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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-48268
[LOGO OF EFFICIENT OF NETWORKS]
Shares
Common Stock
This prospectus relates to the offer and sale of up to 319,566 shares of
Efficient Networks, Inc. common stock by the selling securityholders
identified in this prospectus. We will not receive any of the proceeds from
the sale of shares of common stock by the selling securityholders.
The reported last sales price of our common stock on the Nasdaq National
Market on October 30, 2000 was $36.50 per share. Our common stock is traded in
the Nasdaq National Market under the symbol "EFNT."
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The securities offered hereby involve a high degree of risk. See "Risk
Factors" beginning on page 5 of this prospectus for information that you
should consider before purchasing these securities.
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Neither the Securities and Exchange Commission nor any state securities
commission 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.
This prospectus is dated October 30, 2000
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You should rely only on the information contained in or incorporated by
reference in this prospectus. We have not authorized anyone to provide you
with different information. We are not making an offer of these securities in
any state where the offer is not permitted. You should not assume that the
information contained in or incorporated by reference in this prospectus is
accurate as of any date other than the date on the front of this prospectus.
TABLE OF CONTENTS
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Where You Can Find More Information........................................ 3
Summary.................................................................... 4
Risk Factors............................................................... 5
Use Of Proceeds............................................................ 14
Selling Securityholders.................................................... 15
Plan Of Distribution....................................................... 16
Legal Matters.............................................................. 17
Experts.................................................................... 17
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WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the Commission,
in accordance with the Securities Exchange Act of 1934. You may read and copy
our reports, proxy statements and other information filed by us at the public
reference facilities of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices; 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of
such materials can be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the Commission at 1-800-SEC-0330 for further information about the
public reference rooms. Our reports, proxy statements and other information
filed with the Commission are available to the public over the Internet at the
Commission's World Wide Web site at http://www.sec.gov.
The Commission allows us to "incorporate by reference" into this prospectus
the information we file with the Commission. This means that we can disclose
important information by referring you to those documents. The information
incorporated by reference is considered to be a part of this prospectus.
Information that we file later with the Commission will automatically update
and supersede this information. We incorporate by reference the documents
listed below and any future filings made by us with the Commission under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until this offering is
complete:
. The description of our Common Stock which is contained in our
Registration Statement on Form 8-A filed with the Commission on June 22,
1999 pursuant to Section 12 of the Exchange Act (File No. 000-26473),
and any description of any of our securities which is contained in any
registration statement filed after the date hereof under Section 12 of
the Exchange Act, including any amendment or report filed for the
purpose of updating any such description.
. Our Annual Report on Form 10-K for the fiscal year ended June 30, 2000
as filed with the Commission on September 21, 2000 (File No. 000-26473).
. Flowpoint Corporation's Financial Statements included in our
Registration Statement on Form S-1 as filed with the Commission on
January 10, 2000 (Registration No. 333-94289).
You may request a copy of these filings, at no cost, by contacting us at the
following address:
Investor Relations Department
Efficient Networks, Inc.
4849 Alpha Road
Dallas, Texas 75244
Telephone: (972) 852-1000
E-Mail: [email protected]
You should rely only on the information incorporated by reference or
provided in this prospectus or a prospectus supplement or amendment. We have
not authorized anyone else to provide you with different information. We are
not making an offer of these securities in any state where the offer is not
permitted. You should not assume the information in this prospectus is
accurate as of any date other than the date on the front of those documents.
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SUMMARY
This summary highlights some information from this prospectus, and it may not
contain all of the information that is important to you. It is qualified in its
entirety by the more detailed information and consolidated financial
statements, including the notes to the consolidated financial statements,
incorporated by reference in this prospectus. You should read the full text of,
and consider carefully the more specific details contained in or incorporated
by reference into this prospectus. When used in this prospectus, the terms
"Efficient," "we," "our" and "us" refer to Efficient Networks, Inc. and not to
the selling securityholders.
Efficient Networks, Inc.
Efficient Networks is a worldwide developer and supplier of high-speed
digital subscriber line, or DSL, customer premises equipment for the broadband
access market. Our DSL solutions enable telecommunications and other
communication network service providers to provide high-speed, cost-effective
broadband access services over the existing copper wire telephone
infrastructure. We believe there is significant demand for high-speed broadband
access, especially among business users and consumers who have found
alternative solutions to be inadequate or too expensive. We therefore focus on
developing and producing single- and multiple-user DSL customer premises
equipment for small- to medium-size businesses, branch offices of large
corporations and consumers. Our DSL products enable applications such as high-
speed Internet access, electronic commerce, remote access, telecommuting and
extensions of corporate networks to branch offices.
