment installation and on site support for the DRT facilities and we have not previously been responsible for managing these services. We are planning to complete the set up of our DRT facilities to support their commercial operation of our SDE by June 1, 2008. Depending on the rate of growth of our mobile data services, if our DRT facilities are not timely completed and operational, we may experience SDE capacity issues, which could lead to network failures and disruptions.

Our hosted SDE and data center facilities are potentially vulnerable to damage or interruption from a variety of sources including by fire, flood, earthquake, power loss, telecommunications or computer systems failure, human error, terrorist acts or other events. In addition, under the terms of our service agreement with Verizon, Verizon may cease providing service to us if Verizon determines that its personnel or facilities are at risk of harm or damage. We have not yet completed a business continuity plan and there can be no assurance that the measures implemented by us to date, or measures implemented by us in the future, to manage risks related to network failures or disruptions in our SDE or data center facilities will be adequate, or that the redundancies built into our SDE will work as planned in the event of network failures or other disruptions. In particular, if we experience damage or interruptions to our data center facilities in San Jose, California, or were unable to build out and commence operations in our new data center facilities in Phoenix, Arizona, our ability to provide efficient and uninterrupted operation of our SDE would be significantly impaired.

We could also experience failures or interruptions of our SDE, or other problems in connection with our operations, as a result of:

Poor performance in or disruptions of our mobile data services platform could harm our reputation, delay market acceptance of our services and subject us to liabilities. We enter into service level agreements with our

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customers that specify the events constituting “down time” and the actions that we will take to rectify or respond to such down time, including in certain cases, the payment of financial penalties. For instance, in March 2005, we experienced a multiple day service outage for which we were required to provide significant financial credits to our mobile operator customers under the terms of our service level agreements. Failure to comply with service level agreements in the future may have a material adverse effect on our business, operating results and financial condition.

In addition, if our consumer base grows, additional strain will be placed on our technology systems and networks, which may increase the risk of a network disruption. Any outage in a network or system, or other unanticipated problem that leads to an interruption or disruption of our mobile data services could have a material adverse effect on our operations, sales and operating results.

If our mobile data services platform does not scale as anticipated, or we are unable to grow data center capacity as needed, our business will be harmed.

Despite frequent testing of the scalability of our mobile data services platform in a test environment, the ability of our mobile data services platform to scale to support a substantial increase in the number of users in an actual commercial environment is unproven. If our mobile data services platform does not efficiently and effectively scale to support and manage a substantial increase in the number of users while maintaining a high level of performance, our business will be seriously harmed. In addition if we are unable to secure data center space with appropriate power, cooling and bandwidth capacity, we may not be able to efficiently and effectively scale our business to manage the addition of new mobile operator customers, increases in subscriber growth or increases in data traffic.

If the use of our mobile data services solution results in more mobile data traffic than anticipated, our mobile operator customers may change the pricing and other terms by which they offer our mobile data services, which could result in increased subscriber turnover and damage to our business.

T-Mobile USA and other of our mobile operator customers sell Danger-enabled mobile devices with an unlimited data service plan. Offering unlimited data service plans is profitable for our mobile operator customers as long as average subscriber data usage remains below expected levels. If average subscriber usage of our mobile data services exceeds the levels anticipated by our mobile operator customers, or if we begin to offer new mobile data services, such as video streaming services, that cause average subscriber data usage to increase, our mobile operator customers may decide to raise prices, impose usage caps or discontinue unlimited data service plans. If imposed, these pricing changes or usage restrictions could make our mobile data services solution less attractive to consumers and could result in current subscribers abandoning our mobile data services for other products and services. If subscriber turnover increases, the number of consumers using Danger-enabled mobile devices and our revenues would decrease, and our business would be harmed.

Defects in our mobile data services can be difficult to detect. If defects occur, they could have a material adverse effect on our business.

Our mobile data services are highly complex and may contain design defects that are difficult to detect and correct. In the past, we have experienced delays in new releases of Danger-enabled mobile devices and of our mobile data services due to defects, and we may experience similar delays in the future. In addition, we license software and services from third parties that we incorporate into our mobile data services platform, and we cannot control the business and quality standards of these third parties. Despite testing by us, defects and errors may still be found in our current mobile data services platform or in new mobile data service releases, potentially resulting in delayed or lost revenues, loss of customers due to poor user experience, failure to achieve market acceptance, diversion of development resources and harm to our reputation or brand.

The support of our mobile data services entails the risk of product liability or warranty claims based on mobile device returns and repairs due to defects in our client software or mobile data services. In addition, the

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failure of our mobile data services to perform to customer expectations could give rise to service level agreement claims and credits towards fees owed to us. The consequences of such defects, failures and claims could have a material adverse effect on our business.

Products and services that incorporate our mobile data services platform may contain errors or defects, or may be of low quality and break, which could have an adverse effect on our business.

