<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 19, 1996
[LOGO]
3,300,000 SHARES
COMMON STOCK
Of the 3,300,000 shares of Common Stock, $.001 par value, offered hereby,
2,475,000 shares are being offered initially in the United States (the "U.S.
Offering") by the U.S. Underwriters and 825,000 shares are being offered
initially outside the United States (the "International Offering," and
together with the U.S. Offering, the "Offering") by the International
Underwriters (together with the U.S. Underwriters, the "Underwriters"). See
"Underwriting." Of the shares offered hereby, 1,650,000 shares are being sold
by Wind River Systems, Inc. ("Wind River" or the "Company"), and 1,650,000
shares are being sold by certain stockholders of the Company (the "Selling
Stockholders"). The Company will not receive any of the proceeds from the sale
of shares by the Selling Stockholders. See "Principal and Selling
Stockholders."
The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "WIND." On June 18, 1996, the last reported sales price of the
Company's Common Stock on the Nasdaq National Market was $30.50 per share. See
"Price Range of Common Stock and Dividend Policy."
FOR INFORMATION CONCERNING CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS, SEE "RISK FACTORS" COMMENCING ON PAGE 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C> <C>
UNDERWRITING PROCEEDS
PRICE DISCOUNTS AND PROCEEDS TO TO SELLING
TO PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
Per Share $ $ $ $
Total(3) $ $ $ $
</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $400,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up
to an additional 495,000 shares of Common Stock solely to cover
over-allotments. If all such shares are purchased, the total Price to
Public, Underwriting Discounts and Commissions, Proceeds to Company and
Proceeds to Selling Stockholders will be $ , $ , $ and
$ , respectively. See "Underwriting."
The shares of Common Stock are offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by them, and subject to the
approval of certain legal matters by counsel and certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the shares
of Common Stock will be made in New York, New York against payment therefor on
or about , 1996.
DEUTSCHE MORGAN GRENFELL
HAMBRECHT & QUIST
UBS SECURITIES
WESSELS, ARNOLD & HENDERSON
The date of this Prospectus is , 1996
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Room 1024, Washington, D.C. 20549, and at the Commission's
following Regional Offices: Northwest Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and Seven World Trade Center, 13th Floor,
New York, New York 10048. Copies of such material can be obtained at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549. The Company's Common Stock is
traded on the Nasdaq National Market, and reports, proxy statements and other
information concerning the Company also may be inspected at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed with the Commission under the Exchange Act,
are hereby incorporated by reference into this Prospectus:
(a) The Company's Annual Report on Form 10-K, as amended by Form 10-K/A, for
the fiscal year ended January 31, 1996;
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended April
30, 1996; and
(c) The description of the Company's Common Stock set forth in its
Registration Statement on Form 8-A filed with the Commission on March 12, 1993.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement contained in this Prospectus or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently-filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any and all of the documents that have been
incorporated by reference herein (not including exhibits to such documents
unless such exhibits are specifically incorporated by reference herein or into
such documents). Such request may be directed to Wind River Systems, Inc.,
Attention: Chief Financial Officer, 1010 Atlantic Avenue, Alameda, California
94501, telephone number (510) 748-4100.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS OR THEIR AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN
THE COMMON STOCK OF THE COMPANY ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH
RULE 10B-6A UNDER THE EXCHANGE ACT. SEE "UNDERWRITING."
------------------------
VXWORKS-REGISTERED TRADEMARK-, WIND-REGISTERED TRADEMARK- and WIND RIVER
SYSTEMS-REGISTERED TRADEMARK- are registered trademarks and CROSSWIND, IXWORKS,
TORNADO, TORNADO FOR I(2)0, VXMP, VXSIM, VXVMI, WIND FOUNDATION CLASSES,
WINDNET, WINDVIEW AND WINDX are trademarks of the Company. All other brand names
or trademarks appearing in this Prospectus are the property of their respective
holders.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL DATA APPEARING ELSEWHERE IN THIS PROSPECTUS, AND IN
THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE. UNLESS OTHERWISE INDICATED, THE
INFORMATION CONTAINED IN THE PROSPECTUS (I) DOES NOT GIVE EFFECT TO THE EXERCISE
OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION AND (II) HAS BEEN ADJUSTED TO GIVE
EFFECT TO A THREE-FOR-TWO STOCK SPLIT EFFECTED BY MEANS OF A STOCK DIVIDEND ON
MAY 24, 1996.
THE COMPANY
Wind River develops, markets and supports advanced software operating
systems and development tools that allow customers to create complex, robust,
real-time software applications for embedded computers. An embedded computer is
a microprocessor that is incorporated into a larger device and is dedicated to
responding to external events by performing specific tasks quickly, predictably
and reliably. Some examples of such devices are telecommunications products such
as PABX, routers, central office switches and call processing systems; office
products such as fax machines, laser printers and photocopiers; vehicle
anti-lock brakes and navigation systems; consumer products such as camcorders,
video games and set-top boxes; medical instrumentation and imaging systems; and
industrial automation equipment such as robots. Wind River's products and
services enable customers to enhance product performance, standardize designs
across projects, reduce research and development costs and shorten product
development cycles. The Company's TORNADO product represents the latest
generation of development environments for embedded and real-time applications.
TORNADO provides the developer of embedded systems a robust development
environment for a wide variety of host platforms and microprocessor targets.
Wind River has strategic relationships with most of the major semiconductor
companies, including ARM, Hewlett-Packard, Hitachi, Intel, Motorola, Siemens,
Silicon Graphics and Sun Microsystems. In addition, in January 1996, Intel and
Wind River entered into an agreement pursuant to which Intel has agreed to
supply an evaluation copy of TORNADO FOR I(2)O to each customer purchasing an
Intel i960 RP I/O microprocessor, and a copy of IXWORKS on each such
microprocessor sold. IXWORKS is a real-time operating system for creating
I(2)O-specification compliant intelligent I/O systems for servers, network
devices and storage adaptor cards. Wind River is also currently working on
various initiatives to capitalize on the increasing use of the Internet. The
Company's products have been deployed by a broad range of organizations, ranging
from companies in the following industries: telecommunications and
datacommunications; office automation and computers; medical and industrial; and
aerospace, research and defense. Wind River's customers include ABB, Bay
Networks, StrataCom (Cisco Systems), General Motors, Hewlett-Packard, Hitachi,
Hughes Network Systems, Intel, Lockheed-Martin, Motorola, NEC, Northern Telecom,
Rockwell, Siemens, Silicon Graphics, Sun Microsystems and Texas Instruments.
THE OFFERING
<TABLE>
<S> <C>
U.S. Offering............................................... 2,475,000 shares
International Offering...................................... 825,000 shares
Total................................................... 3,300,000 shares (including 1,650,000 shares by the Company and
1,650,000 by the Selling Stockholders)
Common Stock to be Outstanding
after the Offering......................................... 15,679,751 shares(1)
Use of Proceeds............................................. The net proceeds are expected to be added to working capital
and used for general corporate purposes.
Nasdaq National Market Symbol............................... WIND
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
YEARS ENDED JANUARY 31, APRIL 30,
----------------------------------------------------- ---------
1992 1993 1994 1995 1996 1995
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Total revenues............................................... $ 17,085 $ 25,053 $ 27,341 $ 32,100 $ 44,000 $ 8,700
Operating income............................................. 1,725 3,059 523 3,452 8,130 914
Net income................................................... 1,093 1,721 332 2,460 5,383 667
Net income per share......................................... .11 .16 .02 .17 .35 .04
Common shares used in the calculation of net income per
share(2).................................................... 9,611 10,455 13,317 14,300 15,491 15,065
<CAPTION>
1996
---------
<S> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Total revenues............................................... $ 12,600
Operating income............................................. 2,198
Net income................................................... 1,470
Net income per share......................................... .09
Common shares used in the calculation of net income per
share(2).................................................... 15,992
</TABLE>
<TABLE>
<CAPTION>
APRIL 30, 1996
--------------------------
ACTUAL AS ADJUSTED(3)
--------- ---------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and short-term investments.................................................................... $ 27,909 $ 75,192
Working capital.................................................................................... 27,233 74,516
Total assets....................................................................................... 46,464 93,747
Stockholders' equity............................................................................... 32,830 80,113
</TABLE>
- ------------
(1) Excludes 2,417,323 shares of Common Stock issuable upon exercise of
outstanding stock options at a weighted average exercise price of $6.65 per
share and 150,000 shares of Common Stock issuable upon exercise of an
outstanding warrant at an exercise price of $7.39.
(2) See Note 1 of Notes to Consolidated Financial Statements incorporated by
reference in this Prospectus.
(3) Adjusted to reflect the sale by the Company of shares of Common Stock hereby
at an assumed public offering price of $30.50 per share, after deducting
underwriting discounts and commissions and the expenses of the offering, and
the application of the estimated net proceeds therefrom. See "Use of
Proceeds" and "Capitalization."
3
<PAGE>
THE COMPANY
Wind River Systems, Inc. ("Wind River" or the "Company") develops, markets
and supports advanced software operating systems and development tools that
allow customers to create complex, robust, real-time software applications for
embedded computers. An embedded computer is a microprocessor that is
incorporated into a larger device and is dedicated to responding to external
events by performing specific tasks quickly, predictably and reliably. Some
examples of such devices are telecommunications products such as PABX, routers,
central office switches and call processing systems; office products such as fax
machines, laser printers and photocopiers; vehicle anti-lock brakes and
navigation systems; consumer products such as camcorders, video games and
set-top boxes; medical instrumentation and imaging systems; and industrial
automation equipment such as robots. Wind River's flagship product, TORNADO,
enables customers to enhance product performance, standardize designs across
projects, reduce research and development costs and shorten product development
cycles.
To succeed in today's increasingly competitive markets, manufacturers using
embedded computers must bring complex applications for embedded systems to
market rapidly and economically. Development of real-time embedded applications
has evolved from a relatively modest programming task to a complex engineering
effort. As more powerful and affordable 32-bit microprocessors have become
available, products based on them have become richer in features and
functionality. In addition, the complexity of embedded software is increasing
dramatically, while the time available for product development is decreasing.
More sophisticated development tools are required to develop these more complex
applications, frequently including a real-time operating system ("RTOS") that
provides far more functionality, higher performance and greater productivity
than that necessary or feasible for programming prior generations of
microprocessors. Wind River's flexible operating systems and powerful
development tools allow customers to create and standardize complex real-time
embedded software applications quickly and efficiently.
TORNADO is a scalable, cross-development environment that enables engineers
to develop embedded applications on a host workstation or PC and download the
code via a network or other communications channel to an RTOS that runs on all
significant 32- and 64-bit embedded target microprocessors. TORNADO consists of
three integrated components: the TORNADO toolset, a set of cross-development
tools and utilities; the VXWORKS run-time system, a high performance, scalable
RTOS that executes on the target processor; and a full range of communications
options. TORNADO offers a completely open and extensible environment that
facilitates the integration of a wide variety of third-party tools as well as
the customization of TORNADO tools by the developer. With a wide selection of
processors and board support packages, VXWORKS provides broad portability and
adheres to a variety of computing standards. In addition, in January 1996, Intel
and Wind River entered into an agreement pursuant to which Intel has agreed to
supply an evaluation copy of TORNADO FOR I20 to each customer purchasing an
Intel i960 RP I/O microprocessor and a copy of IXWORKS on each such
microprocessor sold. IXWORKS is an RTOS for developing I2O-specification
compliant intelligent I/O systems for servers, network devices and storage
adaptor cards. The Company also has product initiatives for Internet
applications.