We were incorporated in Delaware in 1993. Our principal executive offices are
located at 4849 Alpha Road, Dallas, Texas 75244 and our telephone number is
(972) 852-1000. Our Website is located at http://www.efficient.com. Information
contained on our Website does not constitute part of this prospectus.
On December 17, 1999 we completed the acquisition of FlowPoint Corporation, a
provider of advanced broadband routers for deployment at customer premises. On
May 22, 2000, we issued 319,566 shares of common stock to complete the
acquisition of Network Telesystems, Inc., a provider of broadband client
services software. This registration statement covers the resale of the shares
issued in the acquisition of Network Telesystems, Inc. On September 28, 2000 we
completed the acquisition of MultiMedia Development Corporation, a developer of
software-based network management systems and solutions for the broadband
networking industry.
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RISK FACTORS
Before you invest in the shares of Efficient common stock, you should be
aware of various risks, including those described below. You should carefully
consider these risk factors, together with all of the other information
included or incorporated by reference in this prospectus, before you decide
whether to purchase shares of common stock. The risks set out below are not
the only risks we face.
If any of the following risks occur, our business, financial condition and
results of operations could be materially adversely affected. In such case,
the trading price of the common stock could decline, and you may lose all or
part of your investment.
Keep these risk factors in mind when you read "forward-looking" statements
elsewhere in this prospectus and in the documents incorporated herein by
reference. These are statements that relate to our expectations for future
events and time periods. Generally, the words "anticipate," "expect," "intend"
and similar expressions identify forward-looking statements. Forward-looking
statements involve risks and uncertainties, and future events and
circumstances could differ significantly from those anticipated in the
forward-looking statements.
Risks Associated With the Digital Subscriber Line Industry
Sales of our products depend on the widespread adoption of broadband access
services and if the demand for broadband access services does not develop,
then our results of operations and financial condition would be adversely
affected.
Our business would be harmed, and our results of operations and financial
condition would be adversely affected, if the use of broadband access services
does not increase as anticipated, or if our customers' broadband access
services are not well received in the marketplace. Certain critical factors
will likely continue to affect the development of the broadband access
services market. These factors include:
. quality and reliability of service;
. availability of cost-effective, high-speed service;
. ability to integrate business applications on the Internet;
. interoperability among multiple vendors' network equipment;
. congestion in service providers' networks;
. security concerns; and
. ability to meet growing demands for increasing bandwidth.
Even if these factors are adequately addressed, the market for broadband
access services to the Internet and corporate networks may fail to develop or
may develop more slowly than anticipated. If this market fails to develop or
develops more slowly than anticipated, our business would be harmed, and our
results of operations and financial condition would be adversely affected.
Many competing technologies serve our target market. If the DSL technology
upon which our products are based does not succeed as a technological solution
for broadband access, we would not be able to sustain or grow our business.
The market for high-speed data transmission services has several competing
technologies which offer alternative solutions, and the demand for DSL
services is uncertain in light of this competition. Technologies which compete
with DSL are:
. other access solutions provided by telephone network service providers
such as dial-up analog modems, integrated services digital networks
(ISDN) and T1 services;
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. broadband wireless technologies; and
. broadband cable technologies.
The introduction of new products based on these or alternative technologies
or the emergence of new industry standards could render our products less
competitive or obsolete. If any of these events occur, we would be unable to
sustain or grow our business.
If these alternatives gain market share at the expense of DSL technologies,
demand for our products would be reduced, and we would be unable to sustain or
grow our business. Additionally, wireless and cable network service providers
are well funded, and cable network service providers have large existing
customer bases. As a result, competition from these companies is intense and
expected to increase.
We depend upon network service providers to deploy DSL services in a broad and
timely manner, and if they do not, we would be unable to sell our products.
We sell our products to network service providers who in turn sell them to
end users in connection with the service provider's deployment of DSL
services. If the network service providers fail to deploy DSL services, we
would be unable to sell our products as anticipated, if at all. Factors that
impact deployments include:
. a prolonged approval process, including laboratory tests, technical
trials, marketing trials, initial commercial deployment and full
commercial deployment;
. the development of a viable business model for DSL services, including
the capability to market, sell, install and maintain DSL services;
. cost constraints, such as installation costs and space and power
requirements at the network service providers' central offices;
. varying and uncertain conditions of the installed copper wire, including
size and length, electrical interference, and crossover interference
with voice and data telecommunications services;
. problems of interoperability among DSL network equipment vendors'
products;
. evolving industry standards for DSL technologies; and
. domestic and foreign government regulation.
Risks Within the DSL Industry
Competition within the DSL market is intense and includes numerous, well
established competitors. If we are unable to compete effectively, our business
would be harmed.