We cannot control the business and quality standards of our mobile operator customers, OEM partners and other technology partners, and we are unable to control the distribution of mobile devices that run our mobile data services. We cannot guarantee that the products and services provided by our OEM partners or mobile operator customers are free from errors or defects. If errors or defects occur in products and services that use our mobile data services platform, it could result in the rejection of these products and services by mobile operators or consumers, damage to our reputation, increased customer service and support costs, warranty claims, lost revenues and diverted development resources, any of which could adversely affect our business and results of operations. For example, in November 2007, T-Mobile USA suspended sales of the Sidekick Slide device and removed devices from retail store shelves due to reports that some Sidekick Slide devices were irregularly powering off. Following an approximately three week delay, the issues were remedied and sales of Sidekick Slide devices resumed. Also, in 2003, our contract manufacturer’s improper assembly process led to a high rate of device screen failures and nearly caused an interruption in the supply of Danger-enabled mobile devices. We were required to implement manufacturing process changes and repair returned devices to remedy the defect without a supply interruption. In addition, where consumers perceive that our mobile operator customers do not have adequate network coverage, sales of Danger-enabled mobile devices may decrease or consumers that purchase our mobile data services may attribute network coverage issues to our mobile data services.

Software and components that we incorporate into our mobile data services may contain errors or defects, which could have an adverse effect on our business.

We cannot control the quality standards of our suppliers of components that we incorporate into our mobile data services. Although we test certain software before incorporating it into our mobile data services, we cannot guarantee that all of the third-party technology that we incorporate will not contain errors, defects or bugs. If errors or defects occur in products and services that we utilize in our mobile data services platform, it could result in the rejection of these products and services by our OEM partners, our mobile operator customers or their subscribers, damage to our reputation, increased customer service and support costs, warranty claims, lost revenues and diverted development resources. For example, complicated wireless transmission radio software, or radio firmware, from third parties is included in Danger-enabled mobile devices. In the past, we have encountered radio firmware defects that have affected the user experience for our mobile data services. In one case, the radio firmware defect caused the software on Danger-enabled mobile devices to freeze and become unusable. To date, our radio firmware vendor has been able to fix these defects or we have been able to modify our client software to reduce the negative effect caused by these defects. However, we cannot guarantee that we will be successful in remedying any future radio firmware defects. In addition, if a component supplier fails to meet one of our product quality standards, the development of our mobile data services may be delayed. Any of these occurrences could adversely affect our business and results of operations.

The occurrence or perception of a security breach or an inappropriate disclosure of confidential information could seriously harm our business.

Our mobile data services include the transmission and storage of personal, private and confidential information. If there is a security breach or if there is an inappropriate disclosure of any of these types of information, we could be exposed to litigation and possible liability. Even if we were not held liable for such event, a security breach or inappropriate disclosure of personal, private or confidential information could harm our reputation and our relationships with current and potential customers. Even the perception of a security risk could inhibit market acceptance of Danger-enabled mobile devices and our mobile data services. For example, in

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February 2005, the personal information contained on Paris Hilton’s Sidekick device was disclosed on the Internet. Although investigations into the incident concluded that our mobile data services solution was not at fault, the incident may have raised concerns regarding the security of our mobile data services solution. In addition, we may be required to invest additional resources to protect against damages caused by any actual or perceived disruptions of our mobile data services solution or security breaches. Any of these developments could seriously harm our business.

We may need to raise additional capital to grow our business, and we may not be able to raise capital on terms acceptable to us or at all.

The operation of our business and our efforts to grow our business further will require significant cash outlays and commitments. We believe that our existing working capital and borrowings available under our loan agreement with Silicon Valley Bank will be sufficient to fund our working capital requirements, capital expenditures and operations for at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and it is possible that we could utilize our available financial resources sooner than we currently expect. The timing and amount of our cash needs may vary significantly depending on numerous factors, including but not limited to:

If our existing working capital, borrowings available under our loan agreement with Silicon Valley Bank and the net proceeds from this offering are not sufficient to meet our cash requirements, we will need to seek additional capital, potentially through debt or equity financings, to fund our growth. We may not be able to raise needed cash on terms acceptable to us or at all. Financings, if available, may be on terms that are dilutive or potentially dilutive to our stockholders, and the prices at which new investors would be willing to purchase our securities may be lower than our current common stock price. The holders of new securities may also receive rights, preferences or privileges that are senior to those of existing holders of our common stock. If new sources of financing are required but are insufficient or unavailable, we would be required to modify our growth and operating plans to the extent of available funding, which could harm our ability to grow our business.

Failure to adequately manage our growth may seriously harm our business.

We operate in an emerging market and have experienced, and may continue to experience, significant growth in our business. Our growth has placed, and is expected to continue to place, a significant strain on our managerial, administrative, operational and financial resources and our infrastructure. Our future success will depend, in part, upon the ability of our senior management to manage growth effectively. This will require us to, among other things:

Moreover, as our sales increase, we may be required to concurrently deploy our services infrastructure at multiple locations or provide increased levels of customization. As a result, we may lack the resources to deploy our mobile data services on a timely and cost-effective basis. Failure to accomplish any of these requirements

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would seriously harm our ability to deliver our mobile data services platform in a timely fashion, fulfill existing customer commitments or attract and retain new customers.

We depend on the services of key personnel to implement our strategy. If we lose the services of our key personnel or are unable to attract and retain other qualified personnel, we may be unable to implement our strategy.