The Company believes that strategic relationships with semiconductor
manufacturers and embedded device manufacturers are significant strengths of the
Company and key to future success in the embedded systems marketplace. Wind
River has strategic relationships with most of the major semiconductor companies
including ARM, Hewlett-Packard, Hitachi, Intel, Motorola, Siemens, Silicon
Graphics and Sun Microsystems. This strategy has allowed the Company to leverage
its partners' sales channels to give its products the widest possible market
exposure. The Company also enters into joint marketing and sales agreements with
certain developers of third-party applications as a means to enhance its
products with industry-specific functionality.
Wind River markets its products and services in North America and Europe
primarily through its own direct sales organization, which consists of sales
persons and field application engineers. Wind River has 13 licensed
international distributors principally to serve customers in regions not
serviced by the Company's direct sales force or its Japanese master
distributors. Wind River's customers include ABB, Bay Networks, StrataCom (Cisco
Systems), General Motors, Hewlett-Packard, Hitachi, Hughes Network Systems,
Intel, Lockheed-Martin, Motorola, NEC, Northern Telecom, Rockwell, Siemens,
Silicon Graphics, Sun Microsystems and Texas Instruments.
The Company was incorporated in California in 1983 and reincorporated in
Delaware in April 1993. The Company's principal executive offices are located at
1010 Atlantic Avenue, Alameda, California 94501 and its telephone number at that
location is (510) 748-4100.
4
<PAGE>
RISK FACTORS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE DISCUSSION IN
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
DISCUSSED HERE. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES
INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED BELOW, AS WELL AS THOSE
DISCUSSED ELSEWHERE IN THIS PROSPECTUS AND IN ANY DOCUMENTS INCORPORATED HEREIN
BY REFERENCE. IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE
FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN
THE COMMON STOCK OFFERED BY THIS PROSPECTUS.
RELIANCE ON CORE FAMILY OF PRODUCTS. Revenue from sales of the TORNADO and
VXWORKS family of products and services accounted for approximately 77% of the
Company's revenues in each of the fiscal year ended January 31, 1996, and the
three months ended April 30, 1996. The Company's future results depend heavily
on continued market acceptance of these products in the Company's current
markets and successful application in new markets. Any factor adversely
affecting the market for the TORNADO and VXWORKS family of products and services
could have a material adverse effect on the Company's business, financial
condition and results of operations. Because in certain instances the Company
receives a royalty based on the number of VXWORKS operating systems sold by its
customers, the Company is also dependent upon its customers' success in
developing and introducing new products and systems that incorporate VXWORKS. To
the extent that such customers are not successful, the Company may not be able
to meet its objectives, and its business, financial condition and results of
operations would be materially and adversely affected.
RISKS ASSOCIATED WITH NEW AND CHANGING MARKETS. The Company is continuously
engaged in product development for new or changing markets. In particular, the
Company has invested significant time and effort, together with a consortium of
industry participants, in the development of I2O, a new specification that is
intended to create an open standard set of interface specifications for high
performance I/O systems. The specification is intended to be used by system,
network and peripheral interface card and operating systems vendors to simplify
the task of building and maintaining high-performance
I/O subsystems. The Company also has developed IXWORKS, an RTOS for use in
conjunction with the I2O specification. The success of the I2O specification and
the IXWORKS product line depends heavily on its adoption by a broad segment of
the industry. The Company also is expending substantial time and financial
resources to develop embedded operating software and development tools for
Internet applications. The commercial Internet market has only recently begun to
develop, is rapidly changing and is characterized by an increasing number of new
entrants with competitive products. Moreover, there is an increasing number of
new Internet protocols to which the Company's products must be ported. It is
unclear which of these competing protocols ultimately will achieve market
acceptance. If the Company develops products directed at Internet protocols that
ultimately fail to be widely adopted, the Company's business, financial
condition and results of operations may be materially and adversely affected. It
is difficult to predict with any assurance whether demand for any of these
products will develop or increase in the future. If these markets, or any other
new market targeted by the Company in the future, fail to develop, develop more
slowly than anticipated or become saturated with competitors, if the Company's
products are not developed in a timely manner, or if the Company's products and
services do not achieve or sustain market acceptance, the Company's business,
financial condition and results of operations would be materially and adversely
affected. See "The Company" and "Business--Products" and "--Product Development
and Engineering."
SIGNIFICANT FLUCTUATIONS IN OPERATING RESULTS. The Company has experienced
significant period-to-period fluctuations in revenues and operating results and
anticipates that such fluctuations will continue. These fluctuations may be
attributable to a number of factors, including the volume and timing of orders
received during the quarter, the timing and acceptance of new products and
product enhancements by the Company or its competitors, unanticipated sales and
buyouts of run-time licenses, stages of product life cycles, purchasing patterns
of customers and distributors, market acceptance of products sold by the
Company's customers, competitive conditions in the industry, business cycles
affecting the
5
<PAGE>
markets in which the Company's products are sold, extraordinary events, such as
acquisitions, including related charges, and economic conditions generally or in
specific geographic areas. The future operating results of the Company may
fluctuate as a result of these and other factors, including the Company's
ability to continue to develop innovative and competitive products. In addition,
the Company has not entered into long-term agreements with its customers, and
the timing of license fees is difficult to predict. The procurement process of
the Company's customers is often several months or longer from initial inquiry
to order and may involve competing considerations. Further, as licensing of the
Company's products increasingly becomes a more strategic decision made at higher
management levels, there can be no assurance that sales cycles for the Company's
products will not lengthen. Product revenue in any quarter depends on the volume
and timing of orders received in that quarter. The Company has at times
recognized a substantial portion of its total revenue from sales booked and
shipped in the latter part of the quarter; thus, the magnitude of quarterly
fluctuations may not become evident until late in a particular quarter. Because
the Company's staffing and operating expenses are based on anticipated total
revenue levels and a high percentage of the Company's costs are fixed in the
short term, small variations between anticipated orders and actual orders, as
well as non-recurring or large orders, could cause disproportionate variations
in the Company's operating results from quarter to quarter. Revenues also are
typically higher in the fourth quarter than in other quarters of the fiscal
year, which ends on January 31, primarily as a result of purchases by customers
prior to the calendar year end, as well as by customers who purchase at the
commencement of a new calendar year. These trends are expected to continue.
A number of additional factors may in the future cause the Company's
revenues and operating results to vary significantly from period to period.
These factors include: software "bugs" or other product quality problems;
changes in operating expenses; changes in Company strategy; personnel changes;
foreign currency exchange rates; and mix of products sold. Although the Company
has been profitable for the last several years on an annual basis, there can be
no assurance that the Company will be able to continue its growth in revenue or
sustain its profitability on a quarterly or annual basis. Due to all of the
foregoing factors, the Company believes that period-to-period comparisons of its
results of operations are not necessarily meaningful and should not be relied
upon as an indication of future performance. It is possible that, in some future
quarters, the Company's operating results will be below the expectations of
stock market analysts and investors. In such event, the price of the Common
Stock would likely be materially and adversely affected.
DEPENDENCE ON VME MARKET. A significant percentage of the Company's
revenues historically has been derived from sales of systems built to the VME
(versabus module eurocard) standard. These systems typically are used in high
cost, low volume applications, including military, telecommunications, space and
research applications. Although the Company believes that revenues from sales of
products designed for embedded systems applications will account for an
increasing percentage of the Company's revenues in the future, the Company
expects revenues from the VME market to continue to be significant for the
foreseeable future. Academic institutions and defense industry participants,
which generate a significant portion of the Company's VME revenues, are
dependent on government funding, the continued availability of which is
uncertain. Any unanticipated termination of government funding of VME customers
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--Customers."
COMPETITION. The embedded real-time software industry is highly competitive
and is characterized by rapidly advancing technology. The Company believes that
the principal competitive factors in the industry are functionality,
reliability, service, reputation and pricing. In order to maintain or improve
its position in the industry, the Company must continue to enhance its current
products and develop new products and product extensions rapidly. The Company
believes that its principal competition comes from companies that develop
real-time embedded software development systems in-house rather than purchasing
such systems from independent software vendors such as the Company. Many of
these organizations have substantial internal programming resources with the
capability to develop specific products for their needs. The Company also
competes with other independent software vendors,
6
<PAGE>
including Integrated Systems, Inc., Mentor Graphics, Inc. (through acquisition
of Microtec/Ready Sytems), Microware Systems Corporation and JavaSoft, a
division of Sun Microsystems, Inc. In addition, hardware or other software
vendors could seek to expand their product offerings by designing and selling
products that directly compete with or adversely affect sales of the Company's
products. Many of the Company's existing and potential competitors have
substantially greater financial, technical, marketing and sales resources than
the Company. In addition, the Company is aware of ongoing efforts by competitors
to emulate the performance and functionality of the Company's products and there
can be no assurance that competitors will not develop equivalent or superior
technology to that of the Company. Because a substantial percentage of the
Company's revenues have been derived from sales of the TORNADO and VXWORKS
family of products and services, the effects of competition could be more
adverse than would be the case if the Company had a broader product offering. In
addition, competitive pressures could cause the Company to reduce the prices of
its products, which would result in reduced profit margins. There can be no
assurance that the Company will be able to compete effectively against its
current and future competitors. If the Company is unable to compete
successfully, its business, financial condition and results of operations would
be materially and adversely affected. See "Business--Competition."
MANAGEMENT OF GROWTH; DEPENDENCE ON KEY PERSONNEL; NEED FOR ADDITIONAL
PERSONNEL. The Company has experienced, and expects to continue to experience,
significant growth in the number of employees, the scope and complexity of its
operating and financial systems and the geographic area of its operations. The
Company's continued success will depend significantly on its ability to
integrate new operations and new personnel. There can be no assurance that the
Company will be successful in achieving such integration efficiently. In
addition, the Company anticipates the need to relocate its management,
engineering, marketing, sales and customer support operations to a new facility
within the next several years. There can be no assurance that any such
relocation will be accomplished efficiently, or that the Company's operations
will not be materially and adversely affected by such relocation. The Company's
future performance depends to a significant degree upon the continued
contributions of its key management, product development, marketing, sales,
customer support and operations personnel, several of whom have joined the
Company only recently. In addition, the Company believes its future success will
depend in large part upon its ability to attract and retain highly-skilled
managerial, product development, marketing, sales, customer support and
operations personnel, many of whom are in great demand. Competition for such
personnel is particularly intense in the San Francisco Bay Area, where the
Company is headquartered, and there can be no assurance that the Company will be
successful in attracting and retaining such personnel. The failure of the
Company to attract, integrate and retain the necessary personnel would have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Employees" and "Management."