Competition in the DSL customer premises equipment market is intense, and we
expect competition to increase. Many of our competitors and potential
competitors have substantially greater name recognition and technical,
financial and marketing resources than we have. In addition, many of our
competitors are able to offer their customers a range of products of which
customer premises equipment is only one element. Our customers may prefer to
purchase from fewer vendors, and may therefore favor competitors with broader
product offerings. If we are unable to compete successfully, our business will
be harmed and our results of operations and financial condition would be
adversely affected. We cannot assure you that we will have the financial
resources, technical expertise or marketing, distribution and support
capabilities to compete successfully.
Competitive pressures could adversely affect us in the following ways:
. reduce demand for our products if customers shift their purchasing to
competitors; or
. cause us to reduce prices on our existing or future products and thereby
adversely affect our gross margins.
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Our failure to enhance our existing products or to develop and introduce new
products that meet changing customer requirements and emerging industry
standards would adversely impact our ability to sell our products.
The market for high-speed broadband access is characterized by rapidly
changing customer demands and short product life cycles. If our product
development and enhancements take longer than planned, the availability of our
products would be delayed. Any such delay could adversely impact our ability
to sell our products and our results of operations and financial condition
would be adversely affected. Our future success will depend in large part upon
our ability to:
. identify and respond to emerging technological trends in the market;
. develop and maintain competitive products that meet changing customer
demands;
. enhance our products by adding innovative features that differentiate
our products from those of our competitors;
. bring products to market on a timely basis;
. introduce products that have competitive prices; and
. respond effectively to new technological changes or new product
announcements by others.
Our current products are not interoperable with certain products offered by
suppliers to our customers and are subject to evolving industry standards. If
our products do not interoperate with our target customers' networks or an
industry standard that achieves market acceptance, customers may refuse to
purchase our products.
In some cases, network equipment vendors, such as Cisco Systems, Inc., sell
to our target customers proprietary or unique systems with which our products
will not function. In these cases, potential customers that have purchased
network equipment that does not function with our DSL customer premises
equipment will not purchase our products for those incompatible networks.
Also, the emergence of new industry standards, whether through adoption by
official standards committees or widespread use by our target customers, could
require us to redesign our products. If such standards become widespread and
our products do not meet these standards, our product sales would decrease,
and our business would be harmed. Additionally, the adoption of new standards
increases the risk that competitors could more easily develop products that
directly compete with our products, which could result in greater competition
and pricing pressure.
We may not be able to produce sufficient quantities of our DSL products
because we depend on third-party manufacturers. If these manufacturers fail to
produce our products in a timely manner, our ability to fulfill our customer
orders would be adversely impacted.
We rely upon third parties to manufacture our products and we expect this to
continue in the future. In particular, ACT Manufacturing manufactures the
majority of our products. In June, 2000 we advanced ACT Manufacturing $50
million against future production of our products. If ACT Manufacturing fails
to produce products for us we may lose all or part of the $50 million advance.
In addition, our success depends, in significant part, on our third party
manufacturers to cost effectively produce our products in sufficient
quantities to meet demand. There are a number of risks associated with relying
on third-party manufacturers, including the following:
. reduced control over delivery schedules;
. reduced control over quality and quality assurance; and
. reduced control over manufacturing yields and costs.
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We have no long-term contracts or arrangements with any of our vendors that
guarantee product availability, the continuation of particular payment terms
or the extension of credit limits. The competitive dynamics of our market
require us to obtain components at favorable prices, but we may not be able to
obtain additional volume purchase or manufacturing arrangements on terms that
we consider acceptable, if at all. If we enter into a high-volume or long-term
supply arrangement and subsequently decide that we cannot use the products or
services provided for in the agreement, our business would also be harmed.
We may not be able to produce sufficient quantities of our products because we
obtain certain key components from, and depend on, certain sole-source
suppliers. If we are unable to obtain these sole-source components, we would
not be able to ship our products in a timely manner and our relationships with
our customers could be harmed.
We obtain certain parts, components and equipment used in our products from
sole sources of supply. For example, we obtain certain semiconductor chipsets
from Alcatel Microelectronics, Motorola, Inc., Analog Devices, Inc., Texas
Instruments Incorporated, and Conexant Systems, Inc. We also rely on Texas
Instruments Incorporated, Samsung Semiconductor Inc., and VLSI Technology,
Inc. to manufacture our application specific integrated circuits.
Although we have agreements with many of these component providers, these
agreements do not require the vendors to meet our supply demands. In recent
periods we have experienced difficulties in obtaining adequate supplies of
certain components, particularly chipsets from Alcatel and Motorola. In
addition, certain standard components, such as capacitors, flash memory and
transformers, have been in short supply and, as a result, have not always been
available to us in our desired quantities and time frames and/or have been
more expensive than anticipated.