We believe that the future success of our business depends on the services of a number of key management and operating personnel, including Henry R. Nothhaft, our Chief Executive Officer and Chairman of the Board of Directors, Joe F. Britt, Jr., our founder and Chief Technology Officer, Matt Hershenson, our founder and Senior Vice President of Advanced Products, and other members of our senior management. We have at-will employment relationships with all of our management and other employees. Some of these key employees have strong relationships with our OEM partners or mobile operator customers and our business may be harmed if these employees leave us. The loss of members of our key management and certain other members of our operating personnel could materially and adversely affect our business.

In addition, our ability to manage our growth depends, in part, on our ability to identify, hire and retain additional qualified employees, including a technically skilled development and engineering staff. We face intense competition for qualified individuals from numerous technology, marketing and mobile software and service companies. In addition, competition for qualified personnel is particularly intense in the San Francisco Bay Area, where our headquarters are located. Qualified individuals are in high demand, and we may incur significant costs to attract them. We may be unable to attract and retain suitably qualified individuals who are capable of meeting our growing creative, operational and managerial requirements, or may be required to pay increased compensation in order to do so. If we are unsuccessful in attracting and retaining these key personnel, our ability to operate our business effectively would be negatively impacted and our business would be adversely affected.

Future acquisitions of businesses or technologies may dilute the ownership interests of our stockholders, cause us to incur debt or assume contingent liabilities and strain our business and resources.

In order to remain competitive, we may find it necessary to acquire complementary businesses, products or technologies in the future. In the event of any future acquisitions, we could:

These actions could harm our business, operating results and financial condition, or the price of our common stock. Moreover, even if we do obtain benefits from acquisitions in the form of increased revenues, there may be a delay between the time when the expenses associated with an acquisition are incurred and the time when we recognize such benefits. This is particularly relevant in cases where it is necessary to integrate new types of technology into our existing mobile data services platform and where new types of products may be targeted for potential operator customers with which we do not have pre-existing relationships. Acquisitions and investment activities also entail numerous risks, including:

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We may not be able to successfully integrate any businesses, products, technologies or personnel that we might acquire in the future, and our failure to do so could have a material adverse effect on our business, operating results and financial condition.

Our expansion in international markets may be subject to added business, political, regulatory, operational, financial and economic risks that could increase our costs and hinder our growth.

Our growth strategy involves the expansion of our operations in foreign jurisdictions. International sales represented approximately 8.2% of our revenues in the year ended September 30, 2006 and 6.5% of our revenues in the year ended September 30, 2007. We currently have an office in the United Kingdom, and we contract with offshore engineering centers in India, Ukraine and Romania. We expect international sales to contribute to our future revenues. We have limited experience conducting business outside of the United States, and we may not be aware of all of the factors that may affect our business in foreign jurisdictions. International operations carry certain risks and associated costs, such as:

In addition, developing mobile data services that are compatible with other languages or cultures can be expensive. As a result, our ongoing international expansion efforts may be more costly than we expect. Further, expansion into developing countries subjects us to the effects of regional instability, civil unrest and

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hostilities, and could adversely affect us by disrupting communications and making travel more difficult. As we continue to expand our business internationally, our success will depend, in large part, on our ability to anticipate and effectively manage these and other risks associated with our international operations. However, any of these factors could adversely affect our international operations and, consequently, our operating results.

Changes to financial accounting standards and the interpretation of those standards could affect the way we recognize and report our financial results and could make it more expensive to issue stock options to employees, either of which would negatively impact our business.

We prepare our financial statements to conform with accounting principles generally accepted in the United States. These accounting principles are subject to interpretation by the Financial Accounting Standards Board, or FASB, the Securities and Exchange Commission, or SEC, and various other regulatory bodies. A change in those principles could have a significant effect on our reported results and might affect our reporting of transactions completed before a change is announced. For example, we have used stock options as a fundamental component of our employee compensation packages. We believe that stock options directly motivate our employees to maximize long-term stockholder value and, through the use of vesting, encourage employees to remain in our employ. Several regulatory agencies and entities have made regulatory changes that could make it more difficult or expensive for us to grant stock options to employees. For example, the FASB released Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, that required us to record a charge to earnings for employee stock option grants beginning October 1, 2006. We have, as a result of these changes, incurred increased compensation costs, which may cause us to change our equity compensation strategy. Any such change may make it more difficult to attract, retain and motivate employees.

Our results may vary significantly from period to period due to the timing of the release of new Danger-enabled mobile device models or new premium applications, content and services, as well as the seasonality of the mobile device market.

We may experience spikes in new subscriber activations and premium applications, content and services revenues as a result of the release of new Danger-enabled mobile device models or new premium applications, content and services. In addition, during the holiday shopping season, mobile device sales typically increase, driving new subscriber activations and an increase in premium applications and content downloads. If we or our OEM partners fail to introduce new Danger-enabled mobile devices and new mobile data services, for any reason, and particularly during key selling periods, our sales will suffer disproportionately. Likewise, if a key event to which our premium applications, content and services release schedule is tied were to be delayed or cancelled, our sales would also suffer disproportionately. Our ability to meet development schedules is affected by a number of factors, including the creative processes involved and the coordination of large and sometimes geographically dispersed development teams required by the increasing complexity of our mobile data services. Any failure to meet anticipated development or release schedules would likely result in a delay of revenues or possibly a significant shortfall in our revenues and cause our operating results to be materially different than anticipated.