RAPID TECHNOLOGICAL CHANGE; DEPENDENCE ON NEW PRODUCTS. The embedded
real-time software industry faces a fragmented market characterized by ongoing
technological developments, evolving industry standards and rapid changes in
customer requirements. The Company's success depends and will continue to depend
upon its ability to continue to develop and introduce in a timely manner new
products that take advantage of technological advances, to identify and adhere
to emerging standards, to continue to improve the functionality of its TORNADO
development environment and the scalability and functionality of the VXWORKS
product, to offer its products across a spectrum of microprocessor families used
in the embedded systems market and to respond promptly to customers'
requirements. The Company has from time to time experienced delays in the
development of new products and the enhancement of existing products. Such
delays are commonplace in the software industry. There can be no assurance that
the Company will be successful in developing and marketing, on a timely basis or
at all, competitive products, product enhancements and new products that respond
to technological change, changes in customer requirements and emerging industry
standards, or that the Company's enhanced or new products will adequately
address the changing needs of the marketplace. The inability of the Company, due
to resource constraints or technological or other reasons, to develop and
introduce new products or product enhancements in a timely manner could have a
material adverse effect on the Company's business, financial condition or
results of operations. From time to
7
<PAGE>
time, the Company or its competitors may announce new products, capabilities or
technologies that have the potential to replace or shorten the life cycles of
the Company's existing products. There can be no assurance that announcements of
currently planned or other new products by the Company or others will not cause
customers to defer purchasing existing Company products. Any failure by the
Company to anticipate or respond adequately to changing market conditions, or
any significant delays in product development or introduction, would have a
material adverse effect on the Company's business, financial condition and
results of operations.
In addition, until recently, the Company's products were primarily used on
the UNIX operating system. In September 1995, the Company introduced a Windows
NT and Windows 95 version of its products, and is targeting this platform for a
significant portion of its growth in the forseeable future. The market for this
platform has different characteristics and includes more competitors than the
UNIX market. As a result, there can be no assurance that the Company will be
successful with these new products in the Windows NT or Windows 95 market, or
that significant new competition will not enter the market or develop. To the
extent that the Company is not successful in this regard, its business,
financial condition and results of operations will be materially and adversely
affected. See "Business--Product Development and Engineering."
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS. In the fiscal years ended
January 31, 1994, 1995 and 1996, the Company derived approximately 37%, 31% and
35%, respectively, of its total revenue from sales outside of North America. The
Company expects that international sales will continue to generate a significant
percentage of its total revenue in the foreseeable future. The Company also
expects to make substantial investments to expand further its international
operations and to increase its direct sales force in Europe and Asia. There can
be no assurance that these investments will result in commensurate increases in
the Company's international sales. International operations are subject to
certain risks, including foreign government regulation; more prevalent software
piracy; longer payment cycles; unexpected changes in, or imposition of,
regulatory requirements, tariffs, import and export restrictions and other
barriers and restrictions; greater difficulty in accounts receivable collection;
potentially adverse tax consequences; the burdens of complying with a variety of
foreign laws; staffing and managing foreign operations; political and economic
instability; changes in diplomatic and trade relationships; possible
recessionary environments in economies outside the United States; and other
factors beyond the control of the Company. Sales by the Company's foreign
subsidiaries are denominated in the local currency, and an increase in the
relative value of the dollar against such currencies would reduce the Company's
revenues in dollar terms or make the Company's products more expensive and,
therefore, potentially less competitive in foreign markets. There can be no
assurance that the Company's future results of operations will not be adversely
affected by currency fluctuations. The Company relies on distributors for sales
of its products in certain foreign countries and, accordingly, is dependent on
their ability to promote and support the Company's products and, in some cases,
to translate them into foreign languages. The Company's international
distributors generally offer products of several different companies, including
in some cases products that are competitive with the Company's products, and
such distributors are not subject to any minimum purchase or resale
requirements. There can be no assurance that the Company's international
distributors will continue to purchase the Company's products or provide them
with adequate levels of support. See "Business--Marketing, Sales and
Distribution."
RISKS OF PRODUCT DEFECTS; PRODUCT AND OTHER LIABILITY. As a result of their
complexity, software products may contain undetected errors or compatibility
issues, particularly when first introduced or as new versions are released.
There can be no assurance that, despite testing by the Company and testing and
use by current and potential customers, errors will not be found in new products
after commencement of commercial shipments. The occurrence of such errors could
result in loss of or delay in market acceptance of the Company's products, which
could have a material adverse effect on the Company's business, financial
condition and results of operations. The increasing use of the Company's
products for applications in systems that interact directly with the general
public, particularly applications in transportation, medical systems and other
markets where the failure of the embedded system could
8
<PAGE>
cause substantial property damage or personal injury, could expose the Company
to significant product liability claims. In addition, the Company's products may
be used for applications in mission-critical business systems where the failure
of the embedded system could be linked to substantial economic loss. The
Company's license and other agreements with its customers typically contain
provisions designed to limit the Company's exposure to potential product
liability and other claims. The limitation of liability provisions contained in
the Company's agreements are not effective in all circumstances and in all
jurisdictions. Although the Company has not experienced any product liability or
economic loss claims to date, the sale and support of the Company's products
entails the risk of such claims. The Company carries insurance against product
liability risks and errors or omissions coverage, although there can be no
assurance that such insurance will continue to be available to the Company on
commercially reasonable terms or at all. A product liability claim or claim for
economic loss brought against the Company in excess of or outside the limits of
its insurance coverage, or a product recall involving the Company's software,
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--Product Development and
Engineering."
LIMITED PROTECTION OF PROPRIETARY TECHNOLOGY. The Company's success is
heavily dependent upon its proprietary technology. To protect its proprietary
rights, the Company relies on a combination of copyright, trade secret, patent
and trademark laws, nondisclosure and other contractual restrictions on copying,
distribution and technical measures. The Company seeks to protect its software,
documentation and other written materials through trade secret and copyright
laws, which provide only limited protection. In addition, the Company has two
United States patent applications pending. There can be no assurance that
patents will issue from the Company's pending applications or that any claims
allowed will be of sufficient scope or strength (or be issued in all countries
where the Company's products can be sold) to provide meaningful protection or
any commercial advantage to the Company. As part of its confidentiality
procedures, the Company generally enters into nondisclosure agreements with its
employees, consultants, distributors and corporate partners and limits access to
and distribution of its software, documentation and other proprietary
information. End user licenses of the Company's software are frequently in the
form of shrink wrap license agreements, which are not signed by licensees, and
therefore may be unenforceable under the laws of many jurisdictions. Despite the
Company's efforts to protect its proprietary rights, it may be possible for
unauthorized third parties to copy the Company's products or to reverse engineer
or obtain and use information that the Company regards as proprietary. There can
be no assurance that the Company's competitors will not independently develop
technologies that are substantially equivalent or superior to the Company's
technologies. Policing unauthorized use of the Company's products is difficult,
and while the Company is unable to determine the extent to which software piracy
of its products exists, software piracy can be expected to be a persistent
problem. In addition, effective protection of intellectual property rights may
be unavailable or limited in certain countries. The status of United States
patent protection in the software industry is not well defined and will evolve
as the United States Patent and Trademark Office grants additional patents.
Patents have been granted on fundamental technologies in software, and patents
may issue that relate to fundamental technologies incorporated into the
Company's products.
As the number of patents, copyrights, trademarks and other intellectual
property rights in the Company's industry increases, products based on its
technology may increasingly become the subject of infringement claims. There can
be no assurance that third parties will not assert infringement claims against
the Company in the future. Any such claims with or without merit could be time
consuming, result in costly litigation, cause product shipment delays or require
the Company to enter into royalty or licensing agreements. Such royalty or
licensing agreements, if required, may not be available on terms acceptable to
the Company, or at all, which could have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
the Company may initiate claims or litigation against third parties for
infringement of the Company's proprietary rights or to establish the validity of
the Company's proprietary rights. Litigation to determine the validity of any
claims, whether or not such litigation is determined in favor of the Company,
could result in significant expense to the Company and divert the efforts of the
Company's technical and management personnel from productive tasks. In the event
of an adverse ruling in any such litigation, the Company might be required to
pay
9
<PAGE>
substantial damages, discontinue the use and sale of infringing products, expend
significant resources to develop non-infringing technology or obtain licenses to
infringing technology. See "Business-- Proprietary Rights."
VOLATILITY OF STOCK PRICE. The market price of the Company's Common Stock
has fluctuated in the past, and is likely to fluctuate in the future. The
Company believes that various factors, including quarterly fluctuations in
results of operations, announcements of new products by the Company or by its
competitors, and changes in the software industry in general cause, and may
continue to cause the market price of the Common Stock to fluctuate, perhaps
substantially. In addition, in recent years the stock market in general, and the
shares of technology companies in particular, have experienced extreme price
fluctuations. This volatility has had a substantial effect on the market prices
of securities issued by the Company and other high technology companies, often
for reasons unrelated to the operating performance of the specific companies.
The market prices of many high technology companies' stocks, including the stock
of the Company, are at or near their historical highs and reflect price/
earnings ratios substantially above historical norms. There can be no assurance
that the market price of the Common Stock will remain at or near its current
level. In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted against that company. Such litigation, if instituted against the
Company, could result in substantial costs and a diversion of management
attention and resources, which would have a material adverse effect on the
Company's business, financial condition and results of operations, even if the
Company is successful in such suits. These market fluctuations, as well as
general economic, political and market conditions such as recessions, may
adversely affect the market price of the Common Stock. See "Price Range of
Common Stock and Dividend Policy."
ANTI-TAKEOVER EFFECTS OF CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE
LAW. The Company's Board of Directors has the authority to issue up to
2,000,000 shares of Preferred Stock and to determine the price, rights,
preferences, and privileges of those shares without any further vote or action
by the stockholders. The rights of the holders of Common Stock will be subject
to, and may be adversely affected by, the rights of the holders of any Preferred
Stock that may be issued in the future. The issuance of Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire a majority of the outstanding voting stock of the
Company. The Company has no present plans to issue shares of Preferred Stock. In
addition, the Company is subject to the provisions of Section 203 of the
Delaware General Corporation Law, an anti-takeover law. Furthermore, certain
provisions of the Company's Certificate of Incorporation and By-laws may have
the effect of delaying or preventing changes in control or management of the
Company, which could adversely affect the market price of the Common Stock.
10
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,650,000 shares of
Common Stock offered by the Company hereby are estimated to be $47,283,000
($61,588,000 if the Underwriters' over-allotment option is exercised in full)
assuming the shares offered hereby are sold at a public offering price of $30.50
per share and after deducting estimated underwriting discounts and commissions
and offering expenses. The Company will not receive any of the proceeds from the
sale of the shares of Common Stock offered by the Selling Stockholders. The
Company expects to use the net proceeds of this offering for general corporate
purposes, including working capital and possible acquisition of office
facilities and businesses, products or technologies complementary to the
Company's current business. The Company has no present plans, commitments or
agreements, and is not currently involved in any negotiations with respect to
any such acquisitions. Pending such uses, the Company intends to invest the net
proceeds from this offering in interest-bearing investment grade securities.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "WIND." The following table sets forth, for the fiscal quarters
indicated, the range of high and low sales prices for the Common Stock on the
Nasdaq National Market for the periods indicated, adjusted to give effect to a
three-for-two stock split effected as a stock dividend on May 24, 1996 to
stockholders of record on May 10, 1996. These prices do not include retail
markups, markdowns or commissions.
