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Registration No. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_______________________________
VIRATA CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
77-0521696
(I.R.S. Employer Identification No.)
2933 Bunker Hill Lane, Suite 201
Santa Clara, California 95054
(408) 566-1000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
_______________________________
Andrew M. Vought
Chief Financial Officer
2933 Bunker Hill Lane, Suite 201
Santa Clara, California 95054
(408) 566-1000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Douglas D. Smith
Gibson, Dunn & Crutcher LLP
One Montgomery Street, Telesis Tower
San Francisco, California 94104
Approximate date of commencement of proposed sale to the public:
From time to time after this registration statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [_]
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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
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 effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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Title of Proposed Maximum Proposed Maximum
Securities to be Amount to be Offering Price Per Aggregate Offering Amount of
Registered Registered Share(1) Price(1) Registration Fee
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<S> <C> <C> <C> <C>
Common Stock 930,733 $14.88 $13,849,308 $3,657
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(1) Estimated pursuant to Rule 457(c) solely for the purpose of calculating the
registration fee. On November 30, 2000, the average of the high and low sale
prices for the common stock of the Company as reported by the Nasdaq Stock
Market's National Market was $14.88 per share.
_______________________________
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, as amended, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said section
8(a), may determine.
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The information in this prospectus is not complete and may be changed. You 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 December 1, 2000
PROSPECTUS
VIRATA CORPORATION
930,733 SHARES
COMMON STOCK
The selling stockholders described below are offering and selling up to
930,733 shares of common stock, par value $0.001 per share, of Virata
Corporation under this prospectus. These shares have been issued by us in
connection with several recent acquisitions.
Our common stock is quoted on the Nasdaq Stock Market's National Market
under the symbol: "VRTA." On November 30, 2000, the last reported sale price of
our common stock was $14.25 per share.
Investing in our common stock involves risks. See "Risk Factors" on page 6.
_______________________________
The shares of common stock offered or sold under this prospectus have not
been approved or disapproved by the SEC or any state securities commission, nor
have these organizations determined that this prospectus is accurate or
complete. Any representation to the contrary is a criminal offense.
_______________________________
The date of this prospectus is December __, 2000
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TABLE OF CONTENTS
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Where You Can Find Additional Information................................. 3
Special Note Regarding Forward Looking Statements......................... 4
Summary................................................................... 5
Risk Factors.............................................................. 6
Use Of Proceeds........................................................... 20
Plan Of Distribution...................................................... 20
Selling Stockholders...................................................... 22
Legal Matters............................................................. 24
Experts................................................................... 24
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You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not
authorized anyone to provide you with information that is different. This
prospectus may only be used in jurisdictions where it is legal to offer or sell
these securities. You should not assume that the information in this prospectus
or any prospectus supplement or any document incorporated by reference in this
prospectus is accurate as of any date other than the date on the front of those
documents.
In this prospectus, unless indicated otherwise, "Virata," "we," "us," and
"our" refer to Virata Corporation.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-3 under the Securities Act with respect to the shares of
common stock offered in this prospectus. This prospectus does not contain all of
the information contained in the registration statement and the exhibits and
schedules filed with the registration statement. For further information with
respect to Virata and the common stock offered in this prospectus, we refer you
to the registration statement and the exhibits and schedules filed as a part of
the registration statement. Statements contained in this prospectus concerning
the contents of any contract or any other document referred to are not
necessarily complete. We refer you to the copy of such contract or document
filed as an exhibit to the registration statement.
Our registration statement, including exhibits and schedules attached
thereto, may be inspected without charge at the Securities and Exchange
Commission's public reference facilities in Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Securities and Exchange Commission's regional
offices located at the Northwest Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New
York, New York 10048. You may also obtain copies of all or any part of our
registration statement from such offices after payment of fees prescribed by the
Securities and Exchange Commission. The Securities and Exchange Commission
maintains a worldwide website that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Securities and Exchange Commission at http://www.sec.gov.
We are subject to the information and periodic requirements of the
Securities Exchange Act of 1934 and accordingly, file periodic reports, proxy
statements and other information with the Securities and Exchange Commission.
Such periodic reports, proxy statements and other information are available for
inspection and copying at the Securities and Exchange Commission's public
reference rooms, and the website of the Securities and Exchange Commission
referred to above.
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus, and the information that we
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file later with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings made with the Securities and Exchange Commission under Sections
13(a), 13(c), 14, or 15(d) of the Exchange Act until our offering is completed.
(a) Annual Report on Form 10-K for the year ended April 2, 2000, filed
June 6, 2000, as amended by Form 10-K/A filed July 28, 2000;
(b) Quarterly Reports on Form 10-Q for the quarters ended July 2, 2000 and
October 1, 2000, filed August 16, 2000 and November 14, 2000,
respectively;
(c) Current Reports on Form 8-K and Form 8-K/A filed April 21, 2000, May
5, 2000, June 22, 2000, August 4, 2000, August 7, 2000, August 30,
2000, September 6, 2000, October 27, 2000 and October 30, 2000;
(d) The description of our common stock contained in our registration
statement on Form S-1/A filed on July 13, 2000, including all
amendments or reports updating this description;
(e) The financial statements of Inverness Systems Ltd. and its subsidiary
as of December 31, 1999 and 1998, and for each of the three years in
the period ended December 31, 1999 contained in our registration
statement of Form S-1/A filed on July 13, 2000; and
(f) The financial statements of Excess Bandwidth Corporation as of March
31, 2000 and 1999, for the year ended March 31, 2000, and for the
periods from April 23, 1998 (date of inception) to March 31, 1999 and
2000 contained in our registration statement of Form S-1/A filed on
July 13, 2000.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
2933 Bunker Hill Lane, Suite 201
Santa Clara, California 95054
Tel: (408) 566-1000
FORWARD-LOOKING INFORMATION
This prospectus, including the information incorporated by reference
herein, contains "forward-looking statements" within the meaning of the federal
securities laws. You should not place undue reliance on these forward-looking
statements, which apply only as of the date of this prospectus. Our actual
results could differ materially from those projected in the forward-looking
statements as a result of the risk factors identified in this prospectus and in
the documents incorporated by reference in this prospectus. In connection with
forward-looking statements which appear in these disclosures, prospective
purchasers of the shares offered hereby should carefully consider the factors
set forth in this prospectus under "Risk Factors" as well as in the sections
captioned "Business," "Risk Factors," and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in our annual report on Form
10-K for the fiscal year ended April 2, 2000, and our quarterly reports on Form
10-Q for the quarters ended July 2, 2000 and October 1, 2000. These reports
are incorporated by reference in this prospectus along with reports we may
subsequently file.
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THE COMPANY
We provide communications processors combined with integrated software
modules to manufacturers of equipment utilizing digital subscriber line, or DSL,
and fixed broadband wireless technologies. These "integrated software on
silicon" product solutions enable our customers to develop a diverse range of
DSL and wireless equipment, including modems, gateways, routers, wireless
receivers and wireless base stations targeted at the voice and high-speed data
network access, or broadband local loop market. We believe our systems
expertise, products and support services enable DSL equipment manufacturers to
simplify product development, reduce the time it takes for products to reach the
market and focus resources on product differentiation and enhancement.
Significant growth in demand for broadband access is being driven by
consumers and businesses who find current dial-up Internet access too slow and
services based on existing high-speed technologies too expensive. By contrast,
DSL technologies enable service providers to offer a wide range of affordable
broadband services using the existing copper wire telephone line infrastructure,
while fixed wireless extends broadband service to markets which DSL does not
serve economically, including geographically remote markets.
To meet the demands of these rapidly growing markets, equipment
manufacturers encounter a number of challenges, including evolving technical
standards, an expanding range of feature expectations and shorter product life-
cycles. In response to these challenges, equipment manufacturers are
increasingly relying upon third party specialists to supply key technology
components, including semiconductors and software. However, combining these
individual elements can be a complex, costly and time-consuming task.