If we become profitable, we cannot assure you that our net operating losses will be available to reduce our tax liability.

Our ability to use our tax net operating loss carryforwards may be limited or reduced. Generally, a change of more than 50 percentage points in the ownership of our shares, by value, over the three-year period ending on the date any shares are acquired constitutes an ownership change and may limit our ability to use net operating loss carryforwards. Furthermore, the number of shares of our common stock issued in our initial public offering may be sufficient, taking into account prior or future changes in our ownership over a three-year period, to cause us to undergo an ownership change. As a result, our ability to use our existing net operating losses to offset U.S. taxable income may become subject to substantial limitations. Further, the amount of our net operating losses could be reduced if any tax deductions taken by us are limited or disallowed by the Internal Revenue Service. All of these limitations could potentially result in increased future tax liability for us.

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Our business could be seriously harmed by earthquakes and other natural disasters.

Our headquarters and our current data center facilities are located in Palo Alto, California and San Jose, California, respectively, and our largest mobile operator customer has facilities located elsewhere in the Pacific Rim, which are areas subject to significant earthquake risks. Any disruption to the networks of this mobile operator customer or our data center facilities resulting from earthquakes or other natural disasters could significantly harm our business.

Risks Related to Our Industry

Changes in the wireless communications industry may adversely affect our business.

The wireless communications industry may experience significant growth and change which could adversely affect our business. New technologies such as Wi-Fi, worldwide interoperability for microwave access, or WiMAX, and voice over Internet protocol, or VOIP, are challenging existing wireless communication technologies. Future growth and adoption of these or other technologies may cause our mobile operator customers to revise or abandon their relationships with us and may cause other mobile operators not to become our customers. This would have an adverse effect on our business, operating results and financial condition. In addition, new entrants to the wireless communication industry offering new business models may challenge existing norms and disrupt the industry. For instance, Google recently announced the formation of the Open Handset Alliance, a consortium of mobile operators, mobile handset manufacturers and software and mobile computing companies focused on developing an open source software platform for mobile devices. In addition, Verizon Wireless recently announced that it will open its network to wireless devices, software and applications that are not sold by Verizon Wireless in an effort to expand its customer base. Changes in the industry caused by such new developments or other entrants, may cause our mobile operator customers to revise or abandon their relationships with us and may cause other mobile operators to choose our competitors. This would have an adverse effect on our business, operating results and financial condition.

Changes in government regulation of the wireless communications industry may adversely affect our business.

It is possible that a number of laws and regulations may be adopted in the United States and elsewhere that could restrict the wireless communications industry, including laws and regulations regarding lawful interception of personal data, taxation, content suitability, copyright, distribution and antitrust. Furthermore, the growth and development of the market for electronic storage of personal information may prompt calls for more stringent consumer protection laws that may impose additional burdens on companies such as ours that store personal information. We anticipate that regulation of our industry will increase and that we will be required to devote legal and other resources to address this regulation. Changes in current laws or regulations or the imposition of new laws and regulations in the United States or elsewhere regarding the media and wireless communications industries may lessen the growth of wireless communications services and may materially reduce our ability to increase or maintain sales of our mobile data services.

A number of studies have examined the health effects of mobile device use, and the results of some of the studies have been interpreted as evidence that mobile device use causes adverse health effects. The establishment of a link between the use of mobile devices and health problems, or any media reports suggesting such a link, could increase government regulation of, and reduce demand for, mobile devices and, accordingly, the demand for our mobile data services, and this could harm our business, operating results and financial condition.

The transmission and storage of personal information could give rise to liabilities or additional costs of operation as a result of governmental regulation, legal requirements or differing views of personal privacy rights.

We transmit and store a large volume of personal information in the course of providing our mobile data services. This information is increasingly subject to legislation and regulations in numerous jurisdictions around

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the world. This government action is typically intended to protect the privacy and security of personal information that is collected, stored and transmitted in or from the governing jurisdiction.

We could be adversely affected if domestic or international legislation or regulations are expanded to require changes in our business practices or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect our business. For example, the USA PATRIOT Act provides certain rights to U.S. law enforcement authorities to obtain personal information in the control of U.S. persons and entities without notifying the affected individuals. If we are required to allocate significant resources to modify our mobile data services platform to enable enhanced legal interception of the personal information that we transmit and store, our financial condition and results of operations may be adversely affected.

In addition, because various foreign jurisdictions have different laws and regulations concerning the storage and transmission of personal information, we may face unknown requirements that pose compliance challenges in new international markets that we seek to enter. Such variation could subject us to costs, liabilities or negative publicity that could impair our ability to expand our operations into some countries and therefore limit our future growth.

As privacy and data protection have become more sensitive issues, we may also become exposed to potential liabilities as a result of differing views on the privacy of personal information. These and other privacy concerns, including security breaches, could adversely impact our business, financial condition and results of operations.