<TABLE>
<CAPTION>
HIGH LOW
---------
<S> <C> <C>
Fiscal Year Ended January 31, 1995
First Quarter.......................................................... $ 4.67 $ 2.92
Second Quarter......................................................... 4.75 3.42
Third Quarter.......................................................... 6.08 3.83
Fourth Quarter......................................................... 6.67 5.00
Fiscal Year Ended January 31, 1996
First Quarter.......................................................... 10.08 5.67
Second Quarter......................................................... 11.83 7.17
Third Quarter.......................................................... 18.33 10.33
Fourth Quarter......................................................... 20.42 16.00
Fiscal Year Ending January 31, 1997
First Quarter.......................................................... 27.00 18.33
Second Quarter (through June 18, 1996)................................. 36.38 25.33
</TABLE>
As of June 14, 1996, there were approximately 264 holders of record of the
Common Stock. On June 18, 1996, the last sale price reported on the Nasdaq
National Market for the Company's Common Stock was $30.50 per share.
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain future earnings to finance the
growth and development of its business and, therefore, does not anticipate
paying any cash dividends in the foreseeable future.
11
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of April
30, 1996, and as adjusted to reflect the receipt by the Company of the net
proceeds from the sale of 1,650,000 shares of Common Stock offered by the
Company hereby at an assumed public offering price of $30.50 per share and after
deducting estimated underwriting discounts and commissions and operating
expenses:
<TABLE>
<CAPTION>
APRIL 30, 1996
-----------------------
ACTUAL AS ADJUSTED
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Stockholders' equity:
Common Stock, par value $.001, 20,000 shares authorized; 14,180 issued and
13,880 outstanding; 15,530 issued and outstanding, as adjusted(1)............ $ 14 $ 16
Additional paid in capital.................................................... 25,038 67,487
Cumulative translation adjustments............................................ (198) (198)
Retained earnings............................................................. 12,808 12,808
Less treasury stock, 300 shares at cost....................................... (4,832) --
--------- ------------
Total stockholders' equity.............................................. $ 32,830 $ 80,113
--------- ------------
Total capitalization.................................................. $ 32,830 $ 80,113
--------- ------------
--------- ------------
</TABLE>
- ------------
(1) Excludes 2,629,305 shares of Common Stock issuable upon exercise of stock
options outstanding at April 30, 1996 at a weighted average exercise price
of $6.21 per share and 150,000 shares of Common Stock issuable upon
exercise of a warrant outstanding at April 30, 1996 at an exercise price of
$7.39. The Company is soliciting stockholder approval, at its Annual
Meeting of Stockholders to be held on July 23, 1996, of an amendment to the
Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock to 75,000,000 from 20,000,000.
12
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the consolidated financial statements and notes thereto
incorporated by reference in this Prospectus. The consolidated statement of
income data for the three-year period ended January 31, 1996 and the
consolidated balance sheet data at January 31, 1995 and 1996 are derived from
and should be read in conjunction with the audited consolidated financial
statements and notes thereto incorporated by reference in this Prospectus. The
consolidated statement of income data for the years ended January 31, 1992 and
1993 and the consolidated balance sheet data at January 31, 1992, 1993 and 1994
are derived from audited consolidated financial statements not included or
incorporated by reference herein. The consolidated statement of income data for
the three months ended April 30, 1995 and 1996 and consolidated balance sheet
data at April 30, 1996 are derived from unaudited consolidated financial
statements that have been prepared on the same basis as the audited financial
statements and, in the opinion of management, include all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the Company's financial position and results of operations for
such periods. Results of operations of interim periods are not necessarily
indicative of results to be expected for the full fiscal year.
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED JANUARY 31, ENDED APRIL 30,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Revenues:
Product....................................... $ 15,051 $ 21,229 $ 22,393 $ 23,196 $ 31,200 $ 6,032 $ 8,531
Services...................................... 2,034 3,824 4,948 8,904 12,800 2,668 4,069
--------- --------- --------- --------- --------- --------- ---------
Total revenues.............................. 17,085 25,053 27,341 32,100 44,000 8,700 12,600
--------- --------- --------- --------- --------- --------- ---------
Costs and expenses:
Cost of product............................... 1,055 1,870 2,241 2,336 3,746 674 1,089
Cost of services.............................. 1,686 2,366 2,726 3,656 5,530 1,187 1,561
Selling and marketing......................... 7,481 10,434 13,654 14,614 17,905 3,935 5,139
Product development and engineering........... 3,088 4,373 4,222 4,656 5,531 1,234 1,595
General and administrative.................... 2,050 2,109 3,975 3,386 3,158 756 1,018
Write-off of receivable from related party
distributor................................. -- 842 -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Total costs and expenses.................... 15,360 21,994 26,818 28,648 35,870 7,786 10,402
--------- --------- --------- --------- --------- --------- ---------
Operating income................................ 1,725 3,059 523 3,452 8,130 914 2,198
Other income (expense).......................... (22) (188) 130 453 661 162 192
--------- --------- --------- --------- --------- --------- ---------
Income before taxes............................. 1,703 2,871 653 3,905 8,791 1,076 2,390
Provision for income taxes...................... 610 1,150 321 1,445 3,408 409 920
--------- --------- --------- --------- --------- --------- ---------
Net income.................................. $ 1,093 $ 1,721 $ 332 $ 2,460 $ 5,383 $ 667 $ 1,470
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net income per share............................ $ 0.11 $ 0.16 $ 0.02 $ 0.17 $ 0.35 $ 0.04 $ 0.09
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Shares used in computing net income per
share(1)....................................... 9,611 10,455 13,317 14,300 15,491 15,065 15,992
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
JANUARY 31, APRIL 30,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and short-terms investments................ $ 1,616 $ 6,415 $ 20,653 $ 20,851 $ 29,837 $ 23,913 $ 27,909
Working capital................................. 3,370 5,637 21,486 24,220 27,817 25,554 27,233
Total assets.................................... 10,489 14,712 33,880 39,183 45,480 40,217 46,464
Total stockholders' equity...................... 4,031 6,671 24,612 28,345 32,813 29,950 32,830
</TABLE>
- ------------
(1) See Note 1 of Notes to Consolidated Financial Statements incorporated by
reference herein, for information regarding the number of shares used in
calculating net income per share.
13
<PAGE>
QUARTERLY RESULTS
The following table presents certain unaudited quarterly statement of income
data for the nine quarters ended April 30, 1996. In the opinion of management,
this information has been prepared on the same basis as the audited consolidated
financial statements incorporated by reference in this Prospectus and includes
all necessary adjustments (consisting only of normal recurring adjustments) that
the Company considers necessary to present fairly such information. The table
should be read in conjunction with the audited consolidated financial statements
of the Company and notes thereto incorporated by reference in this Prospectus.
The Company's quarterly results have in the past been subject to fluctuations
and, as a result, the operating results for any quarter are not necessarily
indicative of results for any future period.
<TABLE>
<CAPTION>
QUARTERS ENDED
-----------------------------------------------------------------------------------------
APRIL 30, JULY 31, OCT. 31, JAN. 31, APRIL 30, JULY 31, OCT. 31,
1994 1994 1994 1995 1995 1995 1995
----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Product............................ $ 4,533 $ 4,417 $ 6,172 $ 8,075 $ 6,032 $ 7,002 $ 7,995
Services........................... 2,004 2,658 1,944 2,298 2,668 3,098 3,405
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenues................... 6,537 7,075 8,116 10,373 8,700 10,100 11,400
----------- ----------- ----------- ----------- ----------- ----------- -----------
Costs and expenses:
Cost of product.................... 405 565 689 677 674 749 797
Cost of services................... 704 765 992 1,195 1,187 1,233 1,550
Selling and marketing.............. 3,350 3,499 3,489 4,278 3,935 4,234 4,369
Product development and
engineering...................... 1,255 1,023 1,081 1,297 1,234 1,332 1,410
General and administrative......... 752 934 805 894 756 819 831
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total costs and expenses......... 6,466 6,786 7,056 8,341 7,786 8,367 8,957
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income..................... 71 289 1,060 2,032 914 1,733 2,443
Other income......................... 24 138 165 126 162 213 55
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before taxes.................. 95 427 1,225 2,158 1,076 1,946 2,498
Provision for income taxes........... 17 167 452 809 409 739 961
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income....................... $ 78 $ 260 $ 773 $ 1,349 $ 667 $ 1,207 $ 1,537
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income per share................. $ 0.01 $ 0.02 $ 0.05 $ 0.09 $ 0.04 $ 0.08 $ 0.10
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Shares used in computing net income
per share........................... 13,803 14,117 14,591 14,685 15,065 15,456 15,678
AS A PERCENTAGE OF TOTAL REVENUES
-----------------------------------------------------------------------------------------
Revenues:
Product............................ 69% 62% 76% 78% 69% 69% 70%
Services........................... 31 38 24 22 31 31 30
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenues................... 100 100 100 100 100 100 100
----------- ----------- ----------- ----------- ----------- ----------- -----------
Costs and expenses:
Cost of product.................... 6 8 8 7 8 7 7
Cost of services................... 11 11 12 12 14 12 14
Selling and marketing.............. 51 49 43 41 45 42 38
Product development and
engineering...................... 19 14 13 13 14 13 12
General and administrative......... 12 13 10 9 9 8 7
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total costs and expenses......... 99 96 87 80 89 83 79
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income..................... 1 4 13 20 11 17 21
Other income......................... 0 2 2 1 2 2 0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before taxes.................. 1 6 15 21 12 19 22
Provision for income taxes........... 0 2 6 8 5 7 8
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income....................... 1% 4% 10% 13% 8% 12% 13%
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
JAN. 31, APRIL 30,
1996 1996
----------- -----------
<S> <C> <C>
Revenues:
Product............................ $ 10,171 $ 8,531
Services........................... 3,629 4,069
----------- -----------
Total revenues................... 13,800 12,600
----------- -----------
Costs and expenses:
Cost of product.................... 1,526 1,089
Cost of services................... 1,560 1,561
Selling and marketing.............. 5,367 5,139
Product development and
engineering...................... 1,554 1,595
General and administrative......... 752 1,018
----------- -----------
Total costs and expenses......... 10,759 10,402
----------- -----------
Operating income..................... 3,041 2,198
Other income......................... 231 192
----------- -----------
Income before taxes.................. 3,272 2,390
Provision for income taxes........... 1,299 920
----------- -----------
Net income....................... $ 1,973 $ 1,470
----------- -----------
----------- -----------
Net income per share................. $ 0.13 $ 0.09
----------- -----------
----------- -----------
Shares used in computing net income
per share........................... 15,759 15,992
Revenues:
Product............................ 74% 68%
Services........................... 26 32
----------- -----------
Total revenues................... 100 100
----------- -----------
Costs and expenses:
Cost of product.................... 11 9
Cost of services................... 11 12
Selling and marketing.............. 39 41
Product development and
engineering...................... 11 13
General and administrative......... 5 8
----------- -----------
Total costs and expenses......... 78 83
----------- -----------
Operating income..................... 22 17
Other income......................... 2 2
----------- -----------
Income before taxes.................. 24 19
Provision for income taxes........... 9 7
----------- -----------
Net income....................... 14% 12%
----------- -----------
----------- -----------
</TABLE>
14
<PAGE>
BUSINESS
Wind River Systems develops, markets and supports advanced software
operating systems and development tools that allow customers to create complex,
robust, real-time software applications for embedded computers. An embedded
computer is a microprocessor that is incorporated into a larger device and is
dedicated to responding to external events by performing specific tasks quickly,
predictably and reliably. Wind River's products and services enable customers to
enhance product performance, standardize designs across projects, reduce
research and development costs and shorten product development cycles. The
Company's TORNADO product represents the latest generation of development
environments for embedded and real time applications. TORNADO provides the
developer of embedded systems a robust development and deployment environment
for a wide variety of host platforms and microprocessor targets.
