From Vixel S-1A dated Sept 1/99..looks like Sun will also own VIXL warrants too..I'm surprised none of you rocket scientists found this..LOL:
<<A COMPONENT USED IN OUR TRANSCEIVERS HAS EXPERIENCED AN ABNORMALLY HIGH FAILURE
RATE WHICH HAS ADVERSELY AFFECTED AND COULD IN THE FUTURE AFFECT OUR SALES.
Our gigabit interface converter transceivers, or GBICs, and our gigabaud
link module transceivers, or GLMs, manufactured prior to March 1999 incorporate
a compact disk, or CD, laser manufactured by a third party. GBICs are removable
and GLMs are non-removable devices that convert optical and electrical signals.
We have observed, and some customers have confirmed, that in certain
applications our GBIC and GLM transceivers that incorporate this CD laser have
experienced an abnormally high failure rate. Although we recorded a warranty
reserve of $3.6 million in the fourth quarter of fiscal 1998 as a result of
these problems, there is a risk that this reserve will be inadequate to
implement a remedy that is satisfactory to our customers. In addition, we cannot
assure you that, over time, failure rates for products that incorporate these CD
lasers will not increase or that the lasers which we began using in our GBIC
transceiver products in March 1999 will not experience problems. Claims against
us in excess of the amount of our reserve could have a material adverse effect
on our business and financial condition. As a result of this problem, Sun
Microsystems has reduced its purchases of GBIC transceivers and in August 1999, we issued to Sun Microsystems a warrant for 150,000 shares of our common
stock. In addition, if we are unable to resolve this matter to our customers'
satisfaction, or if failure rates in transceiver products increase, our
reputation and relationships with current and prospective customers could be
damaged and adversely affect the sales of all of our products.>>
<<THE LOSS OF ONE OR MORE KEY CUSTOMERS COULD SIGNIFICANTLY REDUCE OUR REVENUE.
Our success will depend on our continued ability to develop and manage
relationships with significant OEMs and resellers, as well as on the sales
efforts and success of these customers. Sun Microsystems, Compaq,
Hewlett-Packard and Interphase represented 34.4%, 19.8%, 11.8% and 10.4% of our
total revenue, respectively, for the six months ended July 4, 1999. In fiscal
1998, sales to our top two customers, Sun Microsystems and Hewlett-Packard,
represented 54.4% and 12.3% of our total revenue, respectively. Although we are
attempting to expand our base of OEMs, most of our future revenue may come from
a small number of OEMs.
Our agreements with our customers do not provide any assurance of future
sales to those customers. For example:
- our OEMs and resellers can stop purchasing and marketing our products at
any time;
- our OEM and reseller agreements are not exclusive and contain no renewal
obligation; and
- our OEM and reseller agreements do not require minimum purchases.>> |