Reduced spending by our customers due to the uncertainty of economic and geopolitical conditions may negatively affect our business and results of operations.

Economic and geopolitical uncertainties may directly affect the marketing and distribution of our mobile data services by mobile operators. As current and future conditions in the domestic and global economies remain uncertain, it is difficult to estimate the level of economic growth, which may cause some mobile operators to reduce capital spending on technology products. Accordingly, the future direction of the overall domestic and global economies will have an impact on our overall performance. Economic conditions in the United States, Japan, Europe and elsewhere affecting the wireless industry in which we compete, are beyond our control. If these economic conditions worsen or fail to improve, we may experience reduced demand for and pricing pressure on our mobile data services, which could harm our operating results. In addition, acts of terrorism and the outbreak of hostilities and armed conflicts between countries have created uncertainties that may affect the global economy and could have a material adverse effect on our business, operating results and financial condition.

Mergers, consolidation or other strategic transactions in the communications industry could weaken our competitive position, reduce the number of our mobile operator customers and adversely affect our business.

The communications industry continues to experience consolidation and an increased formation of alliances among communications service providers and between communications service providers and other entities. Should one of our significant mobile operator customers, such as T-Mobile USA, consolidate or enter into an alliance with another entity, this could have a negative material impact on our business. Such a consolidation and alliance may cause us to lose a mobile operator customer or require us to reduce prices as a result of enhanced customer leverage, which would have a material adverse effect on our business. We may not be able to offset the effects of any price reductions. We may not be able to expand our base of mobile operator customers to make up any revenue declines if we lose a mobile operator customer or if our transaction volumes decline.

In addition, if two or more of our competitors or mobile operator customers were to merge or partner, the change in the competitive landscape could adversely affect our ability to compete effectively. Our competitors

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may also establish or strengthen co-operative relationships with their mobile operator customers, sales channel partners or other parties with whom we have strategic relationships, thereby limiting our ability to promote our mobile data services. These events could reduce revenue and adversely affect our operating results.

Risks Related to the Offering and Our Common Stock

There has been no prior public market for our common stock, the trading price of our common stock is likely to be volatile, and you might not be able to sell your shares at or above the initial public offering price.

There has been no public market for our common stock prior to this offering. Investors who purchase our common stock in this offering may not be able to sell their shares at or above the initial public offering price. Market prices for companies similar to us experience significant price and volume fluctuations. An active or liquid market in our common stock may not develop upon completion of this offering or, if it does develop, it may not be sustainable. The following factors, in addition to other risks described in this prospectus, may have a significant effect on our common stock market price:

In addition, if the market for technology stocks or the stock market in general experiences loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition or operating results. The trading price of our common stock might also decline in reaction to events that affect other companies in our industry even if these events do not directly affect us. Each of these factors, among others, could harm the value of your investment in our common stock. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, financial condition, results of operations and growth prospects.

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Our securities have no prior market and an active trading market for our common stock may not develop.

Prior to this offering, there has been no public market for our common stock. Although we expect that our common stock will be approved for listing on the NASDAQ Global Market, an active trading market for our shares may never develop or, even if developed, may not be sustained following this offering. The initial public offering price for our common stock was determined through negotiations with the underwriters, and the negotiated price may not be indicative of the market price of the common stock after the offering. This initial public offering price may vary from the market price of our common stock after the offering. As a result of these and other factors, you may be unable to resell your shares of our common stock at or above the initial public offering price.

Future equity issuances or sales of our common stock in the public market could cause our stock price to decline.

If we issue equity securities in the future or if our stockholders sell a substantial number of shares of our common stock in the public market after this offering, or if there is a perception that these sales or issuances might occur, the market price of our common stock could decline. Based on the number of shares of common stock outstanding as of September 30, 2007, upon the closing of this offering, and assuming no outstanding options are exercised prior to the closing of this offering, we will             have shares of common stock outstanding (including             shares of common stock to be issued upon the exercise of outstanding warrants that, by their terms, provide for automatic exercise on a cashless basis immediately prior to the closing of this offering, assuming a deemed market price equal to the assumed initial public offering price of $             per share, and             shares of common stock to be issued upon the exercise of other outstanding warrants for cash that will terminate if not exercised prior to the closing of this offering). All of the             shares of common stock sold in this offering will be freely tradable without restrictions or further registration under the Securities Act of 1933, as amended, except for any shares purchased by our affiliates as defined in Rule 144 under the Securities Act of 1933, as amended. The remaining             shares of common stock outstanding upon the closing of this offering will be restricted as a result of securities laws or lock-up agreements. These remaining shares will generally become available for sale in the public market as follows:

Deutsche Bank Securities Inc. and UBS Securities LLC may, in their sole discretion, release all or some portion of the shares subject to lock-up agreements prior to the expiration of the lock-up period. See “Shares Eligible for Future Sale.”