INDUSTRY BACKGROUND
Embedded systems consist of a microprocessor and related software,
incorporated into a larger device, dedicated to performing a specific set of
tasks. Embedded systems provide an immediate, predictable response to an
unpredictable sequence of external events. As more powerful microprocessors have
become available and decreased in price, embedded systems are being used in a
wider range of applications and are facilitating the development of entirely new
products. Today, embedded systems are found in telecommunications products such
as PABX, routers, central office switches and call processing systems; office
products such as fax machines, laser printers and photocopiers; automotive
products such as vehicle anti-lock brakes and navigation systems; consumer
products such as camcorders, video games and set-top boxes; medical products
such as instrumentation and imaging systems; and industrial automation equipment
such as robots. Emerging embedded Internet applications for interactive
entertainment, network computers, remote maintenance and other areas may offer
significant additional opportunities for embedded systems.
To succeed in today's increasingly competitive markets, manufacturers using
embedded computers must bring complex applications for embedded systems to
market rapidly and economically. Developing real-time embedded applications has
evolved from a relatively modest programming task to a complex engineering
effort. As more powerful and affordable 32-bit microprocessors have become
available, products based on them have become richer in features and
functionality. In addition, the complexity of embedded software is increasing
dramatically, while the time available for product development is decreasing.
More sophisticated development tools are required to develop these more complex
applications, frequently including an RTOS that provides far more functionality,
higher performance and greater productivity than that necessary or feasible for
programming prior generations of microprocessors. Wind River's flexible
operating systems and powerful development tools allow customers to create and
standardize complex real-time embedded software applications quickly and
efficiently.
As real-time embedded applications increase in complexity, the costs
associated with software development, support and training of engineers are
rising rapidly. In addition, time-to-market, conformance to standards and
product reliability have become critical issues for companies developing real-
time embedded applications.
WIND RIVER DEVELOPMENT ENVIRONMENT AND OPERATING SYSTEM
The Company's operating systems and development tools allow customers to
create complex real-time embedded software applications more quickly, more
economically and with less risk than creating such applications using internally
developed systems and tools. The Company's TORNADO product represents the latest
generation of development and execution environments for embedded and real-time
applications. TORNADO provides the developer of embedded systems a robust
development and deployment environment for a wide variety of host platforms and
microprocessor targets. The TORNADO product consists of three integrated
components: the TORNADO toolset, a set of cross-development tools and utilities;
the VXWORKS run-time system, a high performance, scalable RTOS which executes on
the
15
<PAGE>
target processor; and a full range of communications software options such as
Ethernet, serial line, ICE or ROM emulator for the target connection to the
host. The Wind River environment is designed with the following characteristics:
OPEN, EXTENSIBLE ENVIRONMENT. The Company's TORNADO product is an open
environment that enables additional tool integrations from both the developer
and third party vendors. A set of application programs interfaces (APIs) is
available and published on the Internet for reference, from the GUI to the
connection implementation. The Company believes that this open environment may
make TORNADO the widespread development tool for embedded and real-time
applications.
SCALABLE RTOS. Real-time embedded software applications can range from
small, memory-constrained stand-alone applications to large distributed
applications. The Company's VXWORKS RTOS is built on a microkernel architecture
that requires only 8 kilobytes for a minimal configuration, and also supports
large, complex applications. With VXMP, the extended multiprocessor package for
VXWORKS, applications created on the TORNADO platform can be scaled to
supporting multi-processor hardware.
PORTABLE. The Company's development environment runs on all significant 32-
and 64-bit embedded target microprocessors. The Company's VXWORKS product is a
high performance RTOS built upon an open architecture, and provides support for
a number of industry standards, enabling developers to easily design efficient
multi-vendor systems and migrate to different processors with minimal effort.
The Company believes that the emergence of complex 32-bit microprocessor
platforms, coupled with pressure for faster time-to-market targets for
developers, makes open-platform, highly portable development and execution
environments, such as the Company's TORNADO product, an attractive alternative
to developing proprietary tools and applications.
CONFIGURABLE. The Company's VXWORKS RTOS (and optional components -- e.g.
VXVMP, VXVMI, STREAMS, SNMP) is a highly modular design which allows optional
features and device drivers, both those supplied by Wind River as well as
provided by third parties, to be included or omitted at the developer's
discretion. This allows customers to create a customized RTOS to fit their
hardware and application that incorporates only necessary functions. This
enables the customer to optimally size the RTOS using Wind River's configuration
tool--WINDCONFIG--which makes selection of features and management of
alternative configurations easy.
HIGHLY FUNCTIONAL. Wind River believes it has a broad integrated suite of
tools. In addition to its core toolset and options, Wind River has created
visual development tools for real-time embedded systems. WINDVIEW, a development
and analytical tool, VXSIM, a complete prototype and simulation tool and
STETHOSCOPE, a real time visualization, profiling and debugging tool. The
TORNADO suite of host-based debugging tools is specifically designed to solve
the problems faced by developers of embedded systems. These tools share a common
GUI, and all the tools connect through a central server that handles all the
communication with the target.
The core toolset includes the CROSSWIND debugger and the GNU toolkit, shell
and link loader. Wind River also has a broad suite of options for applications
requiring multiprocessing (VXMP), virtual memory support (VXVMI) target resident
debugging, customization of target hardware (BSP Porting kit) or advanced
networking functionality (WINDNET).
UNIX, WINDOWS NT AND WINDOWS 95 SUPPORT. The Company's TORNADO environment
supports Unix, Windows NT and Windows 95 development environments, and is the
only RTOS to have earned the Windows 95 logo. The Company has maintained a
strong presence in providing development tools and the VXWORKS RTOS for the UNIX
operating system. The Company also recognizes the importance of Windows NT and
Windows 95 as potentially dominant network operating systems, and in September
1995 began to support Windows NT and Windows 95 with the introduction of the
TORNADO development environment.
16
<PAGE>
PRODUCTS
Wind River's operating systems and development tools allow customers to
create complex real-time embedded software applications more quickly, more
economically and with less risk than creating such applications using internally
developed systems and tools.
TORNADO. Wind River's flagship product is TORNADO, a development
environment for embedded applications available for UNIX, Windows NT and Windows
95 development platforms. TORNADO was introduced in September 1995 and
subsequently won the Electronic Design News award for Innovation of the Year.
TORNADO is a scalable, cross-development environment that enables engineers to
develop embedded applications on a host workstation or PC and download the code
via a network or other communications channel to an RTOS that runs on all
significant 32- and 64-bit embedded target microprocessor.
TORNADO consists of three integrated components: the TORNADO toolset, a set
of cross-development tools and utilities; the VXWORKS run-time system, a high
performance, scalable RTOS which executes on the target processor; and a full
range of communications options.
The TORNADO development toolset consists of a launcher, a GNU compiler for C
and C++ programs, a remote source level debugger, a user-interface shell, a
browser, and a variety of other software tools that run on the development host.
TORNADO also offers a completely open and extensible environment that
facilitates the integration of a wide variety of third-party tools as well as
the customization of TORNADO tools by the developer.
VXWORKS. VXWORKS is a high performance, scalable RTOS based on an
object-oriented microkernel design. The run-time system offers over 1,100
functions from real-time kernel functions to networking to utility routines such
as buffer and list management for accelerating application development. With a
wide selection of processors and board support packages, VXWORKS provides broad
portability and adheres to a variety of computing standards, including POSIX
1003.1/1b, ANSI C, and TCP/IP.
For communications, the development toolset can connect to an embedded
target over a variety of options, including Ethernet, serial line, in-circuit
emulator, ROM emulator, or custom. TORNADO eliminates many of the dependencies
of a traditional cross-development environment. With TORNADO, developers can use
any host-target communication strategy and the available tool functionality is
the same regardless of the target processor resources.
I2O PRODUCT INITIATIVE. In January 1996, Intel and Wind River entered into
an agreement pursuant to which Intel has agreed to supply an evaluation copy of
TORNADO FOR I2O to each customer purchasing an Intel i960 RP I/O microprocessor
and a copy of IXWORKS on each such microprocessor sold. I2O is being proposed by
a consortium of leading enterprise computing vendors with the intent of defining
and promoting an open standard set of interface specifications for
high-performance I/O systems. The specification will be used by system, network
and peripheral interface card and operating system vendors to simplify the task
of building and maintaining high-performance I/O subsystems. The I2O
specification makes it possible for systems to distribute I/O functions across
multiple processors, dramatically improving I/O and overall system performance.
Additionally, the specification allows vendors of network and peripheral
interface cards to write a single device driver that will be compatible with a
comprehensive range of operating systems (OS), OS releases, and vendor OS
implementations. A license for the Company's IXWORKS operating system, a version
of VXWORKS made specifically for the Intel i960 RP microprocessor, will be
included with every i960 RP that Intel ships. IXWORKS provides manufacturers the
elements they need to quickly design I2O specification-compliant intelligent I/O
into servers and network and storage adapter cards. Along with the license for
IXWORKS, Intel will deliver purchasers of the Intel i960 RP I/O microprocessor a
CD-ROM that includes a 30-day evaluation copy of TORNADO FOR I2O. The Company
believes that its relationship with Intel on the I2O specification project may
open up a new, potentially significant market opportunity for its products. See
"Risk Factors -- Risks Associated with New and Changing Markets."
17
<PAGE>
INTERNET INITIATIVE. Wind River is currently working on various initiatives
to capitalize on the increasing use of the Internet. The Company believes that
there may be significant opportunities to increase the market size and scope for
its products via the Java paradigm. The Company is also customizing many of its
applications to better serve datacommunications/telecommunications customers
that are building the Internet infrastructure.
