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Netezza Corp · S-1 · On 3/22/07

Filed On 3/22/07 5:15pm ET   ·   SEC File 333-141522   ·   Accession Number 950135-7-1814

  in   Show  and 
  As Of               Filer                 Filing     As/For/On Docs:Pgs              Issuer               Agent

 3/22/07  Netezza Corp                      S-1                   16:456                                    Bowne of Boston I..01/FA

Registration Statement (General Form)   ·   Form S-1
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-1         Netezza Corporation                                 HTML  1,249K 
 2: EX-3.3      EX-3.3 Form of Amended and Restated Certificate of    18     68K 
                          Incorporation                                          
 3: EX-10.1     EX-10.1 2000 Stock Incentive Plan, As Amended         12     41K 
 4: EX-10.2     EX-10.2 Form of Incentive Stock Option Agreement       8     27K 
                          Under 2000 Stock Incentive Plan                        
 5: EX-10.3     EX-10.3 Form of Nonstatutory Stock Option              8     26K 
                          Agreement Under 2000 Stock Incentive                   
                          Plan                                                   
 6: EX-10.4     EX-10.4 Form of Restricted Stock Option Agreement     12     43K 
                          Under 2000 Stock Incentive Plan                        
 7: EX-10.9     EX-10.9 Fiscal 2008 Executive Officer Incentive        7     29K 
                          Bonus Plan                                             
 8: EX-10.10    EX-10.10 Lease Agreement, Dated February 12, 2004     44    160K 
 9: EX-10.11    EX-10.11 Third Amended and Restated Investor          28     97K 
                          Rights Agreement                                       
10: EX-10.12    EX-10.12 Amendment No. 1 to the Third Amended and      6     17K 
                          Restated Investor Rights Agreement                     
11: EX-10.13    EX-10.13 Letter Agreement, Dated June 1, 2006          2     14K 
12: EX-10.14    EX-10.14 Form of Executive Retention Agreement        12     45K 
13: EX-10.15    EX-10.15 Form of Indemnification Agreement             8     34K 
14: EX-10.16    EX-10.16 Term Loan and Security Agreement Dated       31     99K 
                          June 14, 2005                                          
15: EX-10.17    EX-10.17 Loan and Security Agreement Dated January    41    140K 
                          31, 2007                                               
16: EX-23.1     EX-23.1 Consent of Pricewaterhousecooper            HTML      7K 


S-1   ·   Netezza Corporation
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page
"Table of Contents
"Prospectus Summary
"Risk Factors
"Special Note Regarding Forward-Looking Statements
"Use of Proceeds
"Dividend Policy
"Capitalization
"Dilution
"Selected Consolidated Financial Data
"Management s Discussion and Analysis of Financial Condition and Results of Operations
"Business
"Management
"Related Party Transactions
"Principal and Selling Stockholders
"Description of Capital Stock
"Shares Eligible for Future Sale
"Certain U.S. Federal Income Tax Considerations For Non-U.S. Holders
"Underwriting
"Notice to Canadian Residents
"Legal Matters
"Experts
"Where You Can Find More Information
"Index to Consolidated Financial Statements
"Report of Independent Registered Public Accounting Firm
"Consolidated Balance Sheets
"Consolidated Statements of Operations
"Consolidated Statements of Stockholders Equity (Deficit)
"Consolidated Statements of Cash Flows
"Notes to Consolidated Financial Statements

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Table of Contents

As filed with the Securities and Exchange Commission on March 22, 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
 
 
 
 
Netezza Corporation
(Exact name of registrant as specified in its charter)
 
         
Delaware   3571   04-3527320
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification No.)
 
