IWAV --
Is this for real? --- (From its S1)
WE RELY ON A SMALL NUMBER OF CUSTOMERS FOR MOST OF OUR REVENUES, AND A DECREASE
IN REVENUES FROM THESE CUSTOMERS COULD SERIOUSLY HARM OUR BUSINESS
A small number of customers have accounted for a significant portion of our
revenues to date. Net revenues from significant customers as a percentage of our
total net revenues in the two most recent fiscal years and the three months
ended September 30, 1999 were as follows:
FISCAL YEAR THREE MONTHS
ENDED ENDED
JUNE 30, SEPTEMBER 30,
---------------------- --------------
1998 1999 1999
-------- -------- --------------
Nortel Networks.................................... 18% 51% 18%
ADC Telecommunications/Microcellular Systems,
Ltd.............................................. 47 20 21
Hutchison Telecommunications (Hong Kong)........... 21 8 5
HangZhou Topper Electric Corporation............... -- 2 38
Nortel Networks is one of our principal shareholders, and a Nortel Networks
employee is a member of our board of directors. ADC Telecommunications and the
corporate parent of Hutchison Telecommunications are shareholders of ours.
Microcellular Systems, Ltd. was created by a spin-off from ADC
Telecommunications in May 1999.
We expect that the majority of our revenues will continue to depend on sales
to a small number of customers. If any key customers experience a downturn in
their business or shift their purchases to our competitors, our revenues and
operating results would decline.
We expect that for the foreseeable future a significant portion of our net
revenues will be derived from sales to Nortel Networks and Alcatel. If our
revenues, including those expected from Nortel Networks and Alcatel under our
purchase and distribution agreements, are lower than expected, we may not be
able to quickly reduce expenses because many of our expenses are fixed in the
near term. Nortel Networks and Alcatel have minimum purchase commitments under
their respective agreements. We rely on these commitments in making our
manufacturing commitments each quarter. We have also committed to Nortel
Networks and Alcatel that we will maintain quality, delivery, performance and
design standards for our systems. As a result, we bear the risk of carrying
excess inventory if Nortel Networks and Alcatel fail to meet their commitments
or if we fail to meet ours. From time to time, we
have failed to deliver certain product features by specific milestone dates and,
as a result, we have renegotiated downward minimum quarterly commitments with
Nortel Networks, including in the three months ending September 30, 1999. We
cannot assure you that these minimum commitments will be met or that they will
not be renegotiated downward in the future. Failure of Nortel Networks or
Alcatel to meet minimum purchase commitments could cause our revenues and
operating results to decline.
L. |
