Filed On 2/1/07 5:32pm ET · SEC File 333-137659 · Accession Number 891618-7-48
As Of Filer Filing As/For/On Docs:Pgs Issuer Agent
2/01/07 Mellanox Technologies/LTD S-1/A 6:303 Bowne of Palo Alto/FA
Pre-Effective Amendment to Registration Statement (General Form) · Form S-1
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-1/A Amendment to Form S-1 HTML 1,460K
2: EX-1.1 Underwriting Agreement HTML 122K
3: EX-3.1 Articles of Incorporation/Organization or By-Laws HTML 149K
4: EX-5.1 Opinion re: Legality HTML 12K
5: EX-23.3 Consent of Experts or Counsel HTML 4K
6: EX-23.4 Consent of Experts or Counsel HTML 5K
This is an EDGAR HTML document rendered as filed. [ Alternative Formats ]
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 5
to
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MELLANOX TECHNOLOGIES,
LTD.
(Exact name of registrant as
specified in its charter)
| |
|
|
|
|
|
Israel
|
|
3674
|
|
98-0233400
|
|
(State or other jurisdiction
of
|
|
(Primary Standard
Industrial
|
|
(I.R.S. Employer
|
|
incorporation or
organization)
|
|
Classification Code
Number)
|
|
Identification Number)
|
Mellanox Technologies, Ltd.
Hermon Building, Yokneam, Israel 20692
+972-4-909-7200
(Address, including zip code,
and telephone number,
including area code, of
registrant’s principal executive offices)
Michael Gray
Chief Financial Officer
Mellanox Technologies, Inc.
2900 Stender Way
(Name, address, including zip
code, and telephone number,
including area code, of agent
for service)
Copies To:
| |
|
|
|
|
|
|
Alan C. Mendelson, Esq.
Mark V. Roeder, Esq.
Latham & Watkins LLP
140 Scott Drive
Menlo Park, California 94025
(650) 328-4600
|
|
Barry P. Levenfeld, Adv.
Yigal Arnon & Co.
22 Rivlin Street
Jerusalem, Israel 94240
+972-2-623-9220
|
|
Bruce A. Mann, Esq.
William W. Yeung, Esq.
Andrew D. Thorpe, Esq.
Theresa Ng, Esq.
Morrison & Foerster LLP
425 Market Street
San Francisco, California 94105
(415) 268-7000
|
|
David S. Glatt, Adv.
Michael J. Rimon, Adv.
Meitar Liquornik Geva &
Leshem Brandwein
16 Abba Hillel Rd.
Ramat Gan, Israel 52506
+972-3-610-3100
|
Approximate date of commencement of the proposed sale to the
public: As soon as practicable after this
Registration Statement becomes effective.
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. o
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. o
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. o
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 statement number of
the earlier effective registration statement for the same
offering. o
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 which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
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 an offer to buy these
securities in any jurisdiction where the offer or sale is not
permitted.
|
PRELIMINARY PROSPECTUS
6,000,000 Shares
Ordinary Shares
This is the initial public offering of our ordinary shares. We
are selling all of the ordinary shares being sold in this
offering. Prior to this offering, there has been no public
market for our ordinary shares. The initial public offering
price of our ordinary shares is expected to be between $12.00
and $14.00 per share. Our ordinary shares have been approved for
quotation on The Nasdaq Global Market under the symbol
“MLNX,” subject to official notice of issuance.
We have granted the underwriters an option to purchase up to
900,000 additional ordinary shares from us to cover the
over-allotment of shares.
Investing in our ordinary shares involves a high degree of
risk. See “Risk Factors” on page 7 of this
prospectus.
| |
|
|
|
|
|
|
|
|
|
|
|
Underwriting
|
|
Proceeds, Before
|
|
|
|
Price to
|
|
Discounts and
|
|
Expenses, to
|
|
|
|
Public
|
|
Commissions
|
|
Mellanox
|
|
|
|
Per Share
|
|
$
|
|
$
|
|
$
|
|
Total
|
|
$
|
|
$
|
|
$
|
The underwriters expect to deliver the ordinary shares on or
about ,
2007.
Neither the Securities and Exchange Commission nor any state
securities commission nor any other regulatory body has approved
or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
|
|
| Thomas
Weisel Partners LLC |
Jefferies &
Company, Inc. |
The date of this prospectus
is ,
2007.
| Mellanox Technologies is a fabless semiconductor company.
