Well George,
You got my lazy butt to go over and take a look at ZOOX' S-1 to see if I could espy an obvious reason (and it would have to be obvious for me to catch it) for their IPO rating. It would have been nice if the rater had explained his rating criteria, but that would have been too easy. ZOOX' offering numbers haven't been plugged in yet, so nothing to tell from them.
Seagate holds 19.9% of Gadzoox shares (voting, with takeover restrictions) and Seagate CEO is a director. In addition to Luczo, 2 VCs are on the board.
- We have developed a strategic partnership with Seagate Technology, Inc. pursuant to which we have collaborated with Seagate on the development of industry standards, the design and development of new SAN products, the interoperability of products, strategic planning and SAN market development. In addition, Seagate has made several investments in us as described below. Stephen J. Luczo, one of our directors, is also the chief executive officer of Seagate.
- - On May 21, 1997, we sold 2,092,234 shares of Series F preferred stock at a price per share of $4.78 to Seagate for an aggregate purchase price of $10,000,879. On June 16, 1998, we sold 652,569 shares of Series G preferred stock at a price per share of $7.65 to Seagate for an aggregate purchase price of $4,992,153.
- - On September 18, 1998, we entered into a $15,000,000 convertible note purchase agreement with Seagate. The convertible note bears simple interest of 5.75% per annum with principal and interest maturing on September 18, 2001. We have the option to convert any portion of the then outstanding balance of principal and interest into Series G preferred stock or common stock, after completion of this offering, at a price per share of $7.65.
Didn't stumble upon anything else that stood out from the boilerplate, there are +19m shares outstanding, but saw some other interesting tidbits:
- According to International Data Corporation (January 1999), our installed base of fibre channel networking ports represents the largest share of the total combined hub and switch ports shipped in 1997 and 1998.
- ... in fiscal 1999, we derived approximately 75% of our net revenues from our Gibraltar hub products and approximately 16% of our net revenues from our Bitstrip hub product. We expect that net revenues from our hub products will continue to account for a substantial portion of our total net revenues for the foreseeable future.
- In fiscal 1999, Hewlett-Packard Company's Enterprise Storage Solution Division represented 28% of our net revenues, Compaq Computer Corporation represented 15% of our net revenues and Hewlett-Packard Company's Network Server Division represented 14% of our net revenues. In fiscal 1998, Hewlett-Packard Company's Enterprise Storage Solution Division represented 58% of our net revenues, Compaq Computer Corporation represented 5% of our net revenues.
- None of our current customers have any minimum purchase obligations, and they may stop placing orders with us at any time, regardless of any forecast they may have previously provided. For example, in July 1998, Digital Equipment Corporation cancelled orders for our Bitstrip product, and in December 1998, Hewlett-Packard Company unexpectedly reduced orders for our Gibraltar 10-port product.
- Gross margin increased from $340,000 in fiscal 1997 to $1.9 million in fiscal 1998 to $6.2 million in fiscal 1999. Gross margin as a percentage of net revenues decreased from 41.3% in fiscal 1997 to 19.5% in fiscal 1998 and increased to 24.9% in fiscal 1999. The decrease in gross margin as a percentage of net revenues from fiscal 1997 to fiscal 1998 was primarily due to the introduction of new products with low initial sales volumes and manufacturing difficulties experienced by our previous contract manufacturer
- Research and development expenses increased from $2.2 million in fiscal 1997 to $7.2 million in fiscal 1998 and to $13.9 million in fiscal 1999. These increases were primarily due to additional research and development personnel, including the addition of our strategic research and development team and our two ASIC development teams primarily devoted to our development of the Capellix and other switch products. As of March 31, 1999, our staff included personnel with expertise in several key areas, including 4 people engaged in standards and architecture, 2 people engaged in advanced technologies, 14 people engaged in ASIC design, 16 people engaged in software design, 11 people engaged in manufacturing engineering, 30 people engaged in product development and engineering and 8 people in purchasing, administrative and supporting functions.
- Research and development programs that we are currently involved in include 2 and 4 gigabit per second ASIC cores and transceivers, high availability clustering architectures, SAN management application programming interfaces (APIs), distributed SAN management agents, and the integration of SAN, LAN and WAN technologies
- Capellix is currently in Beta evaluation with several of our key original equipment manufacturer partners. We expect to begin commercial shipments in the third calendar quarter of 1999.
- Our proprietary ASICs are manufactured using gallium arsenide (GaAs) and CMOS technologies. We have a strategic and business partnership with GaAs foundry Vitesse Semiconductor, Inc. We have a CMOS foundry relationship with LSI Logic Corporation.
- At March 31, 1999, backlog for our products was approximately $4.1 million, of which 94%, or approximately $3.9 million, is scheduled for delivery to customers during the June 1999 quarter, compared to backlog of approximately $3.2 million at March 31, 1998, of which 97%, or approximately $3.1 million was for scheduled delivery to customers during the June 1998 quarter. Typically, our original equipment manufacturer customers forecast expected purchases on a three to six month rolling basis, as compared to channel partners which order as required with minimal order fulfillment time. All orders are subject to cancellation or delay by the customers with limited or no penalty. Therefore, our backlog is not necessarily indicative of actual sales for any succeeding period.
Cautionary note on the throes of selling new products:
- Our original equipment manufacturer customers typically conduct significant evaluation, testing, implementation and acceptance procedures before they begin to market and sell new technologies, including our products. This evaluation process is lengthy and may range from six months to a year. This process is also complex and may require significant sales, marketing and management efforts on our part. The complexity of this process increases if we must qualify our products with multiple customers at the same time. In addition, once our products have been qualified, the length of the sales cycle of each of our original equipment manufacturer customers may vary depending upon whether our products are being bundled with other product or are being sold as an option or add-on. Sales to distribution channel partners may also require lengthy sales and marketing cycles. As a result, we may expend significant resources in developing partner relationships before recognizing any revenue.
Keeping some tough company:
- We face competition primarily from other manufacturers of SAN hub and switch products, including Emulex Corporation and Vixel Corporation in the SAN hub market and Ancor Communications, Inc., Brocade Communications Systems, Inc. and Vixel Corporation in the SAN switch market.
Okay, where's that Vixel S-1?
Douglas
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