ADDITIONAL PRODUCTS
In addition to its core products, Wind River offers the following additional
products:
VXWORKS OPTIONS. VXWORKS options include VXWINDOWS, the VXVMI virtual
memory interface, and the VXMP multi-processing package. VXWINDOWS, which
includes the X Windows System client software together with OSF-Motif, allows
developers to build graphical VXWORKS applications. VXVMI virtual memory
interface provides run-time memory management and debugging facilities and an
application program interface standardized across different microprocessing
architectures. The VXMP multi-processing package allows applications to be
scaled beyond the performance of single microprocessors by allowing tasks on
different microprocessors to synchronize and communicate.
WINDNET. WINDNET is Wind River's networking environment, comprising both
core technology from Wind River--such as TCP/IP, STREAMS, and the WINDNET SNMP
network management product-- and numerous integrated products from third party
partners providing various protocols, ATM, network management, and distributed
computing solutions.
VXSIM EMBEDDED SYSTEM SIMULATOR. VXSIM is a comprehensive prototyping and
simulation tool that provides full VXWORKS simulation on a UNIX workstation.
VXSIM enables application development to begin before hardware becomes available
and allows software testing to occur early in the development cycle, when errors
are less costly to correct.
WINDVIEW. WindView is a diagnostic and analysis tool that provides detailed
visibility into the dynamic operation of an embedded system. With it, the user
can quickly and easily visualize the complicated interaction among tasks,
interrupt service routines and system objects in an application. This
information is presented through a GUI.
STETHOSCOPE. The Company is a reseller of STETHOSCOPE, a real-time data
visualization, profiling and debugging tool that lets the end user examine and
analyze an embedded application while it is running. STETHOSCOPE features a
multi-window environment that allows program variables to be plotted dynamically
on a workstation.
WINDC++ OBJECT-ORIENTED LANGUAGE SUPPORT. WINDC++ provides a cost-effective
basic set of capabilities for real-time C++ development. It includes the cfront
C++ Language System from Centerline Software, an integrated source code
debugger, an I/O streams class library for formatted and buffered I/O and a
runtime support library. WINDC++ is integrated with TORNADO and VXWORKS.
WIND FOUNDATION CLASSES. Wind Foundation Classes, designed specifically to
accompany TORNADO, provide the C++ programming classes needed by a growing
number of customers.
BOARD SUPPORT PACKAGE PORTING KIT. The VXWORKS operating system can be used
with a wide variety of processor types and target environments. They isolate all
hardware-specific functionality into a special section of code called the Board
Support Package or BSP. The BSP Porting Kit provides assistance to the developer
porting TORNADO or VXWORKS to custom hardware or to a commercial board not
supported by Wind River. It includes comprehensive documentation, a software
validation suite, project management tools and a template BSP to provide a
convenient starting point. To assist third-party developers, Wind River also
offers a service in which it tests and validates the resulting BSP.
SERVICES AND SUPPORT
Wind River provides comprehensive customer service and support that help
customers realize the value and potential of the Company's products.
18
<PAGE>
TRAINING CLASSES. Wind River offers several training courses and workshops
relating to the use of its products. The courses are provided several times each
month and are taught by Wind River trainers at the Company's training facilities
in Alameda, California and Orlando, Florida. Outside North America, the courses
are given under license from the Company by distributors and training
contractors. Training courses can also be provided at a customer site.
TECHNICAL SUPPORT. The Company's technical support staff assists customers
with problems and questions in the installation and use of the Company's
products. Technical support is provided by Wind River's staff of support
engineers in North America, by staff support engineers and/or local distributors
in Europe and by the Company's Japanese subsidiary. Technical support is bundled
with product updates and maintenance and is offered on an annual fee basis. Wind
River's TORNADO includes a tool for submitting problem reports via the Internet.
ENGINEERING SERVICES. A number of services are provided on a
fee-for-service basis, including BSP validation, application level consulting,
customization, and porting to strategic semiconductor architectures. These are
coordinated and performed by the Engineering Services Group in North America and
Japan, though they may on occasion be supported by engineering or outside
subcontractors in North America and Europe.
STRATEGIC ALLIANCES
The Company believes that strategic relationships with semiconductor
manufacturers and embedded device manufacturers are significant strengths of the
Company and key to future success in the embedded systems marketplace. Wind
River has strategic relationships with most of the major semiconductor companies
including ARM, Hewlett-Packard, Hitachi, Intel, Motorola, Siemens, Silicon
Graphics and Sun Microsystems. This strategy has allowed the Company to leverage
its partners' sales channels to give its products the widest possible market
exposure. The Company also enters into joint marketing and sales agreements with
certain developers of third-party applications as a means to enhance its
products with industry-specific functionality. In addition, in January 1996,
Intel and Wind River entered into an agreement pursuant to which Intel has
agreed to supply an evaluation copy of TORNADO FOR I2O to each customer
purchasing an Intel i960 RP I/O microprocessor and a copy of IXWORKS on each
such microprocessor sold.
CUSTOMERS
The Company's products have been deployed by a broad range of organizations,
ranging from companies in the following industries: telecommunications and
datacommunications; office automation and computers; medical and industrial; and
aerospace, research and defense. No single customer accounted for more than 5%
of the Company's total revenues in fiscal 1996, and the top 12 customers in the
aggregate accounted for less than 20%. The following organizations are
representative end users of the Company's products:
<TABLE>
<S> <C>
TELECOMMUNICATIONS/DATACOMMUNICATIONS
- ------------------------------------------------------------------------------------
Applied Signal Technology Motorola Computer Group
Ascom Timeplex Inc. NetEdge Systems
AT&T Network Equipment Technologies
Bay Networks Newbridge Networks
Dialogic Corp Nortel Inc.
Ericsson Orbital Sciences Corp
General Instrument Corp. Qualcomm Inc.
Hitachi Computer Products (America), Inc. StrataCom (Cisco Systems)
Hughes Network Systems Texas Instruments
Hyundai Electronics America TRW, Inc.
Loral Communications Systems ZeitNet Inc.
</TABLE>
19
<PAGE>
<TABLE>
<S> <C>
OFFICE AUTOMATION AND COMPUTERS
- ------------------------------------------------------------------------------------
Apple Computers Intel Corp
Computer Sciences Corp. Legacy Storage Systems
Cray Research SamSung Electronics Co.
Digital Equipment Corporation Scitex Digital Video
Electronic Data Systems Corp. (EDS) Silicon Graphics, Inc
Hewlett-Packard Whittaker Communications
IBM Xerox Corp.
INDUSTRIAL AND MEDICAL
- ------------------------------------------------------------------------------------
ADAC Laboratories Heidelberger Drucksmaschinen AG
Allen-Bradley Co., Inc. Keithley Instruments, Inc.
Applied Materials KLA Instruments Corp
Eastman Kodak Company MTS Systems Corp.
Eaton Corp. Picker International
Fluke Corporation Siemens
General Motors SpaceLabs Medical
Harris Controls Division Tektronix Inc.
AEROSPACE, RESEARCH AND DEFENSE
- ------------------------------------------------------------------------------------
Boeing Los Alamos National Labs
E-Systems Lockheed-Martin
Fermi Labs McDonnell Douglas Aerospace
GTE Government Systems Corp. NASA
Harris Rockwell
Jet Propulsion Laboratory Sandia National Laboratories
Johns Hopkins University Stanford University
</TABLE>
Many of the Company's customers are building systems to the VME standard.
These systems typically are used in high cost, low-volume applications,
including military, telecommunications, space and research applications. A
significant percentage of the Company's revenues have been derived historically
from sales of products designed for VME applications, and the Company expects
revenues from the VME market to be significant for the foreseeable future.
Academic institutions and defense industry participants, which generate a
significant portion of the Company's VME revenues, are dependent on government
funding, the continued availability of which is uncertain. Any unanticipated
termination of government funding of VME customers could have a material and
adverse effect on the Company's business, financial condition and results of
operations. See "Risk Factors -- Dependence on VME Market."
MARKETING, SALES AND DISTRIBUTION
In North America and Europe, Wind River markets its products and services
primarily through its own direct sales organization which consists of
salespersons and field application engineers. Wind River has 44 domestic direct
salespersons and field application engineers located throughout North America,
14 direct salespersons and field application engineers located at wholly-owned
subsidiaries in France, Germany and the United Kingdom and 12 engineering, sales
support and marketing employees in Japan.
The Company distributes its products in Japan through Wind River Systems,
K.K. ("WRSKK"), a joint venture in which the Company owns a 70% equity interest.
Innotech Corporation ("Innotech"), Kobe Steel Ltd. and Nissin Electric Ltd., the
other partners in the joint venture, each owns a 10% equity interest. The
Company has licensed its products exclusively to WRSKK for distribution in
Japan. WRSKK
20
<PAGE>
has in turn entered into master distributor agreements with its three joint
venture partners that provide the right to appoint sub-distributors. See Note 2
of Notes to Consolidated Financial Statements incorporated by reference herein.
Wind River has licensed 13 international distributors principally to serve
customers in regions not serviced by the Company's direct sales force or its
Japanese master distributors. The Company also has established strategic
relationships with computer, semiconductor and software vendors and works
closely with a number of system integrators worldwide that enable Wind River to
further broaden the geographic and market scope for its products.
Revenues from international sales represented approximately 37%, 31% and 35%
of the Company's total revenue in fiscal 1994, 1995 and 1996, respectively. See
Note 9 of Notes to Consolidated Financial Statements for a summary of operations
by geographic region.
COMPETITION
The embedded real-time software industry is highly competitive and is
characterized by rapidly advancing technology. The Company believes that the
principal competitive factors in the industry are functionality, reliability,
service, reputation and pricing. In order to maintain or improve its position in
the industry, the Company must continue to enhance its current products and
develop new products and product extensions rapidly. The Company believes that
its principal competition comes from companies that develop real-time embedded
software development systems in-house rather than purchasing such systems from
independent software vendors such as the Company. Many of these organizations
have substantial internal programming resources with the capability to develop
specific products for their needs. The Company also competes with other
independent software vendors, including Integrated Systems, Inc., Mentor
Graphics, Inc. (through acquisition of Microtec/Ready Sytems), Microware Systems
Corporation and JavaSoft, a division of Sun Microsystems, Inc. In addition,
hardware or other software vendors could seek to expand their product offerings
by designing and selling products that directly compete with or adversely affect
sales of the Company's products. Many of the Company's existing and potential
competitors have substantially greater financial, technical, marketing and sales
resources than the Company. In addition, the Company is aware of ongoing efforts
by competitors to emulate the performance and functionality of the Company's
products and there can be no assurance that competitors will not develop
equivalent or superior technology to that of the Company. Because a substantial
percentage of the Company's revenues have been derived from sales of the TORNADO
and VXWORKS family of products and services, the effects of competition could be
more adverse than would be the case if the Company had a broader product
offering. In addition, competitive pressures could cause the Company to reduce
the prices of its products, which would result in reduced profit margins. There
can be no assurance that the Company will be able to compete effectively against
its current and future competitors. If the Company is unable to compete
successfully, its business, financial condition and results of operations would
be materially and adversely affected.
The Company believes that it competes favorably in its markets on the basis
of product functionality, price/performance characteristics, product
portability, ease of use, sales and marketing strength, financial stability,
support services and corporate reputation. See "Risk Factors--Competition."