After this offering, the holders of approximately             shares of common stock, based on shares outstanding as of September 30, 2007, including             shares underlying outstanding warrants, will be entitled to rights with respect to registration of such shares under the Securities Act of 1933, as amended. If such holders, by exercising their registration rights, sell a large number of shares, they could adversely affect the market price for our common stock. If we file a registration statement and include shares held by these holders pursuant to the exercise of their registration rights, these sales may impair our ability to raise capital. In addition, prior to the consummation of this offering, we intend to file a registration statement on Form S-8 under Securities Act to register up to shares of our common stock for issuance under our stock option and employee stock purchase plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject to the lock-up agreements, if applicable, described above.

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Our executive officers, directors and principal stockholders will continue to have substantial control over us after this offering and will be able to exercise significant influence over matters subject to stockholder approval.

Our executive officers, directors and principal stockholders, together with their respective affiliates, beneficially owned approximately 53.9% of our capital stock as of September 30, 2007, and we expect that upon completion of this offering, that same group will beneficially own at least     % of our outstanding common stock, of which     % will be beneficially owned by our executive officers, assuming no exercise of the underwriters’ over-allotment option. Accordingly, these stockholders, if they act together, will be able to exercise influence over all matters requiring stockholder approval, including the election of directors and approval of corporate transactions, such as a merger or other sale of our company or its assets. This concentration of ownership could have the effect of delaying or preventing a change in our control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which in turn could have a material adverse effect on the market value of our common stock. For information regarding the ownership of our outstanding stock by our executive officers and directors and their affiliates, please see the section entitled “Principal Stockholders.”

As a new investor, you will experience substantial dilution as a result of this offering.

Our assumed initial public offering price per share is substantially higher than the pro forma net tangible book value per share of our common stock outstanding prior to this offering. As a result, investors purchasing common stock in this offering will experience immediate substantial dilution of $             a share. In addition, we have issued options and warrants to acquire common stock at prices below the assumed initial public offering price. To the extent outstanding options and warrants are ultimately exercised, including warrants that will terminate if not exercised prior to the closing of this offering, there will be further dilution to investors in this offering. This dilution is due in large part to the fact that our earlier investors paid substantially less than the assumed initial public offering price when they purchased their shares of common stock. In addition, if the underwriters exercise their over-allotment option, you will experience additional dilution.

Anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent an acquisition of us by others, even if an acquisition would be beneficial to our stockholders, and may affect the trading price of our common stock.

We are a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law, that apply to us, may discourage, delay or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change of control would be beneficial to our existing stockholders. For more information, see the section entitled “Description of Capital Stock—Anti-Takeover Effects of Our Charter and Bylaws and Delaware Law.”

In addition, our amended and restated certificate of incorporation and amended and restated bylaws, which will be in effect as of the closing of this offering, could make it more difficult for a third party to acquire us, or for a change in the composition of our board of directors or management to occur, even if doing so would benefit our stockholders. These provisions include:

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In addition, we are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with an interested stockholder for a period of three years following the date on which the stockholder became an interested stockholder, unless such transactions are approved by our board of directors. This provision could have the effect of delaying or preventing a change of control, whether or not it is desired by or beneficial to our stockholders.

Restrictions in our material agreements with our mobile operator customers and OEM partners may prevent us from being acquired.

Several of our major agreements with our mobile operator customers, including T-Mobile USA, and with our OEM partners contain provisions that do not allow assignment of our agreement without the prior consent of the mobile operator customer or OEM partner, as the case may be. These provisions could deter a potential acquirer from acquiring us and therefore limit the liquidity opportunities for our stockholders.

Our management will have broad discretion over the use and investment of the net proceeds we receive in this offering and might not apply the proceeds in ways that increase the value of your investment.

Our management will have broad discretion over the use and investment of the net proceeds from this offering, and you will be relying on the judgment of our management regarding the application of these net proceeds. Our management might not apply the net proceeds of this offering in ways that increase the value of your investment. Our management intends to use the net proceeds from this offering to repay certain of our credit facilities and for general corporate purposes, including to finance the expansion of our data centers and to fund capital expenditures, or for investments in, or acquisitions of, complementary companies, technologies, products or assets. Pending these uses, we intend to invest the net proceeds of this offering in a variety of investment-grade capital preservation investments, including short- and intermediate-term interest bearing obligations, certificates of deposit or direct or guaranteed obligations of the U.S. government. Our management might not be able to yield a significant return, if any, on any investment of these net proceeds. You will not have the opportunity to influence our decisions on how the net proceeds from this offering are used.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the trading price for our common stock would be negatively impacted. In the event we obtain securities or industry analyst coverage, if one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.

We will incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, and rules of the Securities and Exchange

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Commission and the NASDAQ Global Market, have imposed various requirements on public companies including requiring establishment and maintenance of effective disclosure and financial controls. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantial costs to maintain the same or similar coverage.

The Sarbanes-Oxley Act of 2002 requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, beginning with our annual report on Form 10-K for the fiscal year ending September 30, 2009. Our compliance with Section 404 of the Sarbanes-Oxley Act will require that we incur substantial accounting expense and expend significant management efforts. We currently do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. If we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by NASDAQ, the SEC or other regulatory authorities, which would require additional financial and management resources.