Our integrated products replace numerous software elements and
semiconductors that would otherwise have to be obtained from multiple vendors
and then integrated and tested. Our products meet applicable DSL and networking
standards and are based on a flexible design that:
. simplifies the addition of features;
. can be used with a range of third party physical layer transceivers,
which are the other primary semiconductor components required for
communications equipment;
. delivers the required functionality and performance at a compelling
price; and
. is compliant with relevant industry standards.
By adopting our solutions, our customers enjoy numerous benefits including:
. faster time-to-market;
. reduced product cost;
. the opportunity to focus their engineering resources on product
differentiation and improvement;
. the ability to design multiple products using different subsets of
our modular software; and
. the ability to re-use software extensions they develop on future
generations of their products.
Our objective is to be the leading supplier of communications processors
and integrated software to manufacturers of voice and high-speed data network
access equipment. We intend to achieve this objective by:
. initially focusing on DSL markets;
. licensing our software to all our customers;
. leveraging our flexible semiconductor and software designs to
introduce an expanding range of communications processors and
software modules;
. delivering market-leading features and functionality, such as voice
over DSL and network quality of service solutions; and
. pursuing strategic acquisitions.
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We outsource the manufacturing of our semiconductors, which allows us to
focus our resources on the design, development and marketing of our products.
As of October 1, 2000, we had licensed our software to over 115 companies. These
customers have developed, or are developing, 230 designs of which more than 50
are currently shipping. Additionally, we have shipped more than three million
units of our Helium semiconductor product as of the date of this prospectus.
Our predecessor company, Virata Limited, was formed in 1993 as Advanced
Telecommunications Modules Limited, a corporation organized in the United
Kingdom, as a spin-out from the Olivetti Research Laboratories (now AT&T
Laboratories). In August 1999, Virata Corporation was created and, immediately
prior to its initial public offering in November of 1999, Virata Corporation
became the holding company of Virata Limited.
Our commercial, financial and operational headquarters are located in Santa
Clara, California. Research and development facilities and/or sales offices are
located in Cambridge, England, Raleigh, North Carolina, Santa Barbara,
California, Kfar Saba, Israel, Marlborough, Massachusetts, Taipei, Taiwan and
several other locations around the world. The address of our principal
executive office is 2933 Bunker Hill Lane, Suite 201, Santa Clara, California
95054, where the telephone number is (408) 566-1000. Our Internet address on
the worldwide web is http://www.virata.com. Information contained on our website
does not constitute a part of this prospectus.
RISK FACTORS
You should carefully consider the risks described below or incorporated by
reference herein before making an investment decision. The risks and
uncertainties described below are not the only ones facing us. Additional risks
and uncertainties not presently known to us or that we currently deem immaterial
may also impair our business operations. If any of the following risks actually
occur, our business, financial condition or results of operations could be
harmed. If that happens, the trading price of our common stock could decline,
and you may lose all or part of your investment. These risk factors are not
intended to represent a complete list of the general or specific risk factors
that may affect us.
Risks Relating to Our Business
Because we have a limited operating history selling products to the digital
subscriber line, or DSL, market, we cannot be sure that we can successfully
implement our business strategy.
We have not had a long history of selling our products to the DSL market or
generating significant revenues and many of our products have only recently been
introduced. Furthermore, we have limited historical financial data that can be
used in evaluating our business and our prospects and in projecting future
operating results. For example, we cannot forecast operating expenses based on
our historical results because they are limited, and we are instead required to
forecast expenses based in part on future revenue projections. Most of our
expenses are fixed in the short term and we may not be able to quickly reduce
spending if our revenue is lower than we had projected. Therefore net losses in
a given quarter could be greater than expected. In addition, our ability to
forecast accurately our quarterly revenue is limited, making it difficult to
predict the quarter in which sales will occur.
You must consider our prospects in light of the risks, expenses and
difficulties we might encounter because we are at an early stage of development
in a new and rapidly evolving market. Many of these risks are described under
the sub-headings below. We may not successfully address any or all of these
risks and our business strategy may not be successful.
Because we expect to continue to incur net losses, the price of our stock may
decline and we may not be able to implement our business strategy.
We have not reported net income for any fiscal year since our incorporation
and have accumulated deficit of $179.8 million at October 1, 2000. We expect to
continue to incur net losses, and these losses may be substantial.
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Further, we expect to incur substantial negative cash flow in the future.
Accordingly, our ability to continue to operate our business and implement our
business strategy may be hampered and the value of our stock may decline.
Because we may not be able to achieve or sustain profitability or positive cash
flow, the price of our stock may decline and we may not be able to implement our
business strategy.
Due to our continuing substantial capital expenditures and product
development, sales, marketing and administrative expenses, we will need to
generate significant revenues to achieve profitability and positive cash flow.
We cannot be sure that we will be able to generate such revenues or achieve
profitability or positive cash flow. Even if we do achieve profitability and
positive cash flow, we may not be able to sustain or increase profitability or
cash flow on a quarterly or annual basis. Our ability to generate future
revenues will depend on a number of factors, many of which are beyond our
control. These factors include:
. the rate of market acceptance of high speed network access;
. the rate of market acceptance of our products and the demand for
equipment that incorporates our products;
. changes in industry standards governing DSL technologies;
. the extent and timing of new customer transactions;
. personnel changes, particularly those involving engineering and
technical personnel;
. regulatory developments; and
. general economic trends.
Due to these factors, we cannot forecast with any degree of accuracy what
our revenues will be in future periods and we may not be able to achieve or
sustain profitability or positive cash flow. Our ability to continue to operate
our business and implement our business strategy may thus be hampered and the
value of our stock may decline.
Because our operating results from quarter to quarter may fluctuate, the price
of our stock may decline.
Our revenues, expenses and operating results have fluctuated in the past
and 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.
For example, our results of operations have been negatively affected by the
following:
. the loss of or decrease in sales to a major customer or failure to
complete significant transactions;
. the timing and size of semiconductor orders from, and shipments to,
our existing and new customers;
. unexpected delays in introducing new or enhanced products, including
manufacturing delays;
. the volume and average cost of products manufactured; and
. the timing and size of expenses, including expenses of developing new
products and product improvements.
Accordingly, our revenues, expenses and results of operations could vary
significantly in the future, and you should not rely upon period-to-period
comparisons as indications of future performance. Such fluctuations may make our
stock unattractive to investors and result in a decline in the price of our
stock.
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Because our business is dependent upon the broad deployment of DSL services by
telecommunications service providers, we may not be able to generate substantial
sales of our products if such deployment does not occur.
Our products are incorporated in equipment that is targeted at end-users of
DSL technologies. Consequently, the success of our products may depend upon the
decision by telecommunications service providers to broadly deploy DSL
technologies and the timing of such deployment. If telecommunications service
providers do not offer DSL services on a timely basis or if there are technical
difficulties with the deployment of DSL services, sales of our products may
decline, which would have a negative effect on our results of operations.
Factors that may impact this deployment 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 telecommunications service provider's central
office;
. evolving industry standards for DSL technologies; and
. government regulation.
Because our products are components of other equipment, if equipment
manufacturers do not incorporate our products in their equipment, we may not be
able to generate adequate sales of our products.
Our products are not sold directly to the end-user; rather, they are
components of other products. As a result, we rely upon equipment manufacturers
to design our products into their equipment. We further rely on this equipment
to be successful. If equipment that incorporates our products is not accepted in
the marketplace, we may not achieve adequate sales volume of our products, which
would have a negative effect on our results of operations.
Because the requirements of our customers frequently change, we may not be able
to anticipate trends in the markets for our products, which could result in a
decline in sales of our products.
We must anticipate the price, performance and functionality requirements of
equipment manufacturers who design DSL equipment. We must also successfully
develop products that meet these requirements and make these products available
on a timely basis and in sufficient quantities. If we do not anticipate trends
in the DSL market and meet the requirements of manufacturers of DSL equipment,
we may be unable to generate substantial sales of our products, which would have
a negative effect on our results of operations.
While we have a strategy of licensing and partnering with as many key
participants in our markets as possible, some equipment manufacturers will be
more successful than others in developing and marketing their products that
incorporate our semiconductor products and it is difficult for us to predict
which of these customers will generate revenues for us. Our product sales are
almost completely dependent upon the relative success of our customers in the
marketplace for high-speed network access equipment.
Because we depend on third party foundries to manufacture, assemble and test our
products, we may experience delays in receiving semiconductor devices.
We do not own or operate a semiconductor fabrication facility. Rather, our
semiconductor devices are generally manufactured at independent foundries. We
intend to continue to rely on third-party foundries and other specialist
suppliers for all of our manufacturing, assembly and testing requirements.
However, these foundries are not obligated to supply products to us for any
specific period, in any specific quantity or at any specific price, except as
may be provided in a particular purchase order that has been accepted by one of
them. As a result, we cannot directly control semiconductor delivery schedules,
which could lead to product shortages, quality assurance
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problems and increases in the costs of our products. In addition, we have
occasionally experienced delays in receiving semiconductor devices from
foundries due to foundry scheduling and process problems. To date, such delays
have not had a material effect on our results of operations. However, we may
experience delays in the future and we cannot be sure that we will be able to
obtain semiconductors within the time frames and in the volumes required by us
at an affordable cost or at all. Any disruption in the availability of
semiconductors or any problems associated with the delivery, quality or cost of
the fabrication assembly and testing of our products could significantly hinder
our ability to deliver our products to our customers and may result in a
decrease in sales of our products.
If the foundries we currently use are unable to provide us with
semiconductors, we may be required to seek a new manufacturer of our
semiconductors, and we cannot be certain that a new manufacturer of our
semiconductors will be available. Furthermore, switching to a new manufacturer
could require six months or more and would involve significant expense and
disruption to our business.
Because we depend on third party foundries, if there is a shortage in worldwide
foundry capacity, we may not be able to obtain sufficient manufacturing capacity
to meet our requirements.
From time to time there may be shortages in worldwide foundry capacity due
to increases in semiconductor demand or other factors. In the event of such a
shortage, we may not be able to obtain a sufficient allocation of foundry
capacity to meet our product needs. In addition, such a shortage could lengthen
our products' manufacturing cycle and cause a delay in the shipments of our
products to our customers. This could ultimately lead to a loss of sales of our
products and have a negative effect on our results of operations.
Because we may be required to enter into financial and other arrangements with
foundries in order to secure foundry capacity, our earnings or the ownership of
our stockholders may be diluted.
Allocation of a foundry's manufacturing capacity may be influenced by a
customer's size or the existence of a long-term agreement with the foundry. To
address foundry capacity constraints, other semiconductor suppliers that rely on
third-party foundries have utilized various arrangements, including equity
investments in or loans to independent component manufacturers, in exchange for
guaranteed production capacity, joint ventures to own and operate foundries, or
''take or pay'' contracts that commit a company to purchase specified quantities
of components over extended periods. While we are not currently a party to any
of these arrangements, we may enter into such arrangements in the future. We
cannot be sure, however, that these arrangements will be available to us on
acceptable terms or at all. Any of these arrangements could require us to commit
substantial capital. The need to commit substantial capital could require us to
obtain additional debt or equity financing, which could result in dilution to
our earnings or the ownership of our stockholders. We cannot be sure that this
additional financing, if required, would be available when needed or, if
available, could be obtained on terms acceptable to us.
Because the manufacture of our products is complex, the foundries on which we
depend may not achieve the necessary yields or product reliability that our
business requires.
The manufacture of our products is a highly complex and precise process,
requiring production in a highly controlled environment. Changes in
manufacturing processes or the inadvertent use of defective or contaminated
materials by a foundry could adversely affect the foundry's ability to achieve
acceptable manufacturing yields and product reliability. If the foundries we
currently use do not achieve the necessary yields or product reliability, our
customer relationships could suffer. This could ultimately lead to a loss of
sales of our products and have a negative effect on our results of operations.
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Because we depend on a license from Advanced RISC Machines to manufacture
certain of our planned communicator processor products, our loss of or inability
to maintain the license could result in increased costs or delays in the
manufacturing of our products.
Our communicator processor products feature embedded ARM RISC
microprocessors and, accordingly, are required to be manufactured under a
license from Advanced RISC Machines, or ARM, the owner of the intellectual
property to the ARM RISC microprocessor. In the past, we were required to use
foundries with an ARM license for the manufacture of our communicator processor
products. In June 1999, we obtained a per semiconductor design ARM license,
which means that we are now able to select foundry suppliers that best meet our
quality, delivery and cost objectives regardless of whether they have their own
ARM license or not. With this greater flexibility, we are able to assume more of
the manufacturing and quality control responsibilities, including contracting
for wafer processing, assembly and testing from separate suppliers. If we lose
or are unable to maintain the per semiconductor design license, we would be
required to seek alternative fabrication facilities in our manufacturing of our
communicator processor products. Without the ARM license, the number of
fabrication facilities we could use in our manufacturing would be substantially
reduced to those fabrication facilities that themselves have been directly
licensed by Advanced RISC Machines. Accordingly, the loss of, or our inability
to maintain the ARM license may result in increased costs or delays in our
ability to manufacture our products and could harm our results of operations. In
addition, ARM is only required to indemnify us against intellectual property
infringement claims up to a specified dollar amount.
Because we rely on the technology of third parties, the loss of or inability to
obtain the third party technology could result in increased costs or delays in
the production or improvement of our products.
We currently license technology of third parties to develop and manufacture
our products, including licenses from Advanced RISC Machines, Broadcom and
WindRiver. If any of these third party providers were to change their product
offerings or terminate our licenses, we would incur additional developmental
costs and, perhaps, delays in production, or be forced to modify our existing or
planned software product offerings, an expensive and time consuming process. In
addition, if the cost of any of these third party licenses or products
significantly increases, we could suffer a resulting increase in costs or delays
in our ability to manufacture our products or provide complete customer
solutions and this could harm our results of operations. We cannot be sure that
such third party licenses or substitutes will be available on commercially
favorable terms.
Because our customer base is concentrated, the loss of one or more of our
customers may result in a loss of a significant amount of our revenues.
A relatively small number of customers account for a large percentage of
our total revenues. We expect this trend to continue. Our business will be
seriously harmed if we do not generate as much revenue as we expect from these
customers, experience a loss of any of our significant customers or suffer a
substantial reduction in orders from these customers. For the six months ended
October 1, 2000, Westell Technologies accounted for 33.7% of our total revenues.
For the six months ended October 3, 1999, Orckit Communications and Com21
accounted for 51.5% and 11.6% of our total revenues, respectively. Our future
success depends in significant part upon the decision of our customers to
continue to purchase products from us. Furthermore, it is possible that
equipment manufacturers may design and develop internally, or acquire, their own
semiconductor and software technology, rather than continue to purchase
semiconductors and software from third parties like us. If we are not successful
in maintaining relationships with key customers and winning new customers, sales
of our products may decline. In addition, because a significant portion of our
business has been and is expected to continue to be derived from orders placed
by a limited number of large customers, variations in the timing of these orders
can cause significant fluctuations in our operating results.
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Because manufacturers of DSL equipment may be reluctant to change their sources
of components, if we do not achieve design wins with manufacturers of DSL
equipment, we may be unable to secure sales from these customers in the future.
Once a manufacturer of DSL equipment has designed a supplier's
semiconductor and software into its products, the manufacturer may be reluctant
to change its source of semiconductors due to the significant costs associated
with qualifying a new supplier. Accordingly, our failure to achieve design wins
with manufacturers of DSL equipment which have chosen a competitor's
semiconductor could create barriers to future sales opportunities with these
manufacturers.
Because our customers are not subject to binding agreements, we cannot be
certain that we will sell any of our products.
Achieving a design win with a customer does not create a binding commitment
from that customer to purchase our products. Rather, a design win is solely an
expression of interest by potential customers in purchasing our products and is
not supported by binding commitments of any nature. Accordingly, a customer can
choose at any time to discontinue using our products in their designs or product
development efforts. Even if our products are chosen to be incorporated into a
customer's products, we still may not realize significant revenues from that
customer if their products are not commercially successful. Therefore, we cannot
be sure that any design win will result in purchase orders for our products, or
that these purchase orders will not be later canceled. Our inability to convert
design wins into actual sales and any cancellation of a purchase order could
have a negative impact on our financial condition and results of operations.
Because our customers may cancel orders, we may not be able to recoup expenses
incurred in anticipation of sales of our products.
We work closely with our customers to determine their future product needs
and receive a rolling forecast for products. We have incurred and expect to
continue to incur expenses based upon these sales forecasts. However, our
customer purchase agreements generally contain no minimum purchase requirements
and customers typically purchase our products pursuant to short-term purchase
orders that may be canceled without charge if notice is given within an agreed-
upon period. Therefore, we cannot be sure that the actual product revenues which
we will receive will be commensurate with the level of expenses that we will
incur based on forecasts we receive from our customers in any future period. As
a result, cancellations, deferrals or reductions in pending purchase orders
could have a negative impact on our financial condition and results of
operations.
Because most of our revenues have been and will be derived from a limited number
of products, we may not be able to generate sufficient revenues to sustain our
business if any of these products fail to gain market acceptance.
For the six months ended October 1, 2000, approximately 87.5%, 9.1% and
2.6%, respectively, of our semiconductor revenues were generated from sales of
our Helium products, Hydrogen products, and our Proton family. We expect that
our Proton family and Hydrogen products will represent a diminishing proportion
of our total revenues while a substantial portion of our total revenues will be
derived from our Helium and Beryllium products in the foreseeable future.
Therefore, broad market acceptance of the Helium and Beryllium products is
critical to our success. We cannot be sure that our products will attain broad
market acceptance. The failure of our products to achieve broad market
acceptance could result in a decrease in our revenues, which would have a
negative impact on our results of operations and financial condition.
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Because our products typically have lengthy sales cycles, we may experience
substantial delays between incurring expenses related to research and
development and the generation of sales revenue and may not ultimately sell a
large volume of our products.
It often takes more than one year, occasionally more than two years, for us
to realize volume shipments of our semiconductor products after we first contact
a customer. We first work with customers to achieve a design win, which may take
six months or longer, at which time we sell a source code license. Our customers
then complete the design, testing and evaluation of their systems and begin the
marketing process, a period which typically lasts an additional three to six
months or longer. As a result, a significant period of time may elapse between
our sales efforts and our realization of revenues, if any, from volume
purchasing of our products by our customers.
Because our products are complex, the detection of errors in our products may be
delayed, and if we deliver products with defects, our credibility will be
harmed, and the sales and market acceptance of our products may decrease.
Our products are complex and may contain errors, defects and bugs when
introduced. If we deliver products with errors, defects or bugs, our credibility
and the market acceptance and sales of our products could be significantly
harmed. Furthermore, the nature of our products may also delay the detection of
any such error or defect. If our products contain errors, defects and bugs, then
we may be required to expend significant capital and resources to alleviate
these problems. This could result in the diversion of technical and other
resources from our other development efforts. Any actual or perceived problems
or delays may also adversely affect our ability to attract or retain customers.
Because defects in our products may give rise to product liability claims
against us, we may be required to incur increased expenses and divert management
resources away from our operations.
The existence of any defects, errors or failures in our products could lead
to product liability claims or lawsuits against us or against our customers. In
addition, we have agreed to indemnify certain of our customers in certain
limited circumstances against liability from defects in our products. A
successful product liability claim could result in substantial cost and divert
management's attention and resources, which would have a negative impact on our
financial condition and results of operations. Although we have not experienced
any product liability claims to date, the sale and support of our products
entail the risk of these claims.
Because we are introducing industry standard compliant chip sets, we may be
required to obtain licenses on adverse terms to sell industry standard compliant
chip sets.
We have received correspondence, including a proposed licensing agreement,
from Amati Corporation (which was acquired by Texas Instruments) stating that
they believe that they own a number of patents that are required to be compliant
with the American National Standards Institute, or ANSI, standard specification
T1.413. This industry standard is based on the DMT line code. We have introduced
products that we believe are compliant with this industry standard, and we may
be required to obtain a license to these Amati patents. We are currently
evaluating Amati's patents and proposed licensing terms. If these patents are
valid and essential to the implementation of products that are compliant with
this industry standard, then Amati may be required to offer us a license to use
these patents on commercially reasonable, non-discriminatory terms. If these
patents are valid, but not essential to the implementation of products that are
compliant with this industry standard, and they apply to our products and we do
not modify our products so they become non-infringing, then Amati would not be
obligated to offer us a license on reasonable terms or at all. If we are not
able to agree on license terms and as a result fail to obtain a required
license, then we could be sued and potentially be liable for substantial
monetary damages or have the sale of our products stopped by an injunction. We
could also be subject to similar claims like the Amati claim by third parties in
the future.
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Because we have significant operations in countries outside of the United
States, we may be subject to political, economic and other conditions affecting
such countries that could result in increased operating expenses and regulation
of our products.
Significant portions of our operations occur outside the United States. One
of our principal subsidiaries is incorporated under the laws of, and its
principal offices are located in, the United Kingdom. We also have a subsidiary
and sales office in Taipei, Taiwan and sales offices in several other countries.
In addition, on April 27, 2000, we completed the acquisition of Inverness
Systems, Ltd, a privately-held corporation based in Israel. Our international
operations are subject to a number of risks, including foreign currency exchange
rate fluctuations; longer sales cycles; multiple, conflicting and changing
governmental laws and regulations; protectionist laws and business practices
that favor local competition; difficulties in collecting accounts receivable;
and political and economic instability. In addition, in September 1999, Taiwan
was affected by a significant earthquake. Recently there have been additional
earthquakes and the risk of future earthquakes is significant due to the
proximity of major earthquake fault lines in the area. Taiwan has also suffered
from political unrest. Any future earthquakes, fire, flooding or other natural
disasters, political unrest, labor strikes or work stoppages in Taiwan likely
would result in the disruption of our operations at that facility. Finally, as a
result of our acquisition of Inverness Systems, we are directly affected by the
political, economic and military conditions affecting Israel. Any major
hostilities involving Israel could significantly harm our business. Israel's
economy has been subject to numerous destabilizing factors, including low
foreign exchange reserves, fluctuations in world commodity prices, military
conflicts and civil unrest. Although Israel has entered into various agreements
with certain Arab countries and the Palestinian Authority, and various
declarations have been signed in connection with efforts to resolve some of the
economic and political problems in the Middle East, we cannot predict whether or
in what manner these problems will be resolved. In addition, some of the
officers and employees of Inverness are currently obligated to perform annual
reserve duty and are subject to being called to active duty at any time under
emergency circumstances. We cannot assess the full impact of these requirements
on our workforce or business should this occur and we cannot predict the effect
on us of any expansion or reduction of their obligations.
Because we incur a charge for National Insurance Contribution taxes on any
increase in our common stock price for stock options granted to our United
Kingdom employees, a significant increase in our stock price may harm our
results of operations and cash flows.
Under the laws of the United Kingdom, we must remit a cash payment for National
Insurance Contribution taxes relating to stock options granted to our United
Kingdom employees based on any increase in the Company's common stock price
since the stock option grant date. The tax is calculated as the difference
between the exercise price of the option and the fair value of the common stock
at the date of exercise multiplied by the 12.2% tax rate. Due to the significant
movement in Virata's common stock price during the fiscal year ended April 2,
2000, the tax obligation recognized as of April 2, 2000 was $4.2 million.
In October 2000, the Emerging Issues Task Force of the Financial Accounting
Standards Board reached a consensus on Issue No. 00-16, "Recognition and
Measurement of Employer Payroll Taxes on Employee Stock-Based Compensation."
Issue No. 00-16 requires that employer payroll taxes be recognized as a
liability when the tax obligation is triggered. To date, the Company has
measured and recognized its obligation for National Insurance Contribution taxes
at the end of each quarter based upon the total outstanding stock options held
by employees in the United Kingdom. Upon the adoption of Issue No. 00-16 in the
quarter ending December 31, 2000, the Company will measure and recognize its tax
obligation only upon the exercise of the options by employees in the United
Kingdom. A significant increase in our stock price may result in the recognition
of an additional tax obligation that may harm our results of operations and cash
flows.
Because we sell a significant portion of our products in countries other than
the United States, we may be subject to political, economic and other conditions
affecting such countries that could result in increased reduced revenue for our
products.
International revenues accounted for 35.7% of our total revenues for the
six months ended October 1, 2000. We expect that sales to our international
customers will continue to account for a significant portion of our total
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revenues for at least the next 12 months. Accordingly, we are subject to the
political, economic and other conditions affecting countries or jurisdictions
other than the United States, including Israel, Europe and Asia. Any
interruption or curtailment of trade between the countries in which we operate
and their present trading partners, change in exchange rates or a significant
downturn in the political, economic or financial condition of these countries
could cause demand for and revenue from our products to decrease, cause our
costs of doing business to increase or subject us to increased regulation
including future import and export restrictions.
Because we have expanded rapidly and future expansion may be required, we may
lack the ability to manage this growth in our operations.
We have rapidly and significantly expanded our operations, including the
number of our employees, the geographic scope of our activities and our product
offerings. Recently, we completed the acquisitions of D2 Technologies, Inverness
Systems, Excess Bandwidth and Agranat Systems. Our continued success will
depend significantly on our ability to integrate these new operations and new
personnel. We expect that further significant expansion will be required to
address potential growth in our customer base and market opportunities. If we
are unable to manage growth effectively, we may not be able to take advantage of
market opportunities, develop or enhance our products or our technical
capabilities, execute our business plan or otherwise respond to competitive
pressures or unanticipated requirements. To successfully manage the anticipated
growth of our operations, we believe we must effectively be able to:
. 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.
Because Excess Bandwidth has not completed development of its chip designs, we
may not be able to effectively compete in the Symmetric DSL market.
Excess Bandwidth has only recently begun testing of its first
communications processor designs. If the designs do not work as intended or
require substantial redesign, we may not be able to introduce these
communications processors as products and ship them to customers, or may be
delayed in our introduction of products. Excess Bandwidth's design of its
communications processors is dependent upon the efforts of Debajyoti Pal. The
loss of Dr. Pal's services for any reason would delay or prevent the completion
of the design of products by Excess Bandwidth. Excess Bandwidth licenses the
imbedded microprocessor for its communications processors from MIPS
Technologies, Inc. Loss of the MIPS license for any reason would require a
redesign of the communications processors currently under development by Excess
Bandwidth and could result in delay in introduction of products. If any of these
events occur we would not realize significant revenues from the products under
development by Excess Bandwidth.
We may engage in future acquisitions that could dilute our stockholders' equity
and harm our business, results of operations and financial condition.
Recently, we completed the acquisition of D2 Technologies, Inverness
Systems, Excess Bandwidth and Agranat Systems.
As part of our business strategy, from time to time, we expect to review
opportunities to acquire and may acquire other businesses or products that will
complement our existing product offerings, augment our market coverage or
enhance our technological capabilities. Although we have no current agreements
or negotiations underway with respect to any material acquisitions, we may make
acquisitions of businesses, products or technologies in the future. However, we
cannot be sure that we will be able to locate suitable acquisition
opportunities. The acquisitions that we have completed, agreed to complete and
which we may complete in the
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future could result in the following, any of which could seriously harm our
results of operations or the price of our stock:
. issuances of equity securities that would dilute our current
stockholder's percentages ownership;
. large one-time write-offs;
. the incurrence of debt and contingent liabilities;
. difficulties in the assimilation and integration of the operations,
personnel, technologies, products and the information systems of the
acquired companies;
. diversion of management's attention from other business concerns;
. contractual disputes;
. risks of entering geographic and business markets in which we have no
or only limited prior experience; and
. potential loss of key employees of acquired organizations.
Use of our products requires significant training and support and, because of
our limited resources, we may not be able to support the demand for our
products.
The development of equipment using our products requires significant
training and support. If we are unable to provide this 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 be sure
that our systems, procedures or controls or those of our suppliers will be
adequate to support the anticipated growth in our operations or the demand for
our products. This may result in a decline in the sales of our products and have
a negative impact on our results of operations.
Our executive officers and key personnel are critical to our business, and
because there is significant competition for personnel in our industry, we may
not be able to attract and retain such qualified personnel.
Our success depends to a significant degree upon the continued
contributions of our executive management team, and our technical, marketing,
sales customer support and product development personnel. The loss of
significant numbers of such personnel could significantly harm our business,
financial condition and results of operations. We do not have any life insurance
or other insurance covering the loss of any of our key employees.
Because our products are specialized and complex, our success depends upon
our ability to attract, train and retain qualified personnel, including
qualified technical, marketing and sales personnel. However, the competition for
personnel is intense and we may have difficulty attracting and retaining such
personnel. In addition, companies in the communications, software and
semiconductor industries have frequently made unfair hiring practices claims
against competitors who have hired away such companies' personnel. We cannot be
sure that these claims will not be made against us in the future as we seek to
hire qualified personnel, or that any of these claims would be decided in our
favor. We may incur substantial costs in defending ourselves against any such
claims, regardless of their merits.
We have entered into employment agreements with our executive and certain
other key employees that provide for set terms of employment. In addition, all
of our employees in the United Kingdom and Israel have employment agreements
governed by the laws of the United Kingdom and Israel, respectively. Our
employment agreements do not contain anti-competition clauses.
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Risks Relating to our Industry
Because the markets in which we compete are highly competitive and many of our
competitors have greater resources than we have, we cannot be certain that our
products will be accepted in the marketplace or capture market share.
The market for software and communications semiconductor solutions is
intensely competitive and characterized by rapid technological change, evolving
standards, short product life cycles and price erosion. We expect competition to
intensify as current competitors expand their product offerings and new
competitors enter the market. Given the highly competitive environment in which
we operate, we cannot be sure that any competitive advantages enjoyed by our
products would be sufficient to establish and sustain our products in the
market. Any increase in price or other competition could result in erosion of
our market share, to the extent we have obtained market share, and would have a
negative impact on our financial condition and results of operations. We cannot
be sure that we will have the financial resources, technical expertise or
marketing and support capabilities to continue to compete successfully.
We face competition from a variety of vendors, including software and
semiconductor companies, which generally vary in size and in the scope and
breadth of products and services offered. We also face competition from
customers' or prospective customers' own internal development efforts. Many of
the companies that compete, or may compete in the future, against us have longer
operating histories, greater name recognition, larger installed customer bases
and significantly greater financial, technical and marketing resources. These
competitors may also have pre-existing relationships with our customers or
potential customers. As a result, they may be able to introduce new
technologies, respond more quickly to changing customer requirements or devote
greater resources to the development, promotion and sale of their products than
we can. Our competitors may successfully integrate the functionality of our
software and communication processors into their products and thereby render our
products obsolete. Further, in the event of a manufacturing capacity shortage,
these competitors may be able to manufacture products when we are unable to do
so.
We believe our principal competitors include or will include Alcatel
Microelectronics, Analog Devices, Broadcom, Centillium Communications, Conexant
Systems, GlobeSpan, Intel, Lucent Technologies, Motorola and Texas Instruments.
In addition, there have been a number of announcements by other semiconductor
companies and smaller emerging companies that they intend to enter the market
segments adjacent to or addressed by our products.
Because the markets in which our customers compete are highly competitive, our
customers may not be successful and they may not continue to purchase our
products.
Many of our customers face significant competition in their markets. If our
customers are unable to successfully market and sell their products which
incorporate our products, these customers may cease to purchase our products,
which may have a negative impact on our results of operations.
Because the markets in which we compete are subject to rapid changes, our
products may become obsolete or unmarketable.
The markets for our products and services are characterized by rapidly
changing technology, short product life cycles, evolving industry standards,
changes in customer needs, growing competition and new product introductions. If
our product development and improvements take longer than planned, the
availability of our products would be delayed. Any such delay may render our
products obsolete or unmarketable, which would have a negative impact on our
ability to sell our products and our results of operations.
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Because of changing customer requirements and emerging industry standards, we
may not be able to achieve broad market acceptance of our products.
Our success is dependent, in part, on our ability, in a timely and cost-
effective manner, to:
. successfully develop, introduce and market new and enhanced products
at competitive prices in order to meet changing customer needs;
. respond effectively to new technological changes or new product
announcements by others;
. effectively use and offer leading technologies; and
. maintain close working relationships with our key customers.
We cannot be sure that we will be successful in these pursuits, that the
growth in demand will continue or that our products will achieve market
acceptance. Our failure to develop and introduce new products that are
compatible with industry standards and that satisfy customer requirements or the
failure of our products to achieve broad market acceptance could have a negative
impact on our ability to sell our products and our results of operations.
Because the development of new products requires substantial time and expense,
we may not be able to recover our development costs.
The pursuit of necessary technological advances and the development of new
products require substantial time and expense. Improvements to existing products
or the introduction of new products by us or our competitors have the potential
to replace or provide lower cost alternatives to our existing products or render
these products obsolete, unmarketable or inoperable. The mere announcement of
any improvement or new product could cause potential customers to defer or
cancel purchases of existing products and services. Therefore, we cannot be sure
that we will be able to recover the costs of the development of our products or
succeed in adapting our business to advancements.
Because other high speed data transmission technologies may compete effectively
with digital subscriber line services, our products may not achieve anticipated
unit growth.
DSL services are competing with a variety of different broadband data
transmission technologies, including cable modems, satellite and other wireless
technologies. If any technology that is competing with DSL technology is more
reliable, faster, less expensive or has other advantages over DSL technology,
then the demand for our semiconductors may decrease, which would have a negative
impact on our operating results.
Because price competition among our competitors and volume purchases by large
customers may result in a decrease in the average per unit selling price of our
products, our gross margins for our products may decline.
We expect that price competition among our competitors and volume purchases
of our products at discounted prices will have a negative effect on our gross
margin for these products. We anticipate that average per unit selling prices of
DSL semiconductors will continue to decline as product technologies mature.
Since we do not manufacture our own products, we may be unable to reduce our
manufacturing costs in response to declining average per unit selling prices.
Many of our competitors are larger and have greater resources, and therefore may
be able to achieve greater economies of scale and would be less vulnerable to
price competition. Further, we expect that average per unit selling prices of
our products will decrease in the future due to volume discounts to our large
customers. These declines in average per unit selling prices will generally lead
to declines in our gross margins for these products.
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Because the measures on which we rely to protect our intellectual property
rights afford only limited protections, we may lose any competitive advantage we
may have.
The measures on which we rely to protect our intellectual property afford
only limited protection and we cannot be certain that these safeguards will
adequately protect our intellectual property and other valuable competitive
information. In addition, the laws of some countries in which we sell or plan to
sell our products, including the Peoples' Republic of China, Korea and certain
other Asian countries, may not protect our proprietary rights as fully as do the
laws of the United States, the United Kingdom, or Israel. If we are unable to
adequately protect our proprietary rights, we may lose any competitive advantage
we may have over our competitors. This may have a negative impact on sales of
our products and our results of operations.
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. Our competitors may also
independently develop similar technologies. Moreover, through our participation
in various industry groups, we have entered into cross-licenses for intellectual
property necessary to the implementation of certain types of standards-compliant
products. Such cross-licenses may limit our ability to enforce our intellectual
property rights against competitors.
Because our industry is characterized by frequent litigation over intellectual
property rights, we may be required to incur substantial expenses and divert
management resources.
The industries in which we compete are characterized by numerous
allegations of patent infringement among competitors. Such an infringement claim
could be asserted against us or by us in the future. The defense or prosecution
of any such claim could result in us incurring substantial expenses and
diverting significant management attention and other resources away from our
operations. In the event of an adverse result in any future litigation or claim,
we may be required to:
. pay substantial damages, including treble damages if we are held to
have willfully infringed on the intellectual property of another;
. halt the manufacture, use and sale of infringing products or
technology;
. forfeit a competitive advantage;
. expend significant resources to develop non-infringing technology; or
. obtain licenses to the infringing technology, which may not be
available on commercially reasonable terms, or at all.
Because our products may be required to meet certain industry standards, we may
be required to pay substantial royalties to the owners of the intellectual
property underlying the standards.
In order for us to comply with the International Telecommunications Union
V.34, V.90 and ADSL standards, the software embedded in our current and planned
future products may use the proprietary technology of various parties advancing
or promoting these standards. Where such owners are members of such working
group or union, they must provide a license upon reasonable terms, which may
include the payment of a reasonable royalty. However, if such owners are not
members of such working group or union, there may be no limit on the terms or
the amount of the royalty with respect to such proprietary technology. As a
result, the cumulative effect of the terms and royalties with respect to the use
of the proprietary technology necessary to meet such industry standards could
increase the cost of our products to the point that they are no longer
competitive and could limit our ability to meet certain industry standards.
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Because our products and those of our customers are subject to government
regulations, changes in current or future laws or regulations could cause sales
of our products to decline.
The jurisdiction of the Federal Communications Commission, or FCC, extends
to the entire U.S. communications industry, including our customers and their
products and services that incorporate our products. Future FCC regulations
affecting the U.S. communications services industry, our customers or our
products may have a negative effect on 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. This may cause sales of our products to decline. In
addition, international regulatory bodies have introduced new regulations 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 have a negative impact on our results of
operations and financial condition.
Risks Relating to This Offering
Because The Nasdaq Stock Market is likely to experience extreme price and volume
fluctuations, the price of our stock may decline even if our business is doing
well.
The stock markets, and in particular The Nasdaq Stock Market, have
experienced extreme price and volume fluctuations that have affected and
continue to affect the market prices of equity securities of many technology
companies. These fluctuations often have been unrelated or disproportionate to
the operating performance of those companies. We also expect that the market
price of our common stock will fluctuate as a result of variations in our
quarterly operating results. These fluctuations may be exaggerated if the
trading volume of our common stock is low. In addition, due to the technology-
intensive and emerging nature of our business, the market price of our common
stock may rise and fall in response to:
. announcements of technological or competitive developments;
. acquisitions or strategic alliances by us or our competitors;
. the gain or loss of a significant customer or order; and
. changes in estimates of our financial performance or changes in
recommendations by securities analysts.
Accordingly, market fluctuations, as well as general economic, political
and market conditions such as recessions, interest rate changes or international
currency fluctuations, may negatively impact the market price of our common
stock.
Because of likely fluctuations in the price of our stock we may be subject to
class action litigation, which could distract management and result in
substantial costs.
In the past, securities class action litigation has often been brought
against companies following periods of volatility in the market price of their
securities. We may be the target of similar litigation in the future. Securities
litigation could result in substantial costs and divert management's attention
and resources from our operations and sales of our products, which would have a
negative impact on our financial condition and results of operations.
Provisions of our charter documents and Delaware law could prevent or delay a
change in our control and may reduce the market price of our common stock.