 
 
 
Netezza Corporation
200 Crossing Boulevard
Framingham, MA 01702
(508) 665-6800
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
 
 
 
 
Jitendra S. Saxena
Chief Executive Officer
Netezza Corporation
200 Crossing Boulevard
Framingham, MA 01702
(508) 665-6800
(Name, address, including zip code, and telephone number, including area code, of agent for service)
 
 
 
 
Copies to:
 
     
Patrick J. Rondeau, Esq.
Wendell C. Taylor, Esq.
Wilmer Cutler Pickering Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
(617) 526-6000
  Anthony J. Medaglia, Jr., P.C.
John M. Mutkoski, Esq.
Jocelyn M. Arel, Esq.
Goodwin Procter LLP
Exchange Place
Boston, Massachusetts 02109
(617) 570-1000
 
 
 
 
Approximate date of commencement of proposed sale to public:  as soon as practicable after this Registration Statement is declared 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 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 registration statement for the same offering.  o           
 
CALCULATION OF REGISTRATION FEE
 
             
      Proposed Maximum
    Amount of
Title of Each Class of
    Aggregate Offering
    Registration
Securities to be Registered     Price(1)     Fee(2)
Common Stock, $0.001 par value per share
    $100,000,000     $3,070
             
 
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
 
(2) Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price.
 
 
 
 
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 Section 8(a), may determine.
 



Table of Contents

The information in this prospectus is not complete and may be changed. We and the selling stockholders 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 it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
 
 
SUBJECT TO COMPLETION, DATED MARCH 22, 2007
 
          Shares
 
Image -- NETEZZA LOGO
 
Netezza Corporation
 
Common Stock
 
 
 
 
This is the initial public offering of shares of our common stock. We are selling           shares of our common stock.
 
 
 
 
Prior to this offering, there has been no public market 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 “NTZA.”
 
Investing in our common stock involves risks.  See “Risk Factors” beginning on page 7.
 
                         
          Underwriting
       
          Discounts and
    Proceeds to
 
    Price to Public     Commissions     Netezza Corporation  
 
Per Share
  $           $           $        
Total
    $       $       $  
 
Certain of our stockholders have granted the underwriters the right to purchase up to an additional           shares of common stock to cover over-allotments.
 
The Securities and Exchange Commission and state securities regulators have not approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
 
The underwriters expect to deliver the shares to purchasers on          , 2007.
 
 
 
 
Credit Suisse Morgan Stanley
 
Needham & Company, LLC Thomas Weisel Partners LLC
 
, 2007



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TABLE OF CONTENTS
 
 
         
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  F-1
 Ex-3.3 Form of Amended and Restated Certificate of Incorporation
 Ex-10.1 2000 Stock Incentive Plan, as amended
 Ex-10.2 Form of Incentive Stock Option Agreement under 2000 Stock Incentive Plan
 Ex-10.3 Form of Nonstatutory Stock Option Agreement under 2000 Stock Incentive Plan
 Ex-10.4 Form of Restricted Stock Option Agreement under 2000 Stock Incentive Plan
 EX-10.9 Fiscal 2008 Executive Officer Incentive Bonus Plan
 EX-10.10 Lease Agreement, dated February 12, 2004
 EX-10.11 Third Amended and Restated Investor Rights Agreement
 EX-10.12 Amendment No. 1 to the Third Amended and Restated Investor Rights Agreement
 EX-10.13 Letter Agreement, dated June 1, 2006
 EX-10.14 Form of Executive Retention Agreement
 EX-10.15 Form of Indemnification Agreement
 EX-10.16 Term Loan and Security Agreement dated June 14, 2005
 EX-10.17 Loan and Security Agreement dated January 31, 2007
 EX-23.1 Consent of PricewaterhouseCooper
 
 
You should rely only on the information contained in this document and any free writing prospectus prepared by or on behalf of us or to which we have referred you. We have not authorized anyone to provide you with information that is different. This document may only be used where it is legal to sell these securities. The information in this document may only be accurate on the date of this document.
 
Dealer Prospectus Delivery Obligation
 
Until          , 2007 (25 days after the commencement of this offering), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.