Our ability to successfully implement our business plan and comply with Section 404 requires us to be able to prepare timely and accurate financial statements. We expect that we will need to continue to improve existing, and implement new operational and financial systems, procedures and controls to manage our business effectively. Any delay in the implementation of, or disruption in the transition to, new or enhanced systems, procedures or controls, may cause our operations to suffer and we may be unable to conclude that our internal control over financial reporting is effective and to obtain an unqualified report on internal controls from our auditors as required under Section 404 of the Sarbanes-Oxley Act. Moreover, we cannot be certain that these measures would ensure that we implement and maintain adequate controls over our financial processes and reporting in the future. Even if we were to conclude, and our auditors were to concur, that our internal control over financial reporting provided reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, because of its inherent limitations, internal control over financial reporting may not prevent or detect fraud or misstatements. This, in turn, could have an adverse impact on trading prices for our common stock, and could adversely affect our ability to access the capital markets.

We have never declared or paid dividends on our capital stock and we do not anticipate paying dividends in the foreseeable future.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings to support the operation of and to finance the growth and development of our business. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to compliance with applicable laws and covenants under current or future credit facilities, which may restrict or limit our ability to pay dividends, and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors may deem relevant. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. As a result, a return on your investment will only occur if our stock price appreciates.

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FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are contained principally in the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements made herein include, but are not limited to, statements about:

In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “target,” “believe,” “estimate,” “predict,” “potential,” “plan,” “anticipate,” “seek,” “project,” or the negative of these terms, and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. We discuss many of these risks in this prospectus in greater detail under the heading “Risk Factors.” Also, these forward-looking statements represent our estimates and assumptions only as of the date of this prospectus. Unless required by U.S. federal securities laws, we do not intend to update any of these forward-looking statements to reflect circumstances or events that occur after the statement is made.

You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. The Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act of 1933 do not protect any forward-looking statements that we make in connection with this offering.

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USE OF PROCEEDS

We estimate that our net proceeds from the sale of the common stock that we are offering will be approximately $             million, assuming an initial public offering price of $             per share, which is the mid-point of the range reflected on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters’ over-allotment option to purchase additional shares in this offering is exercised in full, we estimate that our net proceeds will be approximately $             million, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. Each $             increase (decrease) in the assumed initial public offering price of $             per share would increase (decrease) the net proceeds to us from this offering by approximately $             million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. We may also increase or decrease the number of shares we are offering. Each increase (decrease) of             shares in the number of shares offered by us would increase (decrease) the net proceeds to us from this offering by approximately $             million, assuming that the assumed initial public offering price remains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We do not expect that a change in the offering price or the number of shares by these amounts would have a material effect on our uses of the proceeds from this offering, although it may accelerate the time at which we will need to seek additional capital.

We intend to use approximately $7.2 million of the net proceeds of this offering to repay in full the principal and accrued interest on our outstanding term loan from Silicon Valley Bank and the principal and accrued interest on, together with the payment of additional fees related to, our outstanding equipment lease advances from Atel Ventures, Inc. Our intent to use approximately $7.2 million of the net proceeds of this offering to repay these credit facilities is based on amounts outstanding under these credit facilities as of November 30, 2007. Our outstanding term loan from Silicon Valley Bank carries an interest rate of 8.3% and matures in December 2010. Our outstanding equipment lease advances from Atel Ventures carry a weighted average interest rate of 11.9% and mature in November 2009, January 2010 and February 2010. We have used the proceeds of these credit facilities primarily to finance data center equipment and software development license acquisitions.

We intend to use the remaining net proceeds of this offering for working capital and other general corporate purposes, including to finance the expansion and operation of our data centers, to fund capital expenditures and to support our research and development and sales and marketing activities. We may also use a portion of the net proceeds of this offering for the acquisition of, or investment in, companies, technologies, products or assets that complement our business. However, we have no present understandings, commitments or agreements to enter into any acquisitions or to make any of these types of investments.

We have not yet determined our anticipated expenditures and therefore cannot estimate the amounts to be used for each of the purposes discussed above. The amounts and timing of our expenditures will depend on several factors, including the amount of cash generated by our operations, competitive and technological developments, the rate of growth, if any, of our business and actual expenses to operate our business. Accordingly, our management will have significant flexibility in applying the net proceeds of this offering, and investors will be relying on the judgment of our management regarding the application of these net proceeds. Pending use of proceeds from this offering, we intend to invest the net proceeds of this offering in a variety of investment-grade capital preservation investments, including short- and intermediate-term interest bearing obligations, certificates of deposit or direct or guaranteed obligations of the U.S. government. Our management might not be able to yield a significant return, if any, on any investment of these net proceeds.

DIVIDEND POLICY

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings to support the operation of and to finance the growth and development of our business. We do not anticipate paying any cash dividends in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to compliance with applicable laws and covenants under current or future credit facilities, which may restrict or limit our ability to pay dividends, and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors may deem relevant.

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CAPITALIZATION

The following table sets forth our capitalization as of September 30, 2007:

You should read this table together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes, each appearing elsewhere in this prospectus.