Certain provisions of our certificate of incorporation and bylaws and the
provisions of Delaware law could have the effect of delaying, deferring or
preventing our acquisition. For example, we have authorized but unissued shares
of preferred stock which could be used to fend off a takeover attempt, our
stockholders may not take actions by written consent, our stockholders are
limited in their ability to make proposals at stockholder meetings and our
directors may be removed only for cause and upon the affirmative vote of at
least 80% of our outstanding voting
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shares. In addition, our bylaws provide that our board of directors is divided
into three classes of directors, which serve for staggered three-year terms and
our bylaws do not provide for cumulation of stockholders votes in the election
of directors.
A substantial number of our shares of common stock are eligible for sale, and
the sale of these shares may depress our stock price, even if our business is
doing well.
The market price of our common stock could drop as a result of sales of a
large number of shares of common stock in the market after this offering, or the
price could decline based on a belief that such sales could occur.
As of November 15, 2000 we had 62,857,620 shares of common stock
outstanding, 52,727,578 of which were freely tradable without restriction,
contractual or otherwise, or further registration under the federal securities
laws or were saleable subject to the provisions of Rule 144. Of the shares
subject to transfer restrictions, certain of these shares were subject to
contractual transfer restrictions which will expire from time to time over the
next nine months.
In addition, as of November 15, 2000, there were options and warrants
outstanding to purchase an aggregate of 11,605,687 shares of our common stock.
As of November 15, 2000 and after the registration of the shares in this
registration statement, there were 9,395,638 shares of our common stock
outstanding which have been granted registration rights. In the future, we may
grant additional options or grant additional registration rights with respect to
our common stock.
USE OF PROCEEDS
All net proceeds from the sale of the shares of common stock covered by
this prospectus will go to the selling stockholders who offer and sell their
shares. We will not receive any proceeds from the sale of the shares of common
stock by the selling stockholders. See "Plan of Distribution."
PLAN OF DISTRIBUTION
Virata is registering the shares of common stock covered by this prospectus
for the selling stockholders. As used in this prospectus, "selling
stockholders" includes the pledgees, donees, transferees or others who later
receive the selling stockholders' interests for no additional consideration. We
will pay the costs and fees of registering the shares of common stock, but the
selling stockholders will pay any brokerage commissions, discounts or other
expenses relating to the sale of the shares of common stock.
The selling stockholders may sell the shares of common stock on the Nasdaq
National Market, in the over-the-counter market or otherwise, at market prices
prevailing at the time of sale, at prices related to the prevailing market
prices, or at negotiated prices. The selling stockholders may sell some or all
of the shares of common stock in one or more of the following ways:
. a block trade in which a broker-dealer may resell a part of the block,
as principal, in order to facilitate the transaction;
. purchases by a broker-dealer, as principal, and resale by the broker-
dealer for its account;
. ordinary brokerage transactions and transactions in which a broker
solicits purchasers;
. an exchange distribution in accordance with the rules of the Nasdaq
National Market; or
. privately negotiated transactions.
When selling the shares of common stock, the selling stockholders may enter
into hedging transactions. For example, the selling stockholders may:
. enter into transactions involving short sales of the shares of common
stock by broker-dealers;
. sell shares of common stock short themselves and redeliver such shares
to close out their short positions;
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. enter into option or other types of transactions that require the
selling stockholder to deliver shares of common stock to a
broker-dealer, who will then resell or transfer the shares of
common stock under this prospectus; or
. loan or pledge the shares of common stock to a broker-dealer, who
may sell the loaned shares or, in the event of default, sell the
pledged shares.
In addition to selling their shares of common stock under this prospectus,
the selling stockholders may transfer their shares of common stock in other ways
not involving market makers or established trading markets, including directly
by gift, distribution, or other transfer.
The selling stockholders may negotiate and pay broker-dealers commissions,
discounts or concessions for their services. Broker-dealers engaged by the
selling stockholders may allow other broker-dealers to participate in resales.
The selling stockholders and any broker-dealers involved in the sale or resale
of the shares of common stock may qualify as "underwriters" within the meaning
of the Section 2(11) of the Securities Act. In addition, the broker-dealers'
commissions, discounts or concessions may qualify as underwriters' compensation
under the Securities Act. If the selling stockholders qualify as "underwriters",
they will be subject to the prospectus delivery requirements of the Securities
Act.
The shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in
certain states the shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
Under the applicable rules and regulations of the Securities and Exchange
Act, any person engaged in the distribution of the shares may not simultaneously
engage in market making activities with respect to our shares of common stock
for a period of two business days prior to the commencement of such
distribution. In addition, each selling stockholder will be subject to
applicable provisions of the Exchange Act and the associated rules and
regulations under the Exchange Act, including Regulation M, which provisions may
limit the timing of purchases and sales of shares by the selling stockholders.
We will make copies of this prospectus available to the selling stockholders and
have informed them of the need for delivery of copies of this prospectus to
purchasers at or prior to the time of any sale of the shares.
We may suspend the use of this prospectus and any supplements hereto in
certain circumstances due to pending corporate developments, public filings with
the SEC or similar events.
21
<PAGE>
SELLING STOCKHOLDERS
The selling stockholders described below are stockholders that received
shares in connection with several recent acquisitions. In addition, one or more
of the selling stockholders may donate or transfer as gifts some or all of their
Virata shares, or may transfer their shares for no additional consideration to
their stockholders, partners or other beneficial owners. We will include these
donees or transferees among the selling stockholders in a prospectus supplement,
if required.
The table below sets forth the following information regarding selling
stockholders:
. The names of the selling stockholders;
. The number of shares of our common stock owned by the selling
stockholders on the date of this prospectus prior to the offering
for resale of any of the shares being registered by the
registration statement of which this prospectus is a part;
. The number of shares of our common stock that may be offered for
resale by the selling stockholders pursuant to this prospectus;
and
. The number of shares of our common stock to be held by the
selling stockholders after the resale of the offered shares.
<TABLE>
<CAPTION>
Shares of Shares of
Common Stock Shares of Common Stock
Selling Stockholder Beneficially Owned Common Stock Beneficially Owned
------------------- Prior to Offering Being Offered After Offering/(1)/
---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Barry Agranat........................ 6,589 2,965 3,624
Edward Agranat....................... 3,293 1,482 1,811
Ian Agranat.......................... 131,528 22,729 108,799
June Agranat......................... 5,075 2,284 2,791
Robert Anderson...................... 2,495 374 2,121
Gary Angell.......................... 1,337 201 1,136
Leslie Bradley....................... 1,504 226 1,278
Michael Bradley...................... 2,052 923 1,129
George Chamillard.................... 9,883 4,447 5,436
Barry Charton........................ 6,239 936 5,303
Van Curtis........................... 148 22 126
Alex d'Arbeloff...................... 92,260 41,517 50,743
Docor International B.V.............. 231,220 208,098 23,122
Mona Doss............................ 2,005 301 1,704
Ken Guisti........................... 18,718 2,808 15,910
Michael Gonnerman.................... 4,991 749 4,242
Daniel Grunberg...................... 5,662 2,548 3,114
Jeffrey Hotchkiss.................... 2,052 923 1,129
David Iacobone....................... 4,672 701 3,971
Scott Lawrence....................... 20,723 3,108 17,615
David Lindsey........................ 697,512 128,627 648,885
Joanne Masel......................... 120 104 16
Patrick Mehr......................... 2,052 923 1,129
Joanna Myczowska..................... 2,618 393 2,225
Ling Niu............................. 4,392 251 4,141
Stuart Osattin....................... 9,883 4,447 5,436
James Prestridge..................... 15,759 7,092 8,667
Peter Rikov.......................... 18 3 15
Owen Robbins......................... 31,350 14,108 17,242
John Roberson........................ 222 33 189
</TABLE>
22
<PAGE>
Edward Rogas............... 4,105 1,847 2,258
David Schab................ 743 111 632
Peter Schmidt.............. 4,991 749 4242
Kevin Schouler............. 269 40 229
Richard Testa.............. 3,293 1,482 1,811
Chieh-Wen Tsai............. 30,182 3,677 26,505
Blair Whitney.............. 7,540 2,631 4,909
Jeff Wiederholt............ 222 33 189
David Wieneke.............. 320 48 272
David Wong................. 2,698,824 464,824 2,234,000
Dale Worley................ 1,485 223 1,262
Robert Zockoff 11,632 1,745 9,887
(1) Assumes that all of the shares held by the selling stockholders and being
offered under this prospectus are sold, and that the selling stockholders
acquire no additional shares of common stock before the completion of this
offering. The shares held by the selling stockholders, individually and in
the aggregate, do not exceed one percent (1%) of Virata's total number of
shares of common stock outstanding. Based on the number of shares of Virata
common stock outstanding as of November 15, 2000.
23
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the shares of common stock offered
hereby will be passed upon for us by Gibson, Dunn & Crutcher LLP, San Francisco,
California.
EXPERTS
The consolidated financial statements of Virata Corporation as of March 31,
1999 and April 2, 2000 and for each of the three years in the period ended
April 2, 2000 incorporated by reference in this prospectus have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said from as experts in
accounting and auditing.
The financial statements of D2 Technologies, Inc. as of December 31, 1999
and 1998 and for each of the three years in the period ended December 31, 1999
incorporated by reference in this prospectus from Form 8-K/A, dated April 21,
2000, have been audited by Arthur Andersen LLP, independent public accountants,
as indicated in their report in respect thereto, and are incorporated herein in
reliance upon the authority of said firm as experts in giving said report.
The financial statements of Inverness Systems, Ltd. as of December 31, 1998
and 1999 and for each of the three years in the period ended December 31, 1999
incorporated by reference from our registration statement on Form S-1/A, filed
July 13, 2000, have been so incorporated in reliance on the report of Kost,
Forer & Gabbay, a member of Ernst & Young International, independent public
accountants, given upon the authority of said firm as experts in auditing and
accounting.
The financial statements of Excess Bandwidth Corporation as of March 31,
2000 and 1999, for the year ended March 31, 2000, and for the periods from April
23, 1998 (date of inception) to March 31, 1999 and 2000, incorporated by
reference from our registration statement on Form S-1/A, filed July 13, 2000,
have been so incorporated in reliance on the report of PricewaterhouseCoopers
LLP, independent public accountants, given upon the authority of said firm as
experts in auditing and accounting.
The financial statements of Agranat Systems, Inc. as of December 31, 1999
and 1998 and for each of the two years in the period ended December 31, 1999
incorporated by reference from Form 8-K/A, dated October 30, 2000, have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given upon the authority of said firm as experts in
auditing and accounting.
24
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the amounts of expenses to be borne by
Virata in connection with the sale of shares of common stock being registered.
All amounts are estimates except the SEC registration fee:
(U.S.$)
Filing fees - SEC registration fee $ 3,657
Legal Fees and Expenses 22,000
Stock Exchange Listing Fees 30,000
Accounting Fees and Expenses 9,343
Miscellaneous
Total $65,000
Item 15. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware
provides for the indemnification of officers and directors under certain
circumstances against expenses incurred in successfully defending against a
claim and authorizes Delaware corporations to indemnify their officers and
directors under certain circumstances against expenses and liabilities incurred
in legal proceedings involving such persons because of their being or having
been an officer or director. Article VIII of the Registrant's Certificate of
Incorporation and the Registrant's Bylaws provide that all persons who the
Registrant is empowered to indemnify pursuant to the provisions of Section 145
of the Delaware General Corporation Law (or any similar provision or provisions
of applicable law at the time in effect), shall be indemnified by the Registrant
to the full extent permitted thereby except that no person shall be indemnified
for any expenses or amounts paid with respect to any action to recover short
swing profits under Section 16(b) of the Securities Exchange Act of 1934, as
amended. The foregoing right of indemnification shall not be deemed to be
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors, or otherwise. In addition, the Registrant has entered into Indemnity
Agreements with its directors and certain of its officers.
Section 102(b) of the Delaware General Corporation Law permits a
corporation, by so providing in its certificate of incorporation, to eliminate
or limit director's liability to the corporation and its stockholders for
monetary damages arising out of certain alleged breaches of their fiduciary
duty. Section 102(b)(7) provides that no such limitation of liability may affect
a director's liability with respect to any of the following: (i) breaches of the
director's duty of loyalty to the corporation or its stockholders; (ii) acts or
omissions not made in good faith or which involve intentional misconduct of
knowing violations of law; (iii) liability for dividends paid or stock
repurchased or redeemed in violation of the Delaware General Corporation law; or
(iv) any transaction from which the director derived an improper personal
benefit. Section 102(b)(7) does not authorize any limitation on the ability of
the corporation or its stockholders to obtain injunction relief, specific
performance or other equitable relief against directors.
Item 16. Exhibits
The following exhibits are filed as part of this registration statement:
5.1 Opinion of Gibson, Dunn & Crutcher, LLP.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of PricewaterhouseCoopers LLP with respect to the
financial statements of Excess Bandwidth Corporation.
II-1
<PAGE>
23.3 Consent of Arthur Andersen LLP with respect to the financial
statements of D2 Technologies, Inc.
23.4 Consent of Kost, Forer & Gabbay, a member of Ernst & Young
International with respect to the financial statements of
Inverness Systems, Ltd.
23.5 Consent of PricewaterhouseCoopers LLP with respect to the
financial statements of Agranat Systems, Inc.
24.1 Powers of Attorney for certain directors and officers of Virata
(signature page).
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act,
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in this Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent
no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement, and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement,
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to Section 13
or Section 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof;
To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering;
That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Exchange Act (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference
in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
II-2
<PAGE>
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Santa Clara, California, on the 30th day of
November, 2000.
Virata Corporation
By: /s/ Charles Cotton
_____________________________
Charles Cotton
Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
Each person whose individual signature appears below constitutes and
appoints Charles Cotton and Andrew Vought and each of them severally, as true
and lawful attorneys-in-fact and agents with full power of substitution to
execute in the name and on behalf of such person, individually and in each
capacity stated below and, and to file, any and all amendments to this
Registration Statement on Form S-3, including any and all post-effective
amendments.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form S-3 has been signed below by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Charles Cotton Chief Executive Officer and Director November 30, 2000
________________________________________ (Principal Executive Officer)
Charles Cotton
/s/ Andrew Vought Senior Vice President, Chief Financial November 30, 2000
________________________________________ Officer and Secretary
Andrew Vought (Principal Financial Officer and
Principal Accounting Officer)
/s/ Dr. Hermann Hauser Chairman of the Board November 30, 2000
________________________________________
Dr. Hermann Hauser
/s/ Marco De Benedetti Director November 30, 2000
________________________________________
Marco De Benedetti
/s/ Gary Bloom Director November 30, 2000
________________________________________
Gary Bloom
/s/ Bandel Carano Director November 30, 2000
________________________________________
Bandel Carano
/s/ Andrew Hopper Director November 30, 2000
________________________________________
Andrew Hopper
/s/ Martin Jackson Director November 30, 2000
________________________________________
Martin Jackson
</TABLE>
II-4
<PAGE>
/s/ Peter Morris Director November 30, 2000
_______________________________________
Peter Morris
/s/ Patrick Sayer Director November 30, 2000
_______________________________________
Patrick Sayer
/s/ Giuseppe Zocco Director November 30, 2000
_______________________________________
Giuseppe Zocco
II-5
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
NO.
5.1 Opinion of Gibson, Dunn & Crutcher, LLP.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of PricewaterhouseCoopers LLP with respect to the financial
statements of Excess Bandwidth Corporation.
23.3 Consent of Arthur Andersen LLP with respect to the financial statements
of D2 Technologies, Inc.
23.4 Consent of Kost, Forer & Gabbay, a member of Ernst & Young
International with respect to the financial statements of Inverness
Systems, Ltd.
23.5 Consent of PricewaterhouseCoopers LLP with respect to the financial
statements of Agranat Systems, Inc.
24.1 Powers of Attorney for certain directors and officers of Virata
(signature page).