PRODUCT DEVELOPMENT AND ENGINEERING
Wind River believes that its success will depend in large part on its
ability to maintain and enhance its current product line, develop new products,
maintain technological competitiveness and meet an ever-expanding range of
customer requirements. The Company's product development and engineering group
includes 63 full-time employees. During fiscal 1994, 1995 and 1996, product
development and engineering expenses were $4.2 million, $4.7 million and $5.5
million, respectively, excluding capitalized software development costs.
Capitalized software development costs for these periods were $426,000, $506,000
and $490,000, respectively. The Company anticipates that it will continue to
commit substantial resources to research and product development in the future.
21
<PAGE>
The embedded real-time software industry faces a fragmented market
characterized by ongoing technological developments, evolving industry standards
and rapid changes in customer requirements. The Company's success depends and
will continue to depend upon its ability to continue to develop and introduce in
a timely manner new products that take advantage of technological advances, to
identify and adhere to emerging standards, to continue to improve the
functionality of its TORNADO development environment and the scalability and
functionality of the VXWORKS product, to offer its products across a spectrum of
microprocessor families used in the embedded systems market and to respond
promptly to customers' requirements. The Company has from time to time
experienced delays in the development of new products and the enhancement of
existing products. Such delays are commonplace in the software industry. There
can be no assurance that the Company will be successful in developing and
marketing, on a timely basis or at all, competitive products, product
enhancements and new products that respond to technological change, changes in
customer requirements and emerging industry standards, or that the Company's
enhanced or new products will adequately address the changing needs of the
marketplace.
As a result of their complexity, software products may contain undetected
errors or compatibility issues, particularly when first introduced or as new
versions are released. There can be no assurance that, despite testing by the
Company and testing and use by current and potential customers, errors will not
be found in new products after commencement of commercial shipments. The
occurrence of such errors could result in loss of or delay in market acceptance
of the Company's products, which could have a material adverse effect on the
Company's business, financial condition and results of operations. The
increasing use of the Company's products for applications in systems that
interact directly with the general public, particularly applications in
transportation, medical systems and other markets where the failure of the
embedded system could cause substantial property damage or personal injury,
could expose the Company to significant product liability claims. In addition,
the Company's products may be used for applications in mission-critical business
systems where the failure of the embedded system could be linked to substantial
economic loss. See "Risk Factors--Risk of Product Defects; Product and Other
Liability" and "--Rapid Technological Change; Dependence on New Products."
PROPRIETARY RIGHTS
The Company's success is heavily dependent upon its proprietary technology.
To protect its proprietary rights, the Company relies on a combination of
copyright, trade secret, patent and trademark laws, nondisclosure and other
contractual restrictions on copying, distribution and technical measures. The
Company seeks to protect its software, documentation and other written materials
through trade secret and copyright laws, which provide only limited protection.
In addition, the Company has two United States patent applications pending.
There can be no assurance that patents will issue from the Company's pending
applications or that any claims allowed will be of sufficient scope or strength
(or be issued in all countries where the Company's products can be sold) to
provide meaningful protection or any commercial advantage to the Company. As
part of its confidentiality procedures, the Company generally enters into
nondisclosure agreements with its employees, consultants, distributors and
corporate partners and limits access to and distribution of its software,
documentation and other proprietary information. End user licenses of the
Company's software are frequently in the form of shrink wrap license agreements,
which are not signed by licensees, and therefore may be unenforceable under the
laws of many jurisdictions. Despite the Company's efforts to protect its
proprietary rights, it may be possible for unauthorized third parties to copy
the Company's products or to reverse engineer or obtain and use information that
the Company regards as proprietary. There can be no assurance that the Company's
competitors will not independently develop technologies that are substantially
equivalent or superior to the Company's technologies. Policing unauthorized use
of the Company's products is difficult, and while the Company is unable to
determine the extent to which software piracy of its products exists, software
piracy can be expected to be a persistent problem. In addition, effective
protection of intellectual property rights may be unavailable or limited in
certain countries. The status of United States patent protection in the software
industry is not well defined and will evolve as the United States Patent and
Trademark Office grants additional patents. Patents have been granted on
fundamental technologies in software, and patents may issue that relate to
fundamental technologies incorporated
22
<PAGE>
into the Company's products. Wind River believes that, due to the rapid pace of
innovation within its industry, factors such as the technological and creative
skills of its personnel are more important to establishing and maintaining a
technology leadership position within the industry than are the various legal
protections of its technology.
As the number of patents, copyrights, trademarks and other intellectual
property rights in the Company's industry increases, products based on its
technology may increasingly become the subject of infringement claims. There can
be no assurance that third parties will not assert infringement claims against
the Company in the future. Any such claims with or without merit could be time
consuming, result in costly litigation, cause product shipment delays or require
the Company to enter into royalty or licensing agreements. Such royalty or
licensing agreements, if required, may not be available on terms acceptable to
the Company, or at all, which could have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
the Company may initiate claims or litigation against third parties for
infringement of the Company's proprietary rights or to establish the validity of
the Company's proprietary rights. Litigation to determine the validity of any
claims, whether or not such litigation is determined in favor of the Company,
could result in significant expense to the Company and divert the efforts of the
Company's technical and management personnel from productive tasks. In the event
of an adverse ruling in any such litigation, the Company might be required to
pay substantial damages, discontinue the use and sale of infringing products,
expend significant resources to develop non-infringing technology or obtain
licenses to infringing technology. See "Risk Factors--Limited Protection of
Proprietary Technology."
EMPLOYEES
The Company has 208 employees, including 112 in sales, marketing and support
activities, 63 in product development and engineering and 33 in management,
operations, finance and administration. Of these employees, 170 were located in
North America and 38 were located outside of North America. None of the
Company's employees is represented by a labor union or is subject to a
collective bargaining agreement. Wind River has never experienced a work
stoppage. See "Risk Factors--Management of Growth; Dependence on Key Personnel;
Need for Additional Personnel."
23
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below is information regarding directors and executive officers of
the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ------------------------ --- ----------------------------------------------------------
<S> <C> <C>
Jerry L. Fiddler 44 Chairman of the Board
Ronald A. Abelmann 58 President and Chief Executive Officer and Director
David N. Wilner 42 Chief Technical Officer and Director
Robert L. Wheaton 49 Senior Vice President of Sales
David G. Fraser 32 Vice President of Engineering
Richard W. Kraber 55 Vice President of Finance, Chief Financial Officer and
Secretary
David Larrimore 44 Vice President of Marketing
Graham Shenton 56 Managing Director of European Operations
William B. Elmore(1) 43 Director
David B. Pratt(1) 56 Director
</TABLE>
- ------------
(1) Member of the Audit Committee and Compensation Committee
MR. FIDDLER co-founded the Company in February 1983, and currently serves as
Chairman of the Board. From February 1983 to March 1994, he also served as Chief
Executive Officer of the Company. Prior to founding the Company, he was a
computer scientist in the Real-Time Systems Group at Lawrence Berkeley
Laboratory. Mr. Fiddler holds a B.A. in music and photography and an M.S. in
computer science from the University of Illinois.
MR. ABELMANN joined the Company in March 1994 as Chief Executive Officer,
President and Director. From 1987 to 1993, he served as the founding Chief
Executive Officer of Vantage Analysis Systems, a developer of VHDL-based
simulation software for design automation. Prior to then, he served as Group
Vice President and General Manager for the Instrument Division of Varian
Associates. Mr. Abelmann holds B.S. and M.S. degrees in applied physics from the
University of California at Los Angeles, and an M.B.A. from Stanford University.
MR. WILNER co-founded the Company in February 1983 and currently serves as
Chief Technical Officer and a Director. Prior to founding the Company, he was a
senior staff scientist in the Real-Time Systems Group at Lawrence Berkeley
Laboratory. Mr. Wilner holds a B.S. in computer science from the University of
California at Berkeley.
MR. WHEATON joined the Company in March 1992 and currently serves as Senior
Vice President of Sales. From 1989 to 1991, he served as the Vice President,
Marketing of ShareBase Corporation, a relational database hardware and software
company. From 1988 to 1989, he served as the Western Regional Manager of
Powersoft Corporation, a computer software company. Mr. Wheaton holds a B.S. in
automotive engineering from Western Michigan University.
MR. FRASER joined the Company in September 1991 and currently serves as Vice
President of Engineering. From 1988 to 1991, he served as a product marketing
manager at Unisys/Convergent. From 1985 to 1988, he was a software engineer at
Hewlett-Packard in England. Mr. Fraser holds a B.S. in computing science from
Glasgow University, Scotland.
MR. KRABER joined the company in August 1995 and currently serves as Vice
President of Finance and Chief Financial Officer. From 1991 to 1995, he served
as Chief Operating Officer and Chief Financial Officer of Peerless Lighting, an
industrial lighting products company. Prior to then, he was Chief Financial
Officer for GardenAmerica and a consultant and engagement manager for McKinsey &
Company. Mr. Kraber has a B.S. in mathematics from Stanford University and an
M.B.A. from Harvard University.
24
<PAGE>
MR. LARRIMORE joined the company in May 1995 and currently serves as Vice
President of Marketing. From 1991 to 1995, he was Vice President of Marketing
for Destiny Technology, a computer software company. Prior to then, he held a
consulting position with McKinsey & Company and a management position with Dow
Chemical. Mr. Larrimore holds a B.S. in chemical engineering from the Georgia
Institute of Technology and an M.B.A from Stanford University.
MR. SHENTON joined the Company in July 1994 and currently serves as Managing
Director of European Operations. From 1990 until the date he joined the Company,
he was Managing Director of Vantage Analysis Systems Europe, Ltd., a developer
of VHDL-based simulation software for design automation. From 1986 to 1989, he
was Managing Director of IMP Europe, Ltd., a semiconductor design and
application firm. Mr. Shenton holds a B.E. degree from Sydney University,
Australia and an M.E. degree from the University of New South Wales, Australia.
MR. ELMORE became a director of the Company in August 1990. He is currently
a general partner of Foundation Capital, a venture capital investment firm. From
1987 to 1995, he was a general partner of Inman & Bowman and Inman & Bowman
Entrepreneurs, venture capital investment firms. Mr. Elmore holds a B.S. and an
M.S. in electrical engineering from Purdue University and an M.B.A. from
Stanford University. Mr. Elmore currently serves on the board of directors of
ParcPlace--Digitalk, Inc.
MR. PRATT became a director of the Company in April 1995. He has been an
officer of Adobe Systems Incorporated, a developer of software for printing and
publishing, since 1988. He is currently a Senior Vice President and Chief
Operating Officer at Adobe. From 1987 to 1988, he was Executive Vice President
and Chief Operating Officer of Logitech Corporation. From 1986 to 1987, he was
Senior Vice President and Chief Operating Officer of Quantum Corporation. Mr.
Pratt holds a B.S.E.E. degree from the Massachusetts Institute of Technology and
an M.B.A. from the University of Chicago. Mr. Pratt currently serves on the
board of directors of Radius, Inc.