Although these difficulties have not resulted in revenue shortfalls in prior
periods, they have lead to higher costs and to extended delivery times for
customer orders. In future periods, we could continue to experience component
supply difficulties which could continue to result in higher than anticipated
costs, extended delivery cycles and, if sufficiently severe, could cause our
revenues to fail to meet analyst expectations. Moreover, to the extent that we
experience component supply difficulties and our competitors do not, our
customers may elect to move their business to a competitor in order to ensure
timely delivery. Recapturing any business lost due to delayed deliveries may
be difficult or impossible. Any of these outcomes could harm our business.
We may be subject to product returns and product liability claims resulting
from defects in our products. Product returns and product liability claims
could result in the failure to attain market acceptance of our products and
harm our business.
Our products are complex and may contain undetected defects, errors or
failures. The occurrence of any defects, errors or failures could result in
delays in installation, product returns and warranty claims beyond that for
which we have established reserves. Any of these occurrences could also result
in the loss of or delay in market acceptance of our products, either of which
would harm our business and adversely affect our operating results and
financial condition.
Although we have not experienced any material product liability claims to
date, the sale and support of our products entail the risk of these claims. A
successful product liability claim brought against us could be expensive,
divert the attention of management from ordinary business activities and,
correspondingly, harm our business.
Risks That May Cause Financial Fluctuations
We have incurred net losses since our inception and expect future losses.
Accordingly, we may not be able to achieve profitability, and even if we do
become profitable, we may not be able to sustain profitability.
Due to our limited operating history and our history of losses, we may never
be able to achieve profitability, and even if we do, we may not be able to
remain profitable. To achieve profitable operations on a continuing
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basis, we must successfully design, develop, test, manufacture, introduce,
market and distribute our products on a broad commercial basis.
In addition to the foregoing, in connection with our acquisition of
Flowpoint Corporation in December 1999, we recorded approximately $925.1
million of intangible assets which we are amortizing at the rate of
approximately $46.3 million per quarter over a five year period. This goodwill
amortization will adversely affect operating results. Therefore, even if we
achieve positive cash flow from operations, we expect to continue to be
unprofitable for a significant additional period.
Our ability to become operationally profitable will depend on a number of
factors, many of which are beyond our control. These factors include:
. the rate of market acceptance of DSL broadband access in general and the
demand for our products in particular;
. our ability to reduce the manufacturing and component costs of our
products;
. the competitive environment for DSL customer premises equipment and the
rate at which the prices that we are able to command for our products
may decline; and
. our ability to achieve manufacturing and operational efficiencies as we
grow our operations.
Due to these factors, we cannot forecast with any degree of accuracy when or
if we will become operationally profitable or, if we achieve such
profitability, that we would be able to sustain it.
We have a short operating history and, as a result, it is difficult to predict
our future results of operations.
We have a short operating history upon which to evaluate our business. We
first commenced product shipments in August 1994 and did not introduce DSL
products until March 1998. Due to our limited operating history, it is
difficult or impossible for us to predict future results of operations. You
should not expect future revenue growth to be comparable to our recent revenue
growth. In addition, we believe that comparing different periods of our
operating results is not meaningful, and you should not rely on the results
for any period as an indication of our future performance. Investors in our
common stock must consider our business and prospects in light of the risks
and difficulties typically encountered by companies in their early stages of
development, particularly those in rapidly evolving markets such as ours.
If sales forecasted for a particular period are not realized in that period
due to the lengthy sales cycle of our products, our operating results for that
period would be adversely affected.
If we fail to realize forecasted sales for a particular period, our
operating results would be adversely affected and our stock price would likely
decline and could decline significantly. The sales cycle of our products is
typically lengthy and involves:
. a significant technical evaluation;
. delays associated with network service providers' internal procedures to
commit to a particular product line offering and approve large capital
expenditures;
. time required to deploy new technologies within service providers'
networks; and
. testing and acceptance of new technologies.
For these and other reasons, a sale of our products generally requires six
to twelve months to complete. Furthermore, the announcement and projected
implementation of new standards may affect sales cycles, as network service
providers may choose to delay large-scale deployment of DSL services until
compliant products are available.
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Our product cycles tend to be short, and we may incur substantial non-
recoverable expenses or devote significant resources to sales that do not
occur when anticipated.