We are a leading supplier of semiconductor-based interconnect
products that facilitate high-performance data transmission.
Our customers include leading server, storage, communications
infrastructure equipment, and embedded systems vendors.
InfiniBand Adapters InfiniBand Switches
Blade
COMMUNICATIONS
Rack Optimized Servers
INFRASTRUCTURE EMBEDDED
SERVERS STORAGE EQUIPMENT SYSTEMS |
You should rely only on the information contained in this
prospectus or contained in any free writing prospectus filed
with the Securities and Exchange Commission. Neither we, nor the
underwriters, have authorized anyone to provide you with
additional information or information different from that
contained in this prospectus or in any free writing prospectus
filed with the Securities and Exchange Commission. We are
offering to sell, and seeking offers to buy, our ordinary shares
only in jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery
of this prospectus or of any sale of our ordinary shares.
TABLE OF
CONTENTS
Unless the context requires otherwise, the words
“Mellanox,” “we,” “company,”
“us” and “our” refer to Mellanox
Technologies, Ltd. and our wholly-owned subsidiary, Mellanox
Technologies, Inc. For purposes of this prospectus, the term
“shareholders” shall refer to the holders of our
ordinary shares.
i
PROSPECTUS
SUMMARY
This summary highlights information contained elsewhere in
this prospectus and does not contain all of the information that
you should consider in making your investment decision. Before
investing in our ordinary shares, you should carefully read this
entire prospectus, including our financial statements and the
related notes included in this prospectus and the information
set forth under the headings “Risk Factors” and
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations.”
MELLANOX
TECHNOLOGIES, LTD.
We are a leading supplier of semiconductor-based,
high-performance interconnect products that facilitate data
transmission between servers and storage systems through
communications infrastructure equipment. Our products are an
integral part of a total solution focused on computing, storage
and communication applications used in enterprise data centers,
high-performance computing and embedded systems. We are one of
the pioneers of InfiniBand, an industry standard architecture
that provides specifications for high-performance interconnects.
We believe that we are the leading merchant supplier of
field-proven InfiniBand-compliant semiconductor products that
deliver industry-leading performance and capabilities, which we
believe is demonstrated by the performance, efficiency and
scalability of clustered computing and storage systems that
incorporate our products. In addition to supporting InfiniBand,
our next generation of products also support the industry
standard Ethernet interconnect specification, which we believe
will expand our total addressable market.
We are a fabless semiconductor company that provides
high-performance interconnect solutions based on semiconductor
integrated circuits, or ICs. We design, develop and market
adapter and switch ICs, both of which are silicon devices that
provide high performance connectivity. We also offer adapter
cards that incorporate our ICs. These ICs are added to servers,
storage, communications infrastructure equipment and embedded
systems by either integrating them directly on circuit boards or
inserting adapter cards into slots on the circuit board. We have
established significant expertise with high-performance
interconnect solutions from successfully developing and
implementing multiple generations of our products. Our expertise
enables us to develop and deliver products that serve as
building blocks for creating reliable and scalable InfiniBand
and Ethernet solutions with leading performance at significantly
lower cost than products based on alternative interconnect
solutions. We compete with other providers of
semiconductor-based high performance interconnect products based
on InfiniBand, Ethernet, Fibre Channel and proprietary
technologies.
Our products are incorporated into servers produced by the five
largest server vendors: IBM, Hewlett-Packard, Dell, Sun
Microsystems and Fujitsu-Siemens. These server vendors
collectively shipped the majority of servers in 2005, according
to the industry research firm IDC. We also supply leading
storage and communications infrastructure equipment vendors such
as Cisco Systems, LSI Logic, Network Appliance, SilverStorm
Technologies, which was recently acquired by QLogic Corporation,
and Voltaire. Additionally, our products are used by GE Fanuc,
Mercury Computers, SeaChange International and other vendors of
embedded systems. Since we introduced our first product in 2001,
we have shipped products containing approximately
1.7 million InfiniBand ports, which we believe demonstrates
an established customer and end-user base for our products.