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The table above excludes, as of September 30, 2007, the following shares:

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DILUTION

If you invest in our common stock in this offering, your ownership interest will be diluted immediately to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock after this offering. Our historical net tangible book value per share is determined by dividing our total tangible assets (total assets less intangible assets), less total liabilities, redeemable convertible preferred stock and common stock subject to repurchase, by the number of outstanding shares of our common stock. As of September 30, 2007, our historical net tangible book value (deficit) was $(186.4) million, or $(10.40) per share of our common stock. Our pro forma net tangible book value as of September 30, 2007 was approximately $             million, or $             per share of our common stock, based on the number of shares of common stock outstanding as of September 30, 2007, after giving effect to the conversion of all of our outstanding redeemable convertible preferred stock into shares of our common stock, the exercise of warrants that, by their terms, provide for automatic exercise on a cashless basis immediately prior to the closing of this offering, and the reclassification of the preferred stock warrant liability to stockholders’ equity upon the closing of this offering.

Investors participating in this offering will incur immediate and substantial dilution. After giving effect to the sale of common stock offered by us at an assumed initial public offering price of $             per share, the mid-point of the price range reflected on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of September 30, 2007 would have been $             million, or $             per share of our common stock. This represents an immediate increase in pro forma as adjusted net tangible book value of $             per share to our existing stockholders, and an immediate dilution of $             per share to new investors participating in this offering. The following table illustrates this dilution:

A $             increase (decrease) in the assumed initial public offering price of $             per share would increase (decrease) our pro forma as adjusted net tangible book value by approximately $             million, or approximately $             per share, and the pro forma dilution per share to new investors in this offering by approximately $             per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. An increase of             shares in the number of shares offered by us would increase our pro forma as adjusted net tangible book value by approximately $             million, or $             per share, and the pro forma dilution per share to new investors in this offering would be $             per share, assuming that the assumed initial public offering price remains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, a decrease of             shares in the number of shares offered by us would decrease our pro forma as adjusted net tangible book value by approximately $             million, or $             per share, and the pro forma dilution per share to new investors in this offering would be $             per share, assuming that the assumed initial public offering price remains the same, and after deducting the

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underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information discussed above is illustrative only and will adjust based on the actual initial public offering price and other terms of this offering determined at pricing.

If the underwriters exercise their option in full to purchase             additional shares of common stock in this offering, the pro forma as adjusted net tangible book value per share after the offering would be $             per share, the increase in the pro forma as adjusted net tangible book value per share to existing stockholders would be $             per share and the pro forma dilution to new investors purchasing common stock in this offering would be $             per share.

The following table summarizes, on a pro forma as adjusted basis as of September 30, 2007, the differences between the number of shares of common stock purchased from us, the total consideration and the weighted average price per share paid by existing stockholders and by new investors participating in this offering at an assumed initial public offering price of $             per share, before deducting underwriting discounts and commissions and estimated offering expenses:

The above discussion and tables are based on             shares of common stock outstanding as of September 30, 2007, assuming the conversion of all outstanding redeemable convertible preferred stock into shares of common stock and the exercise of warrants that, by their terms, provide for automatic exercise on a cashless basis immediately prior to the closing of this offering. This number excludes, as of September 30, 2007:

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The following table summarizes, on a pro forma as adjusted basis as of September 30, 2007, after giving effect to the exercise in full of all of our stock options outstanding at September 30, 2007 and our issuance of 6,525,841 shares of common stock upon the exercise of warrants outstanding at September 30, 2007, the differences between the number of shares of common stock purchased from us, the total consideration and the weighted average price per share paid by existing stockholders and by new investors purchasing common stock in this offering at an assumed initial public offering price of $             per share, before deducting underwriting discounts and commissions and estimated offering expenses:

The number of shares of common stock outstanding in the table above is based on the pro forma number of shares outstanding as of September 30, 2007 and assumes no exercise of the underwriters’ option to purchase additional shares. If the underwriters’ option to purchase additional shares is exercised in full, the number of shares of common stock held by existing stockholders will be reduced to    % of the total number of shares of common stock to be outstanding after this offering, and the number of shares of common stock held by new investors purchasing common stock in this offering will be increased to             shares or    % of the total number of shares of common stock to be outstanding after this offering.

Effective upon the closing of this offering, an aggregate of up to             shares of our common stock will be reserved for future issuance under our equity benefit plans, and these share reserves will also be subject to automatic annual increases in accordance with the terms of the plans. To the extent that new options are issued under our equity benefit plans or we issue additional shares of common stock in the future, there will be further dilution to new investors purchasing common stock in this offering.

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SELECTED CONSOLIDATED FINANCIAL DATA

We present below our selected consolidated financial data. The selected consolidated statements of operations data for each of the years ended September 30, 2005, 2006 and 2007, and the selected consolidated balance sheet data as of September 30, 2006 and 2007, have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected consolidated statements of operations data for each of the years ended September 30, 2003 and 2004, and the selected consolidated balance sheet data as of September 30, 2003, 2004 and 2005, have been derived from our audited consolidated financial statements that are not included in this prospectus. You should read this information together with our consolidated financial statements and related notes included elsewhere in this prospectus and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our historical results are not necessarily indicative of the results to be expected in any future period.