In the rapidly changing technology environment in which we operate, product
cycles tend to be short. Therefore, the resources we devote to product sales
and marketing may not generate material revenues for us, and from time to time
we may need to write off excess and obsolete inventory. If we incur
substantial sales, marketing and inventory expenses in the future that we are
not able to recover, and we are not able to compensate for such expenses, our
operating results would be adversely affected. In addition, if we sell our
products at reduced prices in anticipation of cost reductions and we still
have higher cost products in inventory, our business would be harmed, and our
results of operations and financial condition would be adversely affected.
Our operating results in one or more future periods are likely to fluctuate
significantly and may fail to meet or exceed the expectations of securities
analysts or investors, causing our stock price to decline.
Our operating results are likely to fluctuate significantly in the future on
a quarterly and an annual basis due to a number of factors, many of which are
outside our control. If our operating results do not meet the expectations of
securities analysts or investors, our stock price is likely to decline,
potentially dramatically. We cannot assure you that this will not occur
because of the numerous factors that could cause our revenues and costs to
fluctuate.
These factors include the following:
. the timing and size of sales of our products and services;
. announcements of new products and product enhancements by competitors;
. the entry of new competitors into our market, including by acquisition;
. unexpected delays in introducing new or enhanced products, including
manufacturing delays;
. the mix and average selling prices of the products we sell;
. the volume and average cost of products manufactured; and
. the effectiveness of our product cost reduction efforts.
Our customer base is concentrated, and the loss of one or more of our
customers could harm our business.
Because DSL service relies upon existing telephone lines to reach end users,
a substantial majority of potential DSL end-user accounts in the U.S. and in
other countries are controlled by a relatively small number of network service
providers. If we are not successful in maintaining relationships with these
few network service providers and the network equipment vendors that supply
them, our business will be harmed.
Although deregulation and increasing competition are expanding our potential
customer base, a small number of customers has accounted for a large portion
of our revenues to date. We sell our DSL products primarily to network service
providers, network equipment vendors and telephone company-aligned
distributors. We expect to continue to be dependent upon a relatively small
number of large customers in future periods, although the specific customers
may vary from period to period. If we are not successful in maintaining
relationships with key customers, and winning new customers, our business
would be harmed.
We derive a substantial amount of our revenues from international sources, and
difficulties associated with international operations could harm our business.
Since inception, a substantial portion of our revenues has been derived from
customers located outside of the United States, and we expect this trend to
continue. Revenues derived from customers located outside of the
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United States represented 52% of our net revenues in fiscal 1998, 41% of our
net revenues in fiscal 1999 and 22% of our net revenues in fiscal 2000. We
believe that our continued growth and ability to attain profitability will
require us to continue to penetrate international markets. If we are unable to
successfully overcome the difficulties associated with international
operations and maintain and expand our international operations, our business
would be harmed. These difficulties include:
. difficulties staffing and managing foreign operations in our highly
technical industry;
. changes in regulatory requirements which are common in the
telecommunications industry;
. licenses, tariffs and other trade barriers imposed on products such as
ours;
. political and economic instability especially in Asia and the Pacific;
. potentially adverse tax consequences;
. difficulties obtaining approvals for products from foreign governmental
agencies which regulate networks;
. compliance with a wide variety of complex foreign laws and treaties
relating to telecommunications equipment; and
. delays or difficulties collecting accounts receivable from foreign
entities that are not subject to suit in the United States.
To date, our international sales and component purchases have been
denominated solely in U.S. dollar and, accordingly, we have not been exposed
to fluctuations in non-U.S. currency exchange rates. In the future, a portion
of our international sales may be denominated in currencies other than U.S.
dollars, which would expose us to gains and losses based upon exchange rate
fluctuations. Such gains and losses may contribute to fluctuations in our
operating results.
Risks That May Affect Our Ability to Execute Our Business Plans
Our business could be adversely affected if we do not adequately address the
risks associated with acquired technologies or companies.
As part of our business strategy, we expect to continue to review potential
acquisitions that could complement our current product offerings, augment our
market coverage or enhance our technical capabilities, or that may otherwise
offer growth opportunities. In December 1999, we acquired Flowpoint
Corporation, in May 2000, we acquired Network Telesystems, Inc., and in
September 2000, we acquired MultiMedia Development Corporation. In connection
with future acquisitions, we could issue equity securities that would dilute
our current stockholders' percentage ownership, incur substantial debt, or
assume contingent liabilities. Such actions by us could seriously harm our
results of operations and/or the price of our common stock. Acquisitions also
entail numerous other risks which could adversely affect our business, results
of operations and financial condition, including:
. difficulties in assimilating acquired operations, technologies or
products;
. unanticipated costs or capital expenditures associated with the
acquisition;
. acquisition-related charges and amortization of acquired technology and
other intangibles that could negatively affect our reported results of
operations;
. diversion of management's attention from our business;
. adversely affect existing business relationships with suppliers and
customers; and
. failure to successfully integrate these businesses, products,
technologies and personnel.
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We rely on indirect distribution channels and strategic relationships to sell
and manufacture our products, and if we are not able to maintain existing and
develop additional strategic relationships and indirect distribution channels,
our business would be harmed.
Our business strategy relies on our strategic relationships with network
equipment vendors, network service providers, and suppliers of DSL technology.
If our existing relationships are not successful or our competitors are better
able to develop these relationships, our business would be harmed. End users
typically purchase DSL customer premises equipment from network service
providers, and network service providers may purchase DSL customer premises
equipment from independent network equipment vendors and distributors. We
typically work closely with our potential customers and suppliers to ensure
interoperability of products with customer networks and of components with our
DSL customer premises equipment. In addition, we rely on our strategic
relationships with telephone company-aligned distributors in order to broaden
our distribution network. Also, larger vendors of DSL customer premises
equipment may be able to leverage their size and established distribution
channels to gain a significant competitive advantage over us. We cannot assure
you that we will be able to maintain or expand our existing strategic
relationships or that we will be able to establish new relationships in the
future.
We continue to rapidly and significantly expand our operations and we may
engage in future acquisitions that dilute our stockholders, cause us to incur
debt and assume contingent liabilities, and our failure to manage growth could
harm our business and adversely affect our results of operations and financial
condition.
We have rapidly and significantly expanded our operations, including the
number of our employees, the geographic scope of our activities and our
product operations. We expect that further significant expansion will be
required to address potential growth in our customer base and market
opportunities. Any failure to manage growth effectively could harm our
business and adversely affect our operating results and financial condition.
We cannot assure you that we will be able to do any of the following, which we
believe are essential to successfully manage the anticipated growth of our
operations:
. improve our existing and implement new operational, financial and
management information controls, reporting systems and procedures;
. hire, train and manage additional qualified personnel;
. expand and upgrade our core technologies; and
. effectively manage multiple relationships with our customers, suppliers
and other third parties.
In the future, we may also experience difficulties meeting the demand for
our products. The installation and use of our products require training. If we
are unable to provide training and support for our products, more time may be
necessary to complete the implementation process and customer satisfaction may
be adversely affected. In addition, our suppliers may not be able to meet
increased demand for our products. We cannot assure you that our systems,
procedures or controls will be adequate to support the anticipated growth in
our operations.
Competition for qualified personnel in the networking equipment and
telecommunications industries is intense, and if we are not successful in
attracting and retaining these personnel, our business would be harmed.
Our future success will depend on the ability of our management to operate
effectively, both individually and as a group. Therefore, the future success
of our business will also depend on our ability to attract and retain high-
caliber personnel. The loss of the services of any of our key personnel, the
inability to attract or retain qualified personnel in the future or delays in
hiring required personnel, particularly engineers, could harm our business.
Because competition for qualified personnel in the networking equipment and
telecommunications industries is intense, we may not be successful in
attracting and retaining such personnel. We are seeking to hire a
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significant number of additional personnel in the near future, including
direct sales and marketing personnel. There may be only a limited number of
people with the requisite skills to serve in those positions, and it may
become increasingly difficult to hire these people. In addition, we are
actively searching for research and development engineers, who also are in
short supply. Our business will be harmed if we encounter delays in hiring
additional engineers. Furthermore, competitors and others have in the past and
may in the future attempt to recruit our employees. We do not have employment
contracts with any of our key personnel.
The loss of the services of one or more of our executive officers or key
employees could harm our business.
Our executive officers and certain key sales, engineering and management
personnel may not remain with us in the future. Our executive officers and key
personnel and in particular Mark A. Floyd, our Chief Executive Officer, and
Patricia W. Hosek, our Executive Vice President of Product Operations are
critical to our business and its future success. If we lost the services of
one or more of our executive officers or key employees, we would need to
devote substantial resources to finding replacements, and until replacements
were found, we would be operating without the skills or leadership of such
personnel, either of which could have a significant adverse effect on our
business. None of our officers or key employees is bound by agreements for any
specific employment term or covenants not to compete.
Our future success will depend in part on our ability to protect our
proprietary rights and the technologies used in our principal products, and if
we do not enforce and protect our intellectual property or if others bring
infringement claims against us, our business would be harmed.
We rely on a combination of patent, copyright and trademark laws, trade
secrets, confidentiality provisions and other contractual provisions to
protect our proprietary rights. However, these measures afford only limited
protection. Our failure to adequately protect our proprietary rights may
adversely affect us. Despite our efforts to protect our proprietary rights,
unauthorized parties may attempt to copy aspects of our products or to obtain
and use trade secrets or other information that we regard as proprietary.
From time to time, third parties, including our competitors, have asserted
patent, copyright and other intellectual property rights to technologies that
are important to us. For example, we have received a letter from IBM
indicating that they hold patents on certain aspects of DSL technology, and
urging us to begin negotiating a license to the patent. We are evaluating the
IBM patents, and have not yet determined whether to seek a license. Even if we
elect to pursue a license from IBM, there can be no assurances we would find
the license terms acceptable. We expect that we will increasingly be subject
to infringement claims as the number of products and competitors in the high-
speed data access market grows and the functionality of products overlaps.
Litigation of intellectual property rights can be expensive and require
significant management time and attention, even if ultimately successful.
Moreover, in the event of an adverse result in any future litigation with
third parties relating to proprietary rights, we could be required:
. to pay substantial damages, including treble damages if we are held to
have willfully infringed;
. to halt the manufacture, use and sale of infringing products;
. to expend significant resources to develop non-infringing technology; or
. to obtain licenses to the infringing technology, if available.
Our products and those of our customers are subject to government regulations,
and changes in current or future laws or regulations that negatively impact
our products and technologies could harm our business.
The jurisdiction of the Federal Communications Commission, or the FCC,
extends to the entire communications industry including our customers and
their products and services that incorporate our products.
13
<PAGE>
Future FCC regulations affecting the broadband access services industry, our
customers or our products may harm our business. For example, FCC regulatory
policies that affect the availability of data and Internet services may impede
our customers' penetration into certain markets or affect the prices that they
are able to charge. In addition, international regulatory bodies are beginning
to adopt standards for the communications industry. Delays caused by our
compliance with regulatory requirements may result in order cancellations or
postponements of product purchases by our customers, which would harm our
business and adversely affect our results of operations and financial
condition.
Additional Risks That May Affect Our Stock Price
Certain provisions of our charter documents may make acquiring control of our
company more difficult for a third party, which could adversely affect our
stock's market price or lessen any premium over market price that an acquirer
might otherwise pay.
Our charter documents contain provisions providing for a classified board of
directors, eliminating cumulative voting in the election of directors and
restricting our stockholders from acting without a meeting. These provisions
may make certain corporate actions more difficult and might delay or prevent a
change in control and therefore limit the price that new investors will pay
for our stock. Further, the board of directors may issue new shares of
preferred stock with certain rights, preferences, privileges and restriction,
including voting rights, without any vote by our stockholders. Our existing
stockholders may be adversely affected by the rights of this preferred stock.
New preferred stock might also be used to make acquiring control more
difficult. We have no current plans to issue shares of preferred stock. We
will also indemnify officers and directors against losses incurred in legal
proceedings to the broadest extent permitted by Delaware law.
USE OF PROCEEDS
We will not receive any proceeds from the sale by the selling
securityholders of the common stock.
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<PAGE>
SELLING SECURITYHOLDERS
The following table contains information as of September 30, 2000, with
respect to the selling securityholders and the common stock beneficially owned
by the selling securityholders that may be offered using this prospectus.
<TABLE>
<CAPTION>
Number of Number
Shares Number of Shares
Beneficially of Shares Beneficially
Owned That May Owned After
Prior to the Be Sold in the
Name Offering(1) the Offering Offering(2)
---- ------------ ------------ ------------
<S> <C> <C> <C>
Akina-Cooke, Rosie (3)................ 191 191 0
Arend, Sandra G. ..................... 64,358 64,358 0
Arja, Shashi.......................... 268 268 0
Bartek, Brice (3)..................... 1,340 1,340 0
Blamey, Richard....................... 1,676 1,676 0
Boros, Michael S...................... 502 502 0
Cooney, James P....................... 1,407 1,407 0
David, Albert P....................... 1,139 1,139 0
Davidson Family Trust (4)............. 143,198 143,198(5) 0
Mark and Lee Ann Diehl................ 1,608 1,608 0
Davidson, Margaret.................... 1,608 1,608 0
Parisse, Irene........................ 1,608 1,608 0
Rich and Kathy Setto.................. 1,608 1,608 0
John M. Davidson TTEE FBO Cynthia Lynn
Davidson 1999 Irrevocable Trust (4).. 3,217 3,217 0
John M. Davidson TTEE FBO Elizabeth
Anne Davidson 1999 Irrevocable
Trust (4)............................ 3,217 3,217 0
John M. Davidson TTEE FBO Molly
Kathryn Davidson 1999 Irrevocable