25
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of May 31, 1996 by (i) each person known to the
Company to own beneficially more than 5% of the Company's Common Stock; (ii)
each director and executive officer; (iii) all directors and executive officers
as a group; and (iv) other Selling Stockholders.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(1) SHARES OFFERING(1)(2)
------------------------ BEING ------------------------
BENEFICIAL OWNERS NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------------------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Jerry L. Fiddler(3).............................. 2,706,831 19.49% 900,000 1,806,831 11.63%
David N. Wilner(4)............................... 1,932,093 13.91 500,000 1,432,093 9.22
Ronald A. Abelmann(5)............................ 269,459 1.91 -- 269,459 1.71
William B. Elmore(6)............................. 133,164 * -- 133,164 *
Robert L. Wheaton(7)............................. 107,801 * -- 107,801 *
Graham Shenton(8)................................ 83,018 * -- 83,018 *
David G. Fraser(9)............................... 60,895 * -- 60,985 *
David Larrimore(10).............................. 32,657 * -- 32,657 *
David Pratt(11).................................. 5,250 * -- 5,250 *
Richard W. Kraber................................ -- -- -- -- --
All officers and directors as a group (10
persons)(12).................................... 5,331,168 37.03 1,400,000 3,931,168 24.50
<CAPTION>
OTHER SELLING STOCKHOLDERS
- -------------------------------------------------
<S> <C> <C> <C> <C> <C>
Robert Fiddler, Custodian for Eli Fiddler UGMA... 60,000 * 60,000 -- --
Robert Fiddler, Custodian for Asher Fiddler
UGMA............................................ 60,000 * 60,000 -- --
Robert Fiddler, Trustee of the
Fiddler/Alden Childrens' Trust.................. 300,000 2.16 130,000 170,000 1.09
</TABLE>
- ------------
* Less than 1%.
(1) This table is based upon information supplied by officers, directors, and
principal and selling stockholders. Unless otherwise indicated in the
footnotes to this table and subject to community property laws where
applicable, each of the stockholders named in this table has sole voting and
investment power with respect to the shares indicated as beneficially owned.
Applicable percentages are based on 13,883,053 shares outstanding on May 31,
1996, adjusted as required by rules promulgated by the Commission.
(2) Adjusted to reflect the sale of 1,650,000 shares by the Company hereby.
(3) Includes 2,700,738 shares held by Mr. Fiddler and his spouse, Melissa K.
Alden, trustees of the The Fiddler and Alden Family Trust (the "Family
Trust") and 6,093 shares subject to stock options exercisable within 60 days
of May 31, 1996 held by Mr. Fiddler. Of the 900,000 shares being offered,
725,000 will be sold by Mr. Fiddler and Ms. Alden as Trustees of the Family
Trust. It is intended that, prior to the consummation of the offering,
175,000 of the shares held in the Family Trust will be donated to Jerry L.
Fiddler and Melissa K. Alden, as Trustees of the Fiddler and Alden 1996 CR
Trust (the "Charitable Trust.") Such shares will be sold by such Trustees as
selling stockholders in the offering. Upon completion of the offering, the
Family Trust will hold 1,800,738 shares and the Charitable Trust will hold
no shares. Mr. Fiddler is Chairman of the Board of the Company.
(4) Includes 172,500 shares held in trust for Mr. Wilner's minor child. Also
includes 6,093 shares subject to stock options exercisable within 60 days of
May 31, 1996. Mr. Wilner is Chief Technical Officer and a Director of the
Company.
(5) Includes 238,439 shares subject to stock options exercisable within 60 days
of May 31, 1996.
(6) Includes 3,750 shares subject to stock options exercisable within 60 days
of May 31, 1996.
(7) Includes 107,801 shares subject to stock options exercisable within 60 days
of May 31, 1996.
(8) Includes 59,556 shares subject to stock options exercisable within 60 days
of May 31, 1996.
(9) Includes 56,993 shares subject to stock options exercisable within 60 days
of May 31, 1996.
(10) Includes 30,624 shares subject to stock options exercisable within 60 days
of May 31, 1996.
(11) Includes 3,750 shares subject to stock options exercisable within 60 days
of May 31, 1996.
(12) Includes 513,099 shares subject to stock options held by officers and
directors exercisable within 60 days of May 31, 1996.
26
<PAGE>
UNDERWRITING
The U.S. Underwriters named below, for whom Deutsche Morgan Grenfell/C.J.
Lawrence Inc., Hambrecht & Quist LLC, UBS Securities LLC and Wessels, Arnold &
Henderson, L.L.C. are acting as representatives (the "U.S. Representatives"),
and the International Underwriters named below, for whom Morgan Grenfell & Co.,
Limited, Hambrecht & Quist LLC, UBS Limited and Wessels, Arnold & Henderson,
L.L.C. are acting as representatives (the "International Representatives") have
severally agreed, subject to the terms and conditions contained in the
Underwriting Agreement (the form of which is filed as an exhibit to the
Company's Registration Statement, of which this Prospectus is a part), to
purchase from the Company and the Selling Stockholders the respective number of
shares of Common Stock indicated below opposite their respective names. The
Underwriters are committed to purchase all of the shares, if they purchase any.
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS SHARES
- ------------------------------------------------------------------------------------------- -----------
<S> <C>
Deutsche Morgan Grenfell/C. J. Lawrence Inc................................................
Hambrecht & Quist LLC......................................................................
UBS Securities LLC.........................................................................
Wessels, Arnold & Henderson, L.L.C. .......................................................
-----------
Subtotal............................................................................... 2,475,000
-----------
<CAPTION>
INTERNATIONAL UNDERWRITERS
- -------------------------------------------------------------------------------------------
<S> <C>
Morgan Grenfell & Co., Limited.............................................................
Hambrecht & Quist LLC......................................................................
UBS Limited................................................................................
Wessels, Arnold & Henderson, L.L.C.........................................................
-----------
Subtotal............................................................................... 825,000
-----------
Total.................................................................................. 3,300,000
-----------
-----------
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions.
The U.S. Underwriters and the International Underwriters have entered into
an Intersyndicate Agreement (the "Intersyndicate Agreement") that provides for
the coordination of their activities. Pursuant to the Intersyndicate Agreement,
sales may be made between the U.S. Underwriters and the International
Underwriters of such number of shares of Common Stock as may be mutually agreed.
The price of any shares of Common Stock so sold shall be the public offering
price, less an amount not greater than the selling concession.
Under the terms of the Intersyndicate Agreement, the International
Underwriters and any dealer to whom they sell shares of Common Stock will not
offer to sell or sell shares of Common Stock to persons who are United States
persons or to persons they believe intend to resell to persons who are United
27
<PAGE>
States persons, and the U.S. Underwriters and any dealer to whom they sell
shares of Common Stock will not offer to sell or sell shares of Common Stock to
any non-United States person or to persons they believe intend to resell to
non-United States persons, except, in each case, for transactions pursuant to
such agreement. As used herein, "United States person" means any national or
resident of the United States or any corporation, pension, profit-sharing or
other trust or other entity organized under the laws of the United States or of
any political subdivision thereof (other than a branch located outside of the
United States of any United States person) and includes any United States branch
of a person who is otherwise not a United States person and "United States"
means the United States of America, its territories, its possessions and all
areas subject to its jurisdiction.
The Underwriters propose to offer the Common Stock to the public on the
terms set forth on the cover page of this Prospectus. The Price to Public and
Underwriting Discount will be identical in the U.S. and International Offerings.
The Underwriters may allow to selected dealers (who may include the
Underwriters) a concession of not more than $ per share. The selected dealers
may reallow a concession of not more than $ to certain other dealers. After
the public offering, the price and concessions and re-allowances to dealers and
other selling terms may be changed by the Underwriters. The Common Stock is
offered subject to receipt and acceptance by the Underwriters, and to certain
other conditions, including the right to reject orders in whole or in part. The
Underwriters do not intend to sell any of the shares of Common Stock offered
hereby to accounts over which they exercise discretionary authority.
The Company has granted an option to the Underwriters to purchase up to a
maximum of 495,000 additional shares of Common Stock to cover over-allotments,
if any, at the public offering price, less the underwriting discount set forth
on the cover page of this Prospectus. Such option may be exercised at any time
until 30 days after the date of the Underwriting Agreement. To the extent the
Underwriters exercise this option, each of the Underwriters will be committed,
subject to certain conditions, to purchase such additional shares in
approximately the same proportion as set forth in the above table. The
Underwriters may purchase such shares only to cover over-allotments made in
connection with the Offering.
Pursuant to the Intersyndicate Agreement, each International Underwriter has
represented and agreed that it has not offered or sold, and has agreed not to
offer or sell, any shares of Common Stock, directly or indirectly, in Canada in
contravention of the securities laws of Canada or any province or territory
thereof and has represented that any offer of shares of Common Stock in Canada
will be made only pursuant to an exemption from the requirement to file a
prospectus in the province or territory of Canada in which such offer is made.
Each International Underwriter has further agreed to send to any dealer who
purchases from it any shares of Common Stock a notice stating in substance that,
by purchasing such shares such dealer represents and agrees that it has not
offered or sold, and will not offer or sell, directly or indirectly, any of such
shares in Canada or to, or for the benefit of, any resident of Canada in
contravention of the securities laws of Canada or any province or territory
thereof and that any offer of shares of Common Stock in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which such offer is made, and that such
dealer will deliver to any other dealer to whom it sells any of such shares of
Common Stock a notice to the foregoing effect.
Pursuant to the Intersyndicate Agreement, each International Underwriter has
represented and agreed that (i) it has not offered or sold and will not offer or
sell any shares of Common Stock offered hereby to persons in the United Kingdom
except to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purpose of
their business or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulations 1995 (the "Regulations"), (ii) it
has complied and will comply with all applicable provisions of the Financial
Services Act 1986 and the Regulations with respect to anything done by it in
relation to the shares of Common Stock offered hereby in, from or otherwise
involving the United Kingdom, and (iii) it has only issued or passed on and will
only issue or pass on to any person in the United Kingdom any document
28
<PAGE>
received by it in connection with the issue of the shares of Common Stock
offered hereby if that person is a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995
or is a person to whom such document may otherwise lawfully be issued or passed
on.
Pursuant to the Intersyndicate Agreement, each International Underwriter has
represented and agreed that it has not offered or sold, and will not offer or
sell, directly or indirectly, in Japan or to or for the account or any resident
thereof, any shares of Common Stock acquired in connection with this offering,
except for offers or sales to Japanese International Underwriters or dealers and
except pursuant to any exemption from the regulation requirement of the
Securities and Exchange Law of Japan. Each International Underwriter has further
agreed to send to any dealer who purchases from it any of such shares of Common
Stock a notice stating in substance that such dealer may not offer or sell any
of such shares, directly or indirectly, in Japan or to or for the account of any
resident thereof, except pursuant to any exemption from the registration
requirement of the Securities and Exchange Law of Japan, and that such dealer
will send to any other dealer to whom it sells any shares a notice to the
foregoing effect.
Pursuant to the Intersyndicate Agreement, each International Underwriter has
represented and agreed that it has not offered or sold, and will not offer and
sell, directly or indirectly, or offer or sell to any person for re-offering or
resale, directly or indirectly any shares of Common Stock to any resