UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 24, 1996
CHEYENNE SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-9189 13-3175893
(State or Other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
3 Expressway Plaza, Roslyn Heights, NY 11577
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 465-4000
Page 1 of 3<PAGE>
ITEM 5. OTHER EVENTS.
On April 24, 1996, Cheyenne Software, Inc., issued
the press release attached hereto as Exhibit 20, which is
hereby incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
20. Press release dated April 24, 1996.
Page 2 of 3<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned hereunto
duly authorized.
CHEYENNE SOFTWARE, INC.
Date April 25, 1996 /s/ ReiJane Huai
Name: ReiJane Huai
Title: President and Chief
Executive Officer
Page 3 of 3<PAGE>
EXHIBIT LIST
20. Press release dated April 24, 1996.
EXHIBIT 20
[LOGO]
NEWS RELEASE
Contacts:
Roy Winnick/Richard Wolff
Kekst and Company
(212) 593-2655
CHEYENNE SOFTWARE ISSUES THIRD-QUARTER RESULTS
--SALES FOR QUARTER INCREASED 24% TO $44.0 MILLION,
WITH NET INCOME OF 14 CENTS PER SHARE VERSUS
20 CENTS IN YEAR-AGO PERIOD --
--"CHEYENNE IS FINANCIALLY, STRATEGICALLY, TECHNOLOGICALLY,
AND OPERATIONALLY STRONG" AND IS "WELL-POSITIONED TO
CONTINUE TO BUILD VALUE,"
SAYS CHAIRMAN/CEO REIJANE HUAI IN LETTER TO SHAREHOLDERS--
ROSLYN HEIGHTS, N.Y., April 24, 1996 -- Cheyenne Software, Inc.
(AMEX: CYE) today reported that for its third quarter ended
March 31, 1996, revenues increased 24% to $44,014,000 from
$35,636,000 in the third quarter of 1995, with net income of
$5,313,000 or 14 cents per share versus $7,975,000 or 20 cents
per share for the comparable 1995 period. Included in last
year's comparable quarter were charges of approximately
$704,000, or about one cent per share, net of income taxes
associated with the write-off of purchased R&D related to the
JETserve product acquisition. For the nine months ended March
31, 1996, revenues increased 44% to $124,927,000 from
$86,899,000 in the comparable 1995 period. Net income for the
nine months was $19,822,000 or 51 cents per share versus
$29,526,000 or 74 cents per share one year ago. Excluding one-
time factors, earnings per share for the nine months were 58
cents versus 48 cents last year.
ReiJane Huai, Chairman, President and Chief Executive Officer
of Cheyenne, said: "As we have previously indicated, our
third-quarter results reflected the combined impact of lower-
than-expected sales in January and the transition from ARCserve
5.0 to our state-of-the-art ARCserve 6.0 family of network
backup software products. This transition is now well under
way and we fully expect to be back on track for significant
revenue and earnings growth by the end of the current quarter.
Sell-through in April to date has been robust in North America
and based on current trends we expect point of sale revenue in
fiscal Q4 to grow between 10% and 15% on a sequential basis.
Sales of ARCserve 6.0 now make up approximately 70% of our ARC-
serve for NetWare business. Sales of upgrades to ARCserve 6.0,
both on a direct basis and through the channel, have been
exceptional. We estimate upgrade revenues in FY97 will exceed
$20 million."
[table follows]
(more)
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Cheyenne Announces Third Quarter Results Page 2
CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
Three and Nine Months Ended March 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
<S> <C> <C> <C> <C>
1996 1995 1996 1995
(In thousands, except per share data)
Revenues $44,014 $ 35,636 $124,927 $86,899
Cost of sales 9,021 6,372 23,299 14,912
Gross profit 34,993 29,264 101,628 71,987
Operating expenses:
Research and development 6,919 4,195 18,232 10,184
Selling and marketing 15,197 10,735 38,747 28,223
General and administrative 5,194 2,902 12,546 6,954
Charge for purchased research
and development -- 704 4,199 1,251
Total operating expenses 27,310 18,536 73,724 46,612
Operating income 7,683 10,728 27,904 25,375
Non-operating income:
Interest income and other 682 1,091 2,330 2,656
Other (losses) gains, net (464) 272 (464) 21,125
Income before income taxes 7,901 12,091 29,770 49,156
Provision for income taxes 2,588 4,116 9,948 19,630
Net income $ 5,313 $ 7,975 $19,822 $ 29,526
Net income per share $ 0.14 $ 0.20 $ 0.51 $ 0.74
Weighted average number of common
shares and equivalents outstanding 38,933 39,925 38,931 39,856
</TABLE>
(more)
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Cheyenne Announces Third Quarter Results Page 3
Separately, Mr. Huai said that he will be sending a letter to
Cheyenne shareholders, the full text of which follows:
April 24, 1996
Dear Fellow Cheyenne Shareholder:
In light of recent events, I want to share with you this update
on the state of the Company, and on what we are doing to
achieve our primary objective: building the value of Cheyenne
for you.