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Table of Contents

 
 
PROSPECTUS SUMMARY
 
This summary highlights information appearing elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, especially the “Risk Factors” section beginning on page 7 and our consolidated financial statements and the related notes appearing elsewhere in this prospectus, before making an investment decision.
 
NETEZZA CORPORATION
 
Overview
 
Netezza is a leading provider of data warehouse appliances. Our product, the Netezza Performance Server, or NPS, integrates database, server and storage platforms in a purpose-built unit to enable detailed queries and analyses on large volumes of stored data. The results of these queries and analyses, often referred to as business intelligence, provide organizations with actionable information to improve their business operations. We designed our NPS data warehouse appliance specifically for analysis of terabytes of data at higher performance levels and at a lower total cost of ownership with greater ease of use than can be achieved via traditional data warehouse systems. Our NPS appliance performs faster, deeper and more iterative analyses on larger amounts of detailed data, giving our customers greater insight into trends and anomalies in their businesses, thereby enabling them to make better strategic decisions.
 
As of January 31, 2007, we had shipped over 200 of our data warehouse appliances worldwide to 87 data-intensive customers including large global enterprises, mid-market companies and government agencies. Our customers span multiple vertical industries and include data intensive companies and government agencies such as Ahold, Amazon.com, American Red Cross, AOL, Blue Cross Blue Shield of Rhode Island, Capital One Services, Catalina Marketing, CNET Networks, CompuCredit Corporation, LoanPerformance, Marriott, the NASD, Neiman Marcus Group, Nielsen Company, Orange UK, Restoration Hardware, Ross Stores, Ryder Systems, Source Healthcare Analytics, Inc., a Wolters Kluwer Health company, the United States Army Corps of Engineers and the United States Department of Veterans Affairs. Our revenues have increased rapidly, from $13.6 million in fiscal 2004 to $79.6 million in fiscal 2007, representing a compound annual growth rate of 80.1%.
 
The Industry
 
The amount of data that is being generated and stored by organizations is exploding. Examples of this data include click-stream records generated by e-business, customer purchasing histories, call data records, information from RFID tagging of inventory and products, and pharmaceutical trial data. Additionally, compliance initiatives driven by government regulations, such as those issued under the Sarbanes-Oxley Act of 2002 and the Health Insurance Portability and Accountability Act of 1996, or HIPAA, as well as company policies requiring data preservation, are expanding the proportion of data that must be retained and easily accessible for future use. As the volume of data continues to grow, enterprises have recognized the value of analyzing such data to significantly improve their operations and competitive position. These enterprises have also realized that frequent analysis of data at a more detailed level is more meaningful than periodic analysis of sampled data.
 
This increasing amount of data and importance of data analysis has led to heightened demand for data warehouses that provide the critical framework for data-driven enterprise decision-making and business intelligence. A data warehouse consists of three main elements — database, server, and storage — and interacts with external systems to acquire and retain raw data, receive query instructions and provide analytical results. The data warehouse acts as a data repository for an enterprise, aggregating information from many departments, and more importantly, enabling analytics through the querying of the data to deliver specific information. The need for more robust, yet cost-effective, data warehouse solutions is being accelerated by the growing number of users of business intelligence within the enterprise, the increasing volume and sophistication of their queries and the need for real-time data availability.


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Our Solution
 
In contrast to traditional data warehouse systems which patch together general-purpose database, server and storage platforms that were not originally designed for analytical processing of large amounts of constantly changing data, our NPS appliance is designed specifically to provide high-performance business intelligence solutions at a low total cost of ownership. It tightly couples database, server, and storage platforms in a compact, efficient unit that integrates easily through open, industry-standard interfaces with leading data access and integration tools. This approach, combined with our proprietary Intelligent Query Streaming technology and Asymmetric Massively Parallel Processing architecture, provides significant benefits to our customers, including:
 
Superior Performance.  The time required to perform many complex and ad hoc queries on terabytes of data is reduced from days or hours to minutes or seconds, enabling our customers to analyze their data more comprehensively so they can make faster and better decisions.
 
Easy and Cost-Effective Procurement.  Combining database, server, and storage platforms into a single scalable platform, based on open standards and commodity components, delivers a significant cost advantage and enables an easier procurement process when compared with competing products.
 
Quick and Easy Infrastructure Installation and Deployment.  With our NPS appliance, data is loaded quickly and easily, and existing tools and software can be easily integrated through standard interfaces. Our NPS appliance can be quickly installed and deployed with minimal need for custom configuration or additional professional services.
 
Rapid Adaptation to Changing Business Needs.  Since our NPS appliance does not require the tuning, data indexing or the same degree of maintenance and configuration required by traditional systems, the NPS appliance can accommodate changes easily without additional administrative effort.
 
Minimal Ongoing Administration and Maintenance.  As a self-regulated and self-monitored data warehouse appliance, our systems typically require less than a single administrator to manage.
 
Small Footprint, and Low Power and Cooling Requirements.  Our NPS appliance is a compact, tightly integrated appliance that requires a significantly smaller data center “footprint”, consumes less power and generates less heat than traditional systems.
 
High Degree of Scalability.  Our unique architecture enables our systems to scale effectively with additional users, more sophisticated queries and greater amounts of data. More users can be supported and additional capacity added quickly and easily, enabling customers to “pay as they grow.”
 
Our Strategy
 
Our objective is to become the leading provider of data warehouse solutions. We plan to accomplish this through the following business strategies:
 
Broaden Our Target Markets.  We plan to continue our market penetration in the vertical industries that we currently serve, while expanding into new markets that can also utilize business intelligence at an affordable cost. We also plan to expand in the mid-market, enabling companies with fewer resources and smaller budgets to leverage the benefits of our data warehouse appliances.
 
Increase Sales to Our Existing Customer Base.  As our customers increasingly benefit from the advantages of our solution, we expect further sales to them to accommodate an increasing number of users and their growing amount of stored data, as well as for deployment of data warehouses for other applications in addition to the ones for which they initially purchased our system.
 
Extend Our Technology Leadership.  We believe that our proprietary product architecture and design provide us with significant competitive advantages over traditional data warehouse systems. We plan to continue to enhance our existing products and introduce new products to enable us to maintain our cost and performance advantages versus competitors.


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Table of Contents

 
Expand Distribution Channels.  We plan to continue to invest in our global distribution channels, including our direct salesforce and relationships with resellers, systems integration firms and analytic service providers to accelerate the sales of our products.
 
Develop Additional Strategic Relationships.  We plan to continue to invest in our relationships with technology partners in the complementary areas of data access and analytics, data integration and data protection to simplify integration and increase sales of our combined offerings.
 
Expand Our Customer Support Capabilities.  We intend to invest in our global customer support organization to enable us to continue providing “high-touch,” high-quality support as we scale our customer base.
 
Pursue Selected Acquisition Opportunities.  We intend to pursue acquisitions of products and/or technologies that we believe are complementary to or can be integrated into our current product suite.
 
“Be Easy to Do Business With.” Our products, pricing, contracts and support principles are simple, straightforward and customer friendly. We plan to continue to operate with these principles to further differentiate our offerings from those of our larger competitors.
 
Company Information
 
We were incorporated in Delaware on August 18, 2000 as Intelligent Data Engines, Inc. and changed our name to Netezza Corporation in November 2000. Our corporate headquarters are located at 200 Crossing Boulevard, Framingham, Massachusetts 01702, and our telephone number is (508) 665-6800. Our website address is www.netezza.com. The information contained on our website or that can be accessed through our website is not part of this prospectus, and investors should not rely on any such information in deciding whether to purchase our common stock.
 
We use various trademarks and trade names in our business, including without limitation “Netezza,” “Netezza Performance Server,” “NPS” and “Intelligent Query Streaming.” This prospectus also contains trademarks and trade names of other businesses that are the property of their respective holders.
 
Unless the context otherwise requires, we use the terms “Netezza,” our company,” “we,” “us” and “our” in this prospectus to refer to Netezza Corporation and its subsidiaries.


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Table of Contents

THE OFFERING
 
Common stock offered           shares
 
Over-allotment option offered by the selling stockholders           shares
 
Common stock to be outstanding after this offering           shares
 
Use of proceeds We intend to use the net proceeds to us from this offering for working capital and other general corporate purposes, including the development of new products, sales and marketing activities, capital expenditures and the costs of operating as a public company. We also intend to use a portion of the net proceeds to us to repay approximately $     of debt. We may use a portion of the net proceeds to us to expand our current business through acquisitions of other companies, assets or technologies. We will not receive any of the proceeds from the sale of shares of common stock by the selling stockholders. See “Use of Proceeds” for more information.
 
Risk factors You should read the “Risk Factors” section of this prospectus for a discussion of factors to consider carefully before deciding whether to purchase shares of our common stock.
 
Proposed NASDAQ Global Market symbol “NTZA”
 
The number of shares of our common stock to be outstanding after this offering is based on 46,309,542 shares of our common stock outstanding as of February 28, 2007 and excludes:
 
  •  9,039,748 shares of our common stock issuable upon the exercise of stock options outstanding as of February 28, 2007;
 
  •  2,412,107 shares of our common stock reserved as of February 28, 2007 for future issuance under our stock compensation plans; and
 
  •  312,781 shares of our common stock issuable upon the exercise of warrants outstanding as of February 28, 2007.
 
Unless otherwise indicated, the information in this prospectus assumes the following:
 
  •  a one-for-two reverse split of our common stock to be effected prior to the closing of this offering;
 
  •  the automatic conversion of all of our outstanding convertible preferred stock into 38,774,847 shares of our common stock upon the closing of this offering;
 
  •  the filing of our second amended and restated certificate of incorporation and the adoption of our amended and restated by-laws as of the closing date of this offering; and
 
  •  no exercise by the underwriters of their over-allotment option.


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Table of Contents

 
SUMMARY FINANCIAL DATA
 
You should read the following financial information together with the more detailed information contained in “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes appearing elsewhere in this prospectus. Our fiscal year ends on January 31. When we refer to a particular fiscal year, we are referring to the fiscal year ended on January 31 of that year. For example, fiscal 2007 refers to the fiscal year ended January 31, 2007.
 
                         
    Fiscal Year Ended January 31,  
    2005     2006     2007  
    (In thousands, except share, per share
 
    and other operating data)  
 
Consolidated Statement of Operations Data:
                       
Revenue
                       
Product
  $ 30,908     $ 45,508     $ 64,632  
Services
    5,121       8,343       14,989  
                         
Total revenue
    36,029       53,851       79,621  
Cost of revenue
                       
Product
    8,874       18,941       26,697  
Services
    1,640       3,491       5,403  
                         
Total cost of revenue
    10,514       22,432       32,100  
                         
Gross profit
    25,515       31,419       47,521  
Operating expenses
                       
Sales and marketing
    14,783       25,626       32,908  
Research and development
    11,366       16,703       18,037  
General and administrative
    2,500       3,124       4,827  
                         
Total operating expenses
    28,649       45,453       55,772  
                         
Operating loss
    (3,134 )     (14,034 )     (8,251 )
Interest income
    206       487       414  
Interest expense
    121       173       765  
Other income (expense), net
    35       (87 )     627  
                         
Loss before cumulative effect of change in accounting principle
    (3,014 )     (13,807 )     (7,975 )
Cumulative effect of change in accounting principle
          (218 )      
                         
Net loss
  $ (3,014 )   $ (14,025 )   $ (7,975 )
Accretion to preferred stock
    (4,096 )     (5,797 )     (5,931 )
                         
Net loss attributable to common shareholders
  $ (7,110 )   $ (19,822 )   $ (13,906 )
                         
Net loss per share attributable to common stockholders — basic and diluted Loss before cumulative effect of change in accounting principle
  $ (0.50 )   $ (2.08 )   $ (1.10 )
Cumulative effect of change in accounting principle
          (0.03 )      
Accretion to preferred stock
    (0.67 )     (0.88 )     (0.82 )
                         
Net loss per share attributable to common stockholders — basic and diluted
  $ (1.17 )   $ (2.99 )   $ (1.92 )
                         
Weighted average number of common shares outstanding:
    6,077,538       6,635,274       7,230,278  
                         
Pro forma net loss per share — basic and diluted (unaudited)(1)
                  $ (0.17 )
                         
Pro forma weighted average common shares outstanding (unaudited)(1)
                    46,005,125  
                         
Other Operating Data:
                       
Number of customers
    15       46       87  
Number of full-time employees
    140       179       225  
 
 
(1) The pro forma consolidated statement of operations data in the table above gives effect to the automatic conversion of all of our outstanding convertible preferred stock into common stock upon the closing of this offering.
 


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    As of January 31, 2007  
                Pro Forma
 
    Actual     Pro Forma(1)     As Adjusted(2)  
    (In thousands)  
          (Unaudited)  
 
Consolidated Balance Sheet Data:
                       
Cash and cash equivalents
  $ 5,018     $ 5,018     $             
Working capital
    25,899       25,899          
Total assets
    69,199       69,199          
Note payable to bank, including current portion
    6,535       6,535          
Convertible redeemable preferred stock
    97,131                
Total stockholders’ equity (deficit)
    (81,123 )     16,008          
 
 
(1) The pro forma consolidated balance sheet data in the table above gives effect to the automatic conversion of all of our outstanding convertible preferred stock into common stock upon the closing of this offering.
 
(2) The pro forma as adjusted consolidated balance sheet data in the table above gives effect to our receipt of the estimated net proceeds to us from this offering at an assumed initial public offering price of $      per share, which is the midpoint of the range listed on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

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RISK FACTORS
 
An investment in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with all of the other information appearing elsewhere in this prospectus, including our consolidated financial statements and the related notes, before deciding whether to purchase shares of our common stock. Each of these risks could materially adversely affect our business, operating results and financial condition. As a result, the trading price of our common stock could decline and you might lose all or part of your investment in our common stock.
 
Risks Related to Our Business and Industry
 
We have a history of losses, and we may not achieve or maintain profitability in the future.
 
We have not been profitable in any fiscal period since we were formed. We experienced a net loss of $14.0 million in fiscal 2006 and $8.0 million in fiscal 2007. As of January 31, 2007, our accumulated deficit was $80.8 million. We expect to make significant additional expenditures to facilitate the expansion of our business, including expenditures in the areas of sales, research and development, and customer service and support. Additionally, as a public company, we expect to incur legal, accounting and other expenses that are substantially higher than the expenses we incurred as a private company. Furthermore, we may encounter unforeseen issues that require us to incur additional costs. As a result of these increased expenditures, we will have to generate and sustain increased revenue to achieve profitability. Accordingly, we may not be able to achieve or maintain profitability and we may continue to incur significant losses in the future.
 
Our operating results may fluctuate significantly from quarter to quarter and may fall below expectations in any particular fiscal quarter, which could adversely affect the market price of our common stock.
 
Our operating results are difficult to predict and may fluctuate from quarter to quarter due to 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, and you should not rely on our past results as an indication of our future performance. If our revenue or operating results fall below the expectations of investors or any securities analysts that follow our company in any period, the price of our common stock would likely decline.
 
Factors that may cause our operating results to fluctuate include:
 
  •  the typical recording of a significant portion of our quarterly sales in the final month of the quarter, whereby small delays in completion of sales transactions could have a significant impact on our operating results for that quarter;
 
  •  the relatively high average selling price of our products and our dependence on a limited number of customers for a substantial portion of our revenue in any quarterly period, whereby the loss of or delay in a customer order could significantly reduce our revenue for that quarter;
 
  •  the possibility of seasonality in demand for our products;
 
  •  the addition of new customers or the loss of existing customers;
 
  •  the rates at which customers purchase additional products or additional capacity for existing products from us;
 
  •  changes in the mix of products and services sold;
 
  •  the rates at which customers renew their maintenance and support contracts with us;
 
  •  our ability to enhance our products with new and better functionality that meet customer requirements;
 
  •  the timing of recognizing revenue as a result of revenue recognition rules, including due to the timing of delivery and receipt of our products;
 
  •  the length of our product sales cycle;
 
  •  the productivity and growth of our salesforce;


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  •  service interruptions with any of our single source suppliers or manufacturing partners;
 
  •  changes in pricing by us or our competitors, or the need to provide discounts to win business;
 
  •  the timing of our product releases or upgrades or similar announcements by us or our competitors;
 
  •  the timing of investments in research and development related to new product releases or upgrades;
 
  •  our ability to control costs, including operating expenses and the costs of the components used in our products;
 
  •  volatility in our stock price, which may lead to higher stock compensation expenses pursuant to Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, or SFAS No. 123(R), which first became effective for us in fiscal 2007 and requires that employee stock-based compensation be measured based on fair value on grant date and treated as an expense that is reflected in our financial statements over the recipient’s service period;
 
  •  future accounting pronouncements and changes in accounting policies;
 
  •  costs related to the acquisition and integration of companies, assets or technologies;
 
  •  technology and intellectual property issues associated with our products; and
 
  •  general economic trends, including changes in information technology spending or geopolitical events such as war or incidents of terrorism.
 
Most of our operating expenses do not vary directly with revenue and are difficult to adjust in the short term. As a result, if revenue for a particular quarter is below our expectations, we could not proportionately reduce operating expenses for that quarter, and therefore this revenue shortfall would have a disproportionate effect on our expected operating results for that quarter.
 
Our limited operating history and the emerging nature of the data warehouse market make it difficult to evaluate our current business and future prospects, and may increase the risk of your investment.
 
Our company has only been in existence since August 2000. We first began shipping products in February 2003 and much of our growth has occurred in the past two fiscal years. Our limited operating history and the nascent state of the data warehouse market in which we operate makes it difficult to evaluate our current business and our future prospects. As a result, we cannot be certain that we will sustain our growth or achieve or maintain profitability. We will encounter risks and difficulties frequently experienced by early-stage companies in rapidly-evolving industries. These risks include the need to:
 
  •  attract new customers and maintain current customer relationships;
 
  •  continue to develop and upgrade our data warehouse solutions;
 
  •  respond quickly and effectively to competitive pressures;
 
  •  offer competitive pricing or provide discounts to customers in order to win business;
 
  •  manage our expanding operations;
 
  •  maintain adequate control over our expenses;
 
  •  maintain adequate internal controls and procedures;
 
  •  maintain our reputation, build trust with our customers and further establish our brand; and
 
  •  identify, attract, retain and motivate qualified personnel.
 
If we fail to successfully address these needs, our business, operating results and financial condition may be adversely affected.


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We depend on a single product family, the Netezza Performance Server family, for all of our revenue, so we are particularly vulnerable to any factors adversely affecting the sale of that product family.
 
Our revenue is derived exclusively from sales and service of the NPS product family, and we expect that this product family will account for substantially all of our revenue for the foreseeable future. If the data warehouse market declines or the Netezza Performance Server fails to maintain or achieve greater market acceptance, we will not be able to grow our revenues sufficiently to achieve or maintain profitability.
 
We face intense and growing competition from leading technology companies as well as from emerging companies. Our inability to compete effectively with any or all of these competitors could impact our ability to achieve our anticipated market penetration and achieve or sustain profitability.
 
The data warehouse market is highly competitive and we expect competition to intensify in the future. This competition may make it more difficult for us to sell our products, and may result in increased pricing pressure, reduced profit margins, increased sales and marketing expenses and failure to increase, or the loss of, market share, any of which would likely seriously harm our business, operating results and financial condition.
 
Currently, our most significant competition includes companies which typically sell several if not all elements of a data warehouse environment as individual products, including database software, servers, storage and professional services. These competitors are often leaders in many of these segments including EMC, Hewlett-Packard, IBM, Oracle, Sun Microsystems, Sybase and Teradata (a division of NCR). In addition, a large number of fast growing companies have recently entered the market, many of them selling integrated appliance offerings similar to our products. Additionally, as the benefits of an appliance solution have become evident in the marketplace, many of our larger competitors have also begun to bundle their products into appliance-like offerings that more directly compete with our products. We also expect additional competition in the future from new and existing companies with whom we do not currently compete directly. As our industry evolves, our current and potential competitors may establish cooperative relationships among themselves or with third parties, including software and hardware companies with whom we have partnerships and whose products interoperate with our own, that could acquire significant market share, which could adversely affect our business. We also face competition from internally-developed systems. Any of these competitive threats, alone or in combination with others, could seriously harm our business, operating results and financial condition.
 
Many of our competitors have greater market presence, longer operating histories, stronger name recognition, larger customer bases and significantly greater financial, technical, sales and marketing, manufacturing, distribution and other resources than we have. In addition, many of our competitors have broader product and service offerings than we do. These companies may attempt to use their greater resources to better position themselves in the data warehouse market including by pricing their products at a discount or bundling them with other products and services in an attempt to rapidly gain market share. Moreover, many of our competitors have more extensive customer and partner relationships than we do, and may therefore be in a better position to identify and respond to market developments or changes in customer demands. Potential customers may also prefer to purchase from their existing suppliers rather than a new supplier regardless of product performance or features. We cannot assure you that we will be able to compete successfully against existing or new competitors.
 
If we lose key personnel, or if we are unable to attract and retain highly-qualified personnel on a cost-effective basis, it will be more difficult for us to manage our business and to identify and pursue growth opportunities.
 
Our success depends substantially on the performance of our key senior management, technical, and sales and marketing personnel. Each of our employees may terminate his or her relationship with us at any time and the loss of the services of such persons could have an adverse effect on our business. We rely on our senior management to manage our existing business operations and to identify and pursue new growth opportunities, and our ability to develop and enhance our products requires talented hardware and software engineers with specialized skills. In addition, our success depends in significant part on maintaining and growing an effective salesforce. We experience intense competition for such personnel and we cannot ensure that we will successfully attract, assimilate, or retain highly qualified managerial, technical or sales and marketing personnel in the future.


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Our success depends on the continued recognition of the need for business intelligence in the marketplace and on the adoption by our customers of data warehouse appliances, often as replacements for existing systems, to enable business intelligence. If we fail to improve our products to further drive this market migration as well as to successfully compete with alternative approaches and products, our business would suffer.
 
Due to the innovative nature of our products and the new approaches to business intelligence that our products enable, purchases of our products often involve the adoption of new methods of database access and utilization on the part of our customers. This may entail the acknowledgement of the benefits conferred by business intelligence and the customer-wide adoption of business intelligence analysis that makes the benefits of our system particularly relevant. Business intelligence solutions are still in their early stages of growth and their continued adoption and growth in the marketplace remain uncertain. Additionally, our appliance approach requires our customers to run their data warehouses in new and innovative ways and often requires our customers to replace their existing equipment and supplier relationships, which they may be unwilling to do, especially in light of the often critical nature of the components and systems involved and the significant capital and other resources they may have previously invested. Furthermore, purchases of our products involve material changes to established purchasing patterns and policies. Even if prospective customers recognize the need for our products, they may not select our NPS solution because they choose to wait for the introduction of products and technologies that serve as a replacement or substitute for, or represent an improvement over, our NPS solutions. Therefore, our future success also depends on our ability to