The increasing reliance of enterprises on information
technology, or IT, for their everyday operations is fueling the
demand for computing, storage and communications infrastructure
systems that can process, store and transmit large volumes of
data. High-performance interconnect solutions play a key role in
enabling high-speed transmission of data and sharing of
resources among systems. There are several trends and
technological advances driving demand for high-performance
interconnect solutions, including:
|
|
|
| |
•
|
Transition to clustered computing and storage using connections
among multiple standard components;
|
| |
•
|
Transition to multiple and multi-core processors in servers;
|
| |
•
|
Enterprise data center infrastructure consolidation; and
|
| |
•
|
Increasing deployments of mission critical, latency (response
time) sensitive applications.
|
As a result of these trends and advances in computing, storage
and communications infrastructure technology, the requirements
on high-performance interconnect solutions have become more
demanding. High-performance interconnect solutions are
challenged to provide high bandwidth, low latency, reduced
complexity, increased interconnect efficiency, reliability,
stability and improved price/performance economics.
1
InfiniBand was developed to address these challenges. We believe
that InfiniBand has significant advantages compared to
alternative interconnect technologies. The InfiniBand standard
was developed under the auspices of the InfiniBand Trade
Association, or IBTA, which was founded in 1999 and is composed
of leading IT vendors and hardware and software solution
providers including Mellanox, Brocade, Cisco Systems, Fujitsu,
Hewlett-Packard, Hitachi, IBM, Intel, LSI Logic, NEC, Network
Appliance, QLogic Corporation, Sun Microsystems and Voltaire.
While InfiniBand currently represents a small portion of the
total interconnect market relative to established solutions such
as Fibre Channel and Ethernet, InfiniBand products have achieved
increasing market adoption, particularly in high-performance
computing applications, and are expanding into mainstream
financial, retail and other commercial enterprise data centers.
We apply our strengths to enhance our position as a leading
supplier of semiconductor-based, high-performance interconnect
products. We consider our key strengths to include the following:
|
|
|
| |
•
|
We have expertise in developing high-performance interconnect
solutions;
|
| |
•
|
We believe we are the leading merchant supplier of InfiniBand
ICs with a multi-year competitive advantage;
|
| |
•
|
We have a comprehensive set of technical capabilities to deliver
innovative and reliable products; and
|
| |
•
|
We have extensive relationships with our key OEM customers and
many end users.
|
We have used these strengths, along with our knowledge of
InfiniBand, to design our innovative, next generation,
high-performance solutions that also support the Ethernet
interconnect standard.
Our goal is to be the leading supplier of semiconductor-based,
high-performance interconnect products for computing, storage
and communications applications. To accomplish this goal, we
intend to:
|
|
|
| |
•
|
Continue to develop leading, high-performance interconnect
solutions;
|
| |
•
|
Facilitate and increase the continued adoption of InfiniBand;
|
| |
•
|
Expand our presence with existing server OEM customers;
|
| |
•
|
Broaden our customer base with storage, communications
infrastructure and embedded systems OEMs; and
|
| |
•
|
Leverage our fabless business model to deliver strong financial
performance.
|
We also face several risks as we grow our business, including
the need to generate and sustain higher revenues while
maintaining reasonable cost and expense levels, the rate and
extent of InfiniBand adoption, our reliance on a small number of
customers for a significant portion of our sales and the
cyclicality of the semiconductor industry in general. Our
success in growing our business also depends on our ability to
effectively compete, develop new products, enhance our existing
products and protect our intellectual property. We also face
risks associated with the outsourcing of our manufacturing and
with our Israeli operations. If we are unable to adequately
address these risks, our ability to grow our business will be
negatively impacted.
As of
September 30, 2006, we had 148 full-time and
23 part-time employees located in the United States
and Israel, including 94 in research and development, 25 in
sales and marketing, 15 in general and administrative, 6 in
operations and 8 in other administrative functions. The majority
of our employees, four of our executive officers and one of our
directors, who is also an executive officer, are located in
Israel.
We were incorporated under the laws of Israel in March 1999. Our
principal executive offices in the United States are
located at 2900 Stender Way,
Santa Clara,
California 95054,
and our principal executive offices in Israel are located at
Hermon Building, Yokneam, Israel 20692. Substantially all of our
assets are located in Israel. Our telephone number in
Santa Clara, California is
(408) 970-3400,
and our telephone number in Yokneam, Israel is +972-4-909-7200.
Michael Gray is our agent for service of process in the United
States, and is located at our principal executive offices in the
United States. Our
website address is
www.mellanox.com.
Information contained on our
website is not a part of this
prospectus and the inclusion of our
website address in this
prospectus is an inactive textual reference only.
Mellanox®,
InfiniBridge®,
InfiniHost®,
InfiniPCI®,
InfiniRISC®
and
InfiniScale®
are our registered trademarks. We have a trademark application
pending to register
ConnectX®.
Trade names, trademarks and service marks of other companies
appearing in this prospectus are the property of the respective
holders.
2
THE
OFFERING
|
|
|
|
Ordinary shares offered by us |
|
6,000,000 shares. |
| |
|
Over-allotment option |
|
900,000 shares. |
| |
|
Ordinary shares outstanding after this offering |
|
31,433,262 shares. |
| |
|
Use of proceeds |
|
We expect the net proceeds to us from this offering, after
expenses, to be approximately $70 million. We intend to use
the net proceeds of this offering to fund development of our
products and for general corporate purposes, including working
capital, sales and marketing activities, general and
administrative matters and capital expenditures. We may also use
a portion of the net proceeds to acquire or invest in
complementary technologies, products or businesses or to obtain
rights to such complementary technologies, products or
businesses. There are no such transactions under consideration
at this time. |
| |
|
Nasdaq Global Market symbol |
|
MLNX. |
| |
|
Risk factors |
|
See “Risk Factors,” beginning on page 7 and the
other information included in this prospectus for a discussion
of factors you should carefully consider before deciding to
invest in our ordinary shares. |
The number of our ordinary shares outstanding after this
offering is based on 25,433,262 shares outstanding as of
December 31, 2006, and excludes:
|
|
|
| |
•
|
an aggregate of 5,114,239 ordinary shares issuable upon the
exercise of outstanding options to purchase our ordinary shares
granted pursuant to our 1999 United States Equity Incentive
Plan, 1999 Israeli Share Option Plan and 2003 Israeli Share
Option Plan as of December 31, 2006, at a weighted average
exercise price of $4.22 per share;
|
| |
| |
•
|
an aggregate of 38,240 additional ordinary shares reserved for
future issuance under our 1999 United States Equity Incentive
Plan and our 2003 Israeli Share Option Plan;
|
| |
| |
•
|
3,428,571 additional ordinary shares reserved for issuance under
our 2006 Global Share Incentive Plan, which we adopted in
connection with this offering;
|
| |
| |
•
|
additional ordinary shares to be automatically reserved for
issuance on an annual basis on the first day of each fiscal
year, beginning in 2008, under our 2006 Global Share Incentive
Plan, such annual increase to be equal to the least of 2% of
ordinary shares outstanding on a fully diluted basis on the date
of the increase, 685,714 ordinary shares or a smaller number
determined by our board of directors, provided that the
aggregate number of ordinary shares reserved for issuance under
such plan may not exceed 15,474,018;
|
|
|
|
| |
•
|
571,428 additional ordinary shares reserved for issuance
pursuant to purchase rights under our Employee Share Purchase
Plan, which we adopted in connection with this offering;
|
|
|
|
| |
•
|
additional ordinary shares to be automatically reserved for
issuance on an annual basis on the first day of each fiscal
year, beginning in 2008, under our Employee Share Purchase Plan,
such annual increase to be equal to the least of 0.5% of
ordinary shares outstanding on a fully diluted basis on the date
of the increase, 171,428 ordinary shares or a smaller number
determined by our board of directors, provided that the
aggregate number of ordinary shares reserved for issuance under
such plan may not exceed 2,114,285; and
|
| |
| |
•
|
an aggregate of 52,569 ordinary shares issuable upon the
exercise of outstanding options granted outside of our equity
incentive plans as of December 31, 2006, at a weighted
average exercise price of $1.20 per share.
|
Except as otherwise indicated, information in this prospectus
reflects or assumes the following:
|
|
|
| |
•
|
that our amended and restated articles of association, which we
will file in connection with the completion of this offering,
are in effect;
|
|
|
|
| |
•
|
a 1.75-to-1 reverse split of our ordinary shares effected prior
to the completion of this offering;
|
|
|
|
| |
•
|
a 1.75-to-1 reverse split of our preferred shares;
|
3
|
|
|
| |
•
|
the conversion of all of our outstanding convertible preferred
shares into an aggregate of 17,571,520 ordinary shares
immediately prior to the completion of this offering and
following the reverse split of our ordinary shares, assuming the
conversion of our Series A and B preferred shares into
ordinary shares at a rate of 1 to 1 (without giving
effect to the 1.75-to-1 reverse share split), the conversion of
our Series C preferred shares into ordinary shares at a rate of
1 to 1.0249 (without giving effect to the 1.75-to-1
reverse share split) and the conversion of our Series D
preferred shares into ordinary shares at a rate of 1 to 2.2245
(without giving effect to the 1.75-to-1 reverse share split, and
based on an assumed initial public offering price of
$13.00 per share); and
|
|
|
|
| |
•
|
no exercise of the underwriters’ over-allotment option to
purchase up to 900,000 additional shares of our ordinary shares.
|
4
Summary
Consolidated Financial Data
The summary consolidated statements of operations data for each
of the three years in the period ended
December 31, 2005
and the nine months ended
September 30, 2006 have been
derived from our audited consolidated financial statements that
are included elsewhere in this prospectus. The summary
consolidated statements of operations data for the nine months
ended
September 30, 2005 have been derived from our
unaudited consolidated financial statements that are included
elsewhere in this prospectus. The following tables provide
summary consolidated financial data which you should read
together with our financial statements and related notes and the
sections of this prospectus entitled
“Selected Financial
Data” and
“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.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2005
|
|
|
2006
|
|
|
|
|
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
Consolidated Statement of
Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
10,151
|
|
|
$
|
20,254
|
|
|
$
|
42,068
|
|
|
$
|
29,874
|
|
|
$
|
32,741
|
|
|
Cost of revenues
|
|
|
(4,535
|
)
|
|
|
(8,736
|
)
|
|
|
(15,203
|
)
|
|
|
(11,253
|
)
|
|
|
(9,601
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
5,616
|
|
|
|
11,518
|
|
|
|
26,865
|
|
|
|
18,621
|
|
|
|
23,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
14,457
|
|
|
|
12,864
|
|
|
|
13,081
|
|
|
|
9,307
|
|
|
|
11,064
|
|
|
Sales and marketing
|
|
|
5,298
|
|
|
|
5,640
|
|
|
|
7,395
|
|
|
|
5,291
|
|
|
|
6,080
|
|
|
General and administrative
|
|
|
1,720
|
|
|
|
1,719
|
|
|
|
3,094
|
|
|
|
2,118
|
|
|
|
2,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
21,475
|
|
|
|
20,223
|
|
|
|
23,570
|
|
|
|
16,716
|
|
|
|
19,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
(15,859
|
)
|
|
|
(8,705
|
)
|
|
|
3,295
|
|
|
|
1,905
|
|
|
|
3,452
|
|
|
Other income, net
|
|
|
308
|
|
|
|
123
|
|
|
|
326
|
|
|
|
281
|
|
|
|
232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before taxes on
income
|
|
|
(15,551
|
)
|
|
|
(8,582
|
)
|
|
|
3,621
|
|
|
|
2,186
|
|
|
|
3,684
|
|
|
Provision for taxes on income
|
|
|
(12
|
)
|
|
|
(306
|
)
|
|
|
(462
|
)
|
|
|
(329
|
)
|
|
|
(271
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(15,563
|
)
|
|
$
|
(8,888
|
)
|
|
$
|
3,159
|
|
|
$
|
1,857
|
|
|
$
|
3,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion of Series D
mandatorily redeemable convertible preferred shares
|
|
|
(144
|
)
|
|
|
(155
|
)
|
|
|
(166
|
)
|
|
|
(125
|
)
|
|
|
(132
|
)
|
|
Income allocable to preferred
shareholders
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,993
|
)
|
|
|
(1,732
|
)
|
|
|
(3,281
|
)
|
|
Net income (loss) attributable to
ordinary shareholders
|
|
|
(15,707
|
)
|
|
|
(9,043
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share
attributable to ordinary shareholders — basic and
diluted
|
|
$
|
(2.32
|
)
|
|
$
|
(1.27
|
)
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing net
income (loss) per share attributable to ordinary shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
6,764
|
|
|
|
7,117
|
|
|
|
7,520
|
|
|
|
7,492
|
|
|
|
7,673
|
|
|
Diluted
|
|
|
6,764
|
|
|
|
7,117
|
|
|
|
9,091
|
|
|
|
9,040
|
|
|
|
9,623
|
|
|
Pro forma net income per
share — basic and diluted
(unaudited)(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
—
|
|
|
|
—
|
|
|
|
0.13
|
|
|
|
—
|
|
|
|
0.14
|
|
|
Diluted
|
|
|
—
|
|
|
|
—
|
|
|
|
0.11
|
|
|
|
—
|
|
|
|
0.12
|
|
|
Pro forma weighted average
ordinary shares outstanding
(unaudited)(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
—
|
|
|
|
—
|
|
|
|
25,092
|
|
|
|
—
|
|
|
|
25,245
|
|
|
Diluted
|
|
|
—
|
|
|
|
—
|
|
|
|
27,575
|
|
|
|
—
|
|
|
|
27,939
|
|
5
|
|
|
|
(1) |
|
For information regarding the computation of per share amounts,
refer to Note 1 of our consolidated financial statements.
Pro forma basic and diluted net income per share is presented
for the year ended December 31, 2005 and the nine months
ended September 30, 2006 to reflect per share data assuming
(a) the conversion of all of our preferred shares into
ordinary shares immediately prior to the completion of this
offering, as if the conversion had taken place at the beginning
of the fiscal year ended December 31, 2005 and (b) the
exercise of warrants and options exercisable at the respective
date. |
| |
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
September 30, 2006
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
Actual
|
|
|
as Adjusted
|
|
|
|
|
(in thousands of dollars)
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
Consolidated Balance Sheet
Data:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
15,800
|
|
|
$
|
85,840
|
|
|
Working capital
|
|
|
19,930
|
|
|
|
89,970
|
|
|
Total assets
|
|
|
37,145
|
|
|
|
107,185
|
|
|
Convertible preferred shares
|
|
|
92,053
|
|
|
|
—
|
|
|
Total shareholders’
(deficit)/equity
|
|
$
|
(70,117
|
)
|
|
$
|
91,976
|
|
The preceding table presents a summary of our consolidated
balance sheet data as of
September 30, 2006:
|
|
|
| |
•
|
on an actual basis; and
|
| |
| |
•
|
on a pro forma as adjusted basis to give effect to the
conversion of all of our outstanding convertible preferred
shares into 17,571,848 shares of ordinary shares
immediately prior to the completion of this offering, assuming
our initial public offering price of $13.00 per share, as
adjusted to reflect the 1.75-to-1 reverse split of our ordinary
shares and to give effect to the sale by us of
6,000,000 shares of ordinary shares in this offering at an
initial public offering price of $13.00 per share, after
deducting the underwriting discounts and commissions and
estimated offering expenses payable by us.
|
Recent
Developments
Although our financial statements for the year ended
December 31, 2006 are not yet complete, the following
information reflects our results based on currently available
information.
Fourth quarter 2006 revenues were $15.8 million for the
period ended
December 31, 2006, compared to
$13.4 million for the prior quarter ended
September 30, 2006. This 18% increase in sequential
revenues resulted primarily from increased unit sales of 7%, and
an increase in average selling prices of 10% due primarily to a
shift in product mix.
Gross profit was $11.9 million for the quarter ended
December 31, 2006, compared to $9.8 million for the
prior quarter ended
September 30, 2006. As a percentage of
revenues, fourth quarter gross margin increased sequentially to
75% compared to 73% in the prior quarter ended
September 30, 2006. This increase was primarily
attributable to a decrease in production costs associated with
outsourced labor, raw materials and volume discounts and a shift
in product mix.
The Company currently anticipates that its pre-tax net income as
a percentage of revenues for the quarter ended
December 31,
2006 will be comparable to its pre-tax net income as a
percentage of revenues for the quarter ended
September 30,
2006, which was 22.4%.
For the year ended
December 31, 2006,
the Company had four
customers who individually accounted for more than 10% of total
revenues, and no one customer accounted for more than 20% of
total revenues. For the year ended
December 31, 2005, the
Company had two customers who individually accounted for more
than 10% of total revenues, including one customer (Cisco) who
accounted for 44% of total revenues.
Our estimates for operating expenses and net income are not yet
final and are subject to further review. We are currently
performing our annual review procedures for the year ended
December 31, 2006.
6
RISK
FACTORS
Investing in our ordinary shares involves a high degree of
risk. You should carefully consider the following risk factors,
in addition to the other information set forth in this
prospectus, before purchasing our ordinary shares. Each of these
risk factors could harm our business, financial condition or
operating results, as well as decrease the value of an
investment in our ordinary shares.
Risks
Related to Our Business
We
have a history of losses, have only recently become profitable
and may not sustain or increase profitability in the
future.
We have only recently become profitable, and we first recorded a
profit in the year ended
December 31, 2005. We incurred net
losses prior to the quarter ended
June 30, 2005 and
incurred a net loss during the quarter ended
March 31,
2006. As of
September 30, 2006, we had an accumulated
deficit of approximately $73.1 million. In addition, we
recorded net losses of $15.6 million and $8.9 million
for the years ended
December 31, 2003 and
2004,
respectively. We may not be able to sustain or increase
profitability on a quarterly or an annual basis. This may, in
turn, cause the price of our ordinary shares to decline. To
sustain or increase our profitability, we will need to generate
and sustain substantially higher revenues while maintaining
reasonable cost and expense levels. We expect to increase
expense levels in each of the next several quarters to support
increased research and development, sales and marketing and
general and administrative efforts. These expenditures may not
result in increased revenues or customer growth, and we may not
remain profitable.
We do
not expect to sustain our recent revenue growth rate, which may
reduce our share price.
Our revenues have grown rapidly over the last four years,
approximately doubling in size from each of 2003 to 2004 and
2005, and increasing by 15% in 2006. Our revenues increased from
$10.2 million to $20.3 million, $42.1 million and
$48.5 million for the years ended
December 31, 2003,
2004,
2005 and
2006, respectively. We do not expect to sustain
our recent growth rate in future periods. You should not rely on
the revenue growth of any prior quarterly or annual periods as
an indication of our future performance. If we are unable to
maintain adequate revenue growth, we may not have adequate
resources to execute our business objectives and our share price
may decline.
InfiniBand
may not be adopted at the rate or extent that we anticipate, and
adoption of InfiniBand is largely dependent on third-party
vendors and end users.
While the usage of InfiniBand has increased since its first
specifications were completed in October 2000, continued
adoption of InfiniBand is dependent on continued collaboration
and cooperation among information technology, or IT, vendors. In
addition, the end users that purchase IT products and services
from vendors must find InfiniBand to be a compelling solution to
their IT system requirements. We cannot control third-party
participation in the development of InfiniBand as an industry
standard technology. We rely on server, storage, communications
infrastructure equipment and embedded systems vendors to
incorporate and deploy InfiniBand integrated circuits, or ICs,
in their systems. InfiniBand may fail to effectively compete
with other technologies, which may be adopted by vendors and
their customers in place of InfiniBand. The adoption of
InfiniBand is also impacted by the general replacement cycle of
IT equipment by end users, which is dependent on factors
unrelated to InfiniBand. These factors may reduce the rate at
which InfiniBand is incorporated by our current server vendor
customers and impede its adoption in the storage, communications
infrastructure and embedded systems markets, which in turn would
harm our ability to sell our InfiniBand products.
We
have limited visibility into end-user demand for our products,
which introduces uncertainty into our production forecasts and
business planning and could negatively impact our financial
results.
Our sales are made on the basis of purchase orders rather than
long-term purchase commitments. In addition, our customers may
defer purchase orders. We place orders with the manufacturers of
our products according to our estimates of customer demand. This
process requires us to make multiple demand forecast assumptions
with respect to both our customers’ and end users’
demands. It is more difficult for us to accurately forecast
end-user demand
7
because we do not sell our products directly to end users. In
addition, the majority of our adapter card business is conducted
on a short order fulfillment basis, introducing more uncertainty
into our forecasts. Because of the lead time associated with
fabrication of our semiconductors, forecasts of demand for our
products must be made in advance of customer orders. In
addition, we base business decisions regarding our growth on our
forecasts for customer demands. As we grow, anticipating
customer demand may become increasingly difficult. If we
overestimate customer demand, we may purchase products from our
manufacturers that we may not be able to sell and may
over-budget company operations. Conversely, if we underestimate
customer demand or if sufficient manufacturing capacity were
unavailable, we would forego revenue opportunities and could
lose market share or damage our customer relationships.
We
depend on a small number of customers for a significant portion
of our sales, and the loss of any of these customers will
adversely affect our revenues.
A small number of customers accounts for a significant portion
of our revenues. In the year ended
December 31, 2005, sales
to Cisco Systems and Topspin Communications (which was acquired
by Cisco Systems in May 2005) accounted for 44% of our
total revenues, and sales to Voltaire accounted for 12% of our
total revenues. In the year ended
December 31, 2004, sales
to Cisco Systems accounted for 34% of our total revenues, and
sales to Voltaire accounted for 18% of our total revenues.
Because the majority of servers, storage, communications
infrastructure equipment and embedded systems is sold by a
relatively small number of vendors, we expect that we will
continue to depend on a small number of customers to account for
a significant percentage of our revenues for the foreseeable
future. Our customers, including our most significant customers,
are not obligated by long-term
contracts to purchase our
products and may cancel orders with limited potential penalties.