Despite a tough third quarter, and despite the misinformation
currently being spread by an opportunistic, unsolicited suitor
seeking to take advantage of it, Cheyenne is financially,
strategically, technologically and operationally strong. We
believe we are well-positioned to continue to build the value
of Cheyenne for our shareholders, customers, business partners
and employees. And the Board of Directors and management of
Cheyenne are 100 percent united in our commitment and determi-
nation to do so.
Let me describe the basis for our confidence in the Company and
its prospects.
Financial Strength
Largely based on the strength of our strategy, technology, and
product offerings, and despite the hiccup we experienced last
quarter, our financial performance over the past decade has
been very strong. For example, our annual revenue grew from $8
million in 1991 to $128 million in 1995, and our annual net
income has grown from $2 million to $38.5 million over the same
period. We have achieved this growth with no debt, and we cur-
rently have more than $76 million of cash on hand, an increase
of about $6.5 million from the previous quarter.
Pre-tax operating margins are expected to be approximately 25%
before one-time charges for the year ending June 30, 1996.
This performance is near the top for software companies. We
intend to push for even higher margins and expect that the
shift to fee-based technical support currently under way will
substantially increase margins in the latter half of fiscal
year 1997. We believe, in short, that we are well-positioned
for future growth, with many new and innovative products for
Windows NT, Windows 95, NetWare and UNIX, among other plat-
forms.
(MORE)
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Cheyenne Announces Third Quarter Results Page 4
Market Leader
We do not just claim to be, but are universally recognized as,
the world's leading provider of network backup and recovery
software, with more than one-third of that $410 million market
--a market industry analysts expect to double in size over the
next three years. We have a broad range of well-established,
innovative storage management solutions in such areas as net-
work backup, disaster recovery, on-line backup of relational
databases and groupware applications, as well as Internet-based
solutions. We are confident of our ability to build upon our
strength in four key platforms: Microsoft Windows NT, Windows
95, Novell NetWare, and UNIX.
Windows NT and Windows 95
Revenues related to Windows NT products grew 66% to $8.3 mil-
lion in the third quarter from $5.0 million in the second quar-
ter. Unit shipments of ARCserve and InocuLAN grew 80% and
100%, respectively, on a sequential basis. We are gaining mar-
ket share rapidly in the backup and anti-virus segments based
on our excellence in product quality and our channel strategy.
In the desktop arena, Cheyenne is planning additional 32-bit
Windows products, including an extensive line of backup, anti-
virus, storage management, and communications utilities for
Windows 95 and Windows NT that will be unveiled later this
quarter, along with some very exciting new strategic alliances.
NetWare
We are actively committed to Novell NetWare customers and are
seeing strong sales growth for our various NetWare offerings.
ARCserve 6.0 for NetWare addresses a market in which we have an
estimated 65% share and an installed base of more than 500,000
servers. Importantly, the transition to ARCserve 6.0 is
already well under way. During the third quarter, sales of the
newly-introduced ARCserve 6.0 exceeded those of ARCserve 5.0.
We sold close to 40,000 copies into our worldwide distribution
channel compared to 5,000 copies sold when the product was re-
leased at the end of the previous quarter. This market accep-
tance should provide a significant opportunity for the cross-
selling of our NetWare anti-virus and fax products. Finally,
we also have a number of enhanced NetWare offerings in the
pipeline for release later this year. For instance, we re-
cently signed an agreement with Novell to integrate our anti-
virus and fax technologies with Novell's Groupwise product and
we will introduce a Groupwise backup option as well.
(MORE)
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Cheyenne Announces Third Quarter Results Page 5
UNIX
UNIX remains a popular platform for deploying enterprise
applications. We are shipping and preparing additional prod-
ucts for the most popular UNIX platforms, including Hewlett-
Packard HP-UX, IBM AIX, SCO Open Server, and Sun Solaris. We
will ship ARCserve/Open 2.2 for UNIX in the fourth quarter com-
plete with agents to backup Informix, Sybase, Lotus Notes, and
Web servers, and our engineers are hard at work on the next
release. The Santa Cruz Operation (SCO), the world's leading
provider of UNIX, chose to bundle ARCserve/Open with its Open
Server software. We expect to distribute approximately 4,000
units of this important new product within the next few months.
Other Initiatives
Among other new initiatives, in March 1996 we announced our
"Application Agent Strategy" for groupware, database, and Web
applications. Under our innovative approach, we are delivering
software agents that work in tandem with ARCserve, and that
permit on-line backup of mission-critical groupware and on-line
transaction processing (OLTP) applications running on Windows
NT, UNIX, NetWare and OS/2. Our Application Agent Strategy has
been strongly endorsed by several industry consultants, trade
publications and existing and potential customers, who are
already purchasing or beta-testing many of these Application
Agents for such groupware systems as Lotus Notes, cc:Mail and
Microsoft Exchange Server, and such database systems as
Microsoft SQL Server, Oracle, Sybase, Btrieve, Gupta and
others. We also previewed the industry's first Web server
backup agent at NetWorld+Interop in Las Vegas, which generated
a lot of excitement among our customers, Web masters, and in-
dustry analysts.
Strategic Relationships
One of Cheyenne's often unrecognized competitive advantages is
the number of relationships we enjoy with more than 40 of the
world's leading technology companies, including Compaq, Com-
puter Associates, Fujitsu, Hewlett-Packard, IBM, and Microsoft.
These partners license our software, integrate it into their
own solutions, and participate with us in joint development and
joint marketing. Many of them sell and distribute Cheyenne
products directly as well. We have recently formed several new
strategic partnerships, including, last month, a contract with
Novell to integrate Cheyenne FAXserve with Novell Groupwise and
partnerships with Intel and Symantec to integrate ARCserve with
their respective network and systems management software.
(MORE)
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Cheyenne Announces Third Quarter Results Page 6
Additionally, we have been working with the leaders in the
"firewall" market--which refers to products designed to prevent
unauthorized access to an enterpris--to enhance their data
protection by providing real-time virus scanning capabilities.
This market will increase in both size and importance as
increasing numbers of transactions are conducted and informa-
tion disseminated via the Internet. Just yesterday, we signed
a letter of intent with CheckPoint Software Technologies Ltd.
to create the industry's first integrated firewall and anti-
virus solution.
The benefit of these strategic relationships is clear. For
example, ARCserve for Windows NT has shown impressive momentum,
with unit shipments of that offering nearly doubling over the
last quarter. Several of our partners offer widely respected
system and network management platforms. Cheyenne's strategy
is to partner--not compete--with these companies. Through
these partnerships, Cheyenne customers are assured that our
products are tightly integrated with market-leading management
platforms. In fact, we are the only data storage management
software company that supports all major network management
server operating systems.
A Growing Global Company
As for our market scope, more than 50% of Cheyenne's revenue
now comes from outside North America, and we are aggressively
and successfully expanding our global presence. For example,
in the three years since we established CSKK, our wholly owned
Japanese subsidiary, its annual revenues have increased from
less than $1 million in its first year to $18 million today,
and CSKK has already achieved strong profitability. We are the
leading provider of storage management, anti-virus, and com-
munications software in Japan, and have OEM relationships with
virtually all of the major Japanese systems vendors, including
Fujitsu, NEC, Mitsubishi, Toshiba and Hitachi. And we recently
opened offices in China and Taiwan, which join our existing and
well-established sales and technical support offices in Europe,
Asia, and North and South America.
***
The McAfee Proposal
As many of you know, our Board of Directors last week unani-
mously rejected an unsolicited proposal from McAfee Associates,
Inc. After careful consideration, the Board determined that
the proposal was not in the best interests of Cheyenne's share-
holders, customers, business partners or employees from a
financial, strategic, technological, or operational point of
view, and that it represents little more than an attempt by an
opportunistic suitor to take advantage of Cheyenne's substan-
tially undervalued stock and to deprive Cheyenne's shareholders
and other constituents of the values to which they are entitled
and which they were instrumental in creating.
(MORE)
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Cheyenne Announces Third Quarter Results Page 7
Under the proposal, McAfee would have exchanged each Cheyenne
share for 0.4783 of a share of McAfee. Consequently, the value
to be received by Cheyenne shareholders would not be $27.50 as
widely reported, but rather would be dependent on the value of
McAfee stock.
Our Board, management, and investment bankers do not believe
that the proposal is in your interests, for several reasons.
First, under the McAfee proposal, McAfee shareholders would
receive the lion's share of the combined company but would con-
tribute far less to the combined entity. Cheyenne shareholders
would suffer significant dilution from the near-doubling of
McAfee's outstanding stock under its proposed transaction, re-
ceiving only an approximately 46% ownership interest in the
combined entity even though Cheyenne (based on calendar 1995
results) would be contributing 64% of its revenues, 57% of its
combined pre-tax income, and the tremendous value and earnings
potential represented by our technological expertise, our broad
and rapidly growing range of market-leading and innovative
products, our strategic relationships, our international pres-
ence, and our loyal and dedicated employees. Indeed, McAfee
has emphasized that it would not enter into any transactions
that was not "prima facie accretive" to McAfee stock, which by
definition means that any McAfee transaction would be dilutive
to Cheyenne shareholders.
Moreover, from a strategic and operational perspective,
McAfee's proposal raises a number of difficult questions:
- How solid are McAfee's growth prospects and therefore its
valuation, given that in its core business McAfee directly
competes against the established market leaders, Symantec
and Intel, in the highly competitive desktop management
and anti-virus markets? (By contrast, Cheyenne is the
market leader in the higher-value-added enterprise storage
management market.)
- How could McAfee, a California-based company with some 300
employees, hope to acquire and successfully manage a com-
pany twice its size, and to retain the people who are its
principal assets, in what amounts to a different industry,
with a radically different and incompatible business
model, located more than 3,000 miles away?
- How could McAfee hope to deliver on its promise of so-
called manufacturing efficiencies and other cost savings
when Cheyenne already outsources all of its manufacturing,
when there is virtually no significant geographic or func-
tional overlap between the two organizations, and when
Cheyenne is already operating at a very high level of
organizational efficiency?
(MORE)
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Cheyenne Announces Third Quarter Results Page 8
- What sense does it make for Cheyenne to link up with a
company in direct competition with many of Cheyenne's most
important strategic partners?
- What sense does it make to combine two companies whose
distribution strategies are fundamentally incompatible?
For these and other reasons, our Board and management have
rejected McAfee's proposal. We deplore McAfee's stated intent
to pursue its proposal and the resulting confusion and concern
this has caused among our shareholders, customers, employees,
and other constituents.
Please be assured that all of us on the Board of Directors and
management team of your Company very much appreciate your con-
tinuing interest and support and reaffirm our commitment to
you, our shareholders.
On behalf of the Board of Directors,
Sincerely,
/signed/
ReiJane Huai
Chairman, President and
Chief Executive Officer
***
Safe Harbor Statement
Except for any statements of historical fact, the above state-
ments constitute forward-looking statements and are inherently
subject to uncertainties. The actual results of Cheyenne may
differ materially from the forward looking statements noted
above based on a number of important factors including, but not
limited to: receipt and fulfillment of expected orders; the
level and timing of returns and exchanges; changes in general
business conditions and seasonality; the growth in computer
networking; market volatility related to the competition be-
tween Novell, Microsoft and other network operating system ven-
dors and other factors; the successful expansion of Cheyenne
into the Windows NT, UNIX, desktop, groupware, Internet, and
firewall markets; the ability to expand successfully into new
geographic regions; the maintenance and expansion of strategic
partnerships; the effectiveness of price and other competition
faced by
(MORE)
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Cheyenne Announces Third Quarter Results Page 9
Cheyenne; the market acceptance of new products like ARCserve
Version 6 and the timing of such acceptance; the successful
establishment of fee-based technical support; changes in dis-
tributors' and other customers' buying patterns; the continua-
tion of the April trend in sell-through; changes in the Com-
pany's and the industry's sales practices; one-time events and
other factors which may disrupt the Company's business; and
other important factors disclosed from time to time in the Com-
pany's Form 10K and Form 10Q and other Securities and Exchange
Commission filings, including the Form 10Q for the quarter
ended Dec. 31, 1995 and, when filed, for the quarter ended
March 31, 1996.
About Cheyenne Software
Cheyenne Software, Inc. is an international developer of
essential software solutions for NetWare, Windows NT, UNIX,
Macintosh, OS/2, Windows 3.1 and Windows 95 operating systems.
Its enterprise-wide offerings include an array of storage man-
agement, security, and communications products, including
Cheyenne[R] HSM, JETserve[TM], InocuLAN[R], FAXserve[TM], and
its flagship product line, the ARCserve[R] family of network
backup software. Cheyenne can be contacted at (800) 243-9462
(U.S. or Canada) or (516) 465-4000, or by visiting its WWW home
page at: http://www.cheyenne.com.
# # #
[CHEYENNE SOFTWARE, INC. ADDRESS FOOTER]