Trust (4)............................ 3,217 3,217 0
Davis, Mary Kay....................... 1,575 1,575 0
Freeman, Jack......................... 16,089 16,089 0
Fritz, Frederick Miles................ 3,217 3,217 0
Gaydosh, Gregory A.................... 3,217 3,217 0
Greenwell, Daniel E................... 754 754 0
Greer, Lewis M........................ 7,843 7,843 0
Hightower, Michael (3)................ 7,106 7,106 0
Hokit, Jeffrey D...................... 1,575 1,575 0
Kroeger, Hal.......................... 321 321 0
Liston, Jeanne........................ 670 670 0
Long, Charlene Liloa (3).............. 402 402 0
Manzo, Joseph P....................... 9,184 9,184 0
Mappin, Laura......................... 402 402 0
Miller, Jeffrey S..................... 905 905 0
Perkel, Amy........................... 234 234 0
Perricone, Steve...................... 3,502 3,502 0
Pickering, James (3).................. 2,262 2,262 0
Reed, John M.......................... 1,139 1,139 0
Robesky, Kenneth...................... 6,033 6,033 0
Stewart, Todd D....................... 955 955 0
Sundarraj, Akkamapet P. (3)........... 6,435 6,435 0
Terrill, William Young................ 703 703 0
Triglia, Donald E..................... 1,877 1,877 0
Tulloh, Steven P. (3)................. 11,396 11,396 0
Lou and Marilyn Varricchio............ 1,608 1,608 0
</TABLE>
--------
(1) Calculated based on Rule 13d-3(d)(i) of the Exchange Act using 58,509,284
shares of common stock outstanding as of October 13, 2000.
(2) Assumes the sale of all shares that may be sold in the offering.
(3) Selling Securityholder is an employee of Efficient.
(4) Trustee of Selling Securityholder is an employee of Efficient.
(5) John M. Davidson, trustee of the Davidson Family Trust, has agreed with
us that he will not sell more than one half of the shares held by the
trust between the date of this prospectus and May 22, 2001. Following May
22, 2001, all shares held by the trust may be sold.
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<PAGE>
PLAN OF DISTRIBUTION
We will not receive any of the proceeds of the sale of the common stock
offered by this prospectus. The common stock may be sold from time to time to
purchasers:
. directly by the selling securityholders; or
. through underwriters, broker-dealers or agents who may receive
compensation in the form of discounts, concessions or commissions from
the selling securityholders or the purchasers of the common stock.
If the common stock is sold through underwriters or broker-dealers, the
selling securityholders will be responsible for underwriting discounts or
commissions or agent's commissions.
The common stock may be sold in one or more transactions at:
. fixed prices;
. prevailing market prices at the time of sale;
. varying prices determined at the time of sale; or
. negotiated prices.
These sales may be effected in transactions:
. on any national securities exchange or quotation service on which the
common stock may be listed or quoted at the time of the sale, including
the Nasdaq National Market;
. in the over-the-counter market;
. in transactions otherwise than on such exchanges or services or in the
over-the-counter market;
. through the writing or purchase of non-traded and exchange-traded
options;
. by pledge to secure debts and other obligations;
. in hedge transactions and in settlement of other transactions; or
. in a combination of any of the above transactions.
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as an agent on both sides of the
trade.
In connection with sales of the common stock or otherwise, the selling
securityholders may enter into hedging transactions with broker-dealers. These
broker-dealers may in turn engage in short sales of the common stock in the
course of hedging their positions. The selling securityholders may also sell
the common stock short and deliver common stock to close out short positions,
or loan or pledge common stock to broker-dealers that in turn may sell the
common stock.
Our common stock trades on the Nasdaq National Market under the symbol
"EFNT."
There can be no assurance that the selling securityholders will sell any or
all of the common stock pursuant to this prospectus. In addition, any common
stock covered by this prospectus that qualify for sale pursuant to Rule 144 or
Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A rather
than pursuant to this prospectus.
We are paying all of the expenses related to this registration of common
stock.
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<PAGE>
LEGAL MATTERS
The validity of the issuance of Efficient's securities offered by this
prospectus will be passed upon for Efficient Networks, Inc. by Wilson Sonsini
Goodrich & Rosati, Professional Corporation, Palo Alto, California.
EXPERTS
The consolidated financial statements of Efficient Networks, Inc. for each
of the years in the three-year period ended June 30, 2000 have been
incorporated by reference herein in reliance upon the report of KPMG LLP,
independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
The financial statements of FlowPoint Corporation as of March 31, 1998,
August 31, 1998 and February 28, 1999 and for the years ended March 31, 1997
and 1998, the five-month period ended August 31, 1998 and the six-month period
ended February 28, 1999 have been incorporated by reference herein in reliance
upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
17