If any of our large customers reduces or cancels its purchases
from us for any reason, it could have an adverse effect on our
revenues and results of operations. For example, one of our
largest customers — Cisco Systems — has
ordered fewer products from us in the nine months ended
September 30, 2006 as compared to its order history for the nine
months ended
September 30, 2005, which resulted in a
decrease to revenues from that customer by $9.8 million. A
portion of this percentage decline was attributable to an
accumulation of inventory in 2005 by Cisco following its
acquisition of Topspin Communications, which we believe has been
substantially sold in 2005 and 2006. In addition, our sales are
dependent on our customers’ sales, and the loss of end-user
customers by any of our OEM customers could have an adverse
effect on our revenues and results of operations.
We
face intense competition and may not be able to compete
effectively, which could reduce our market share, net revenues
and profit margin.
The markets in which we operate are extremely competitive and
are characterized by rapid technological change, continuously
evolving customer requirements and declining average selling
prices. We may not be able to compete successfully against
current or potential competitors. With respect to InfiniBand
products, we compete with QLogic Corporation, which recently
acquired SilverStorm Technologies. We also compete with
providers of alternative technologies, including Ethernet, Fibre
Channel and proprietary interconnects. The companies that
provide IC products for these alternative technologies include
Marvell Technology Group, Broadcom Corporation, Emulex
Corporation, QLogic Corporation and Myricom. Many of our current
and potential competitors have longer operating histories,
significantly greater resources, greater economies of scale,
stronger name recognition and larger customer bases than we
have. This may allow them to respond more quickly than we are
able to respond to new or emerging technologies or changes in
customer requirements. In addition, these competitors may have
greater credibility with our existing and potential customers.
If we do not compete successfully, our market share, revenues
and profit margin may decline, and, as a result, our business
may be adversely affected.
If we
fail to develop new products or enhance our existing products to
react to rapid technological change and market demands in a
timely and cost-effective manner, our business will
suffer.
We must develop new products or enhance our existing products
with improved technologies to meet rapidly evolving customer
requirements. We are currently engaged in the development
process for next generation products, and we need to
successfully design our next generation and other products
successfully for customers who continually require higher
performance and functionality at lower costs. The development
8
process for these advancements is lengthy and will require us to
anticipate accurately technological innovations and market
trends. Developing and enhancing these products can be
time-consuming, costly and complex. Our ability to fund product
development and enhancements partially depends on our ability to
generate revenues from our existing products. For example, we
recently introduced our next generation of products that also
support the industry standard Ethernet interconnect
specification.
There is a risk that these developments or enhancements, such as
migrating our next generation products from 130nm to 90nm
silicon process technology, will be late, fail to meet customer
or market specifications and will not be competitive with other
products using alternative technologies that offer comparable
performance and functionality. We may be unable to successfully
develop additional next generation products, new products or
product enhancements. Our next generation products that include
Ethernet support or any new products or product enhancements may
not be accepted in new or existing markets. Our business will
suffer if we fail to continue to develop and introduce new
products or product enhancements in a timely manner or on a
cost-effective basis.
We
rely on a limited number of subcontractors to manufacture,
assemble, package and production test our products, and the
failure of any of these third-party subcontractors to deliver
products or otherwise perform as requested could damage our
relationships with our customers, decrease our sales and limit
our growth.
While we design and market our products and conduct test
development in-house, we do not manufacture, assemble, package
and production test our products, and we must rely on
third-party subcontractors to perform these services. We
currently rely on Taiwan Semiconductor Manufacturing Company, or
TSMC, to produce our silicon wafers, and Flextronics
International Ltd. to manufacture and production test our
adapter cards. We also rely on Advanced Semiconductor
Engineering, or ASE, to assemble, package and production test
our ICs. We are currently arranging an additional manufacturing
line with one of our subcontractors, but we may not be able to
finalize this arrangement. If these subcontractors do not
provide us with high-quality products, services and production
and production test capacity in a timely manner, or if one or
more of these subcontractors terminates its relationship with
us, we may be unable to obtain satisfactory replacements to
fulfill customer orders on a timely basis, our relationships
with our customers could suffer, our sales could decrease and
our growth could be limited. In particular, there are
significant challenges associated with moving our IC production
from our existing manufacturer to another manufacturer with whom
we do not have a pre-existing relationship.
We currently do not have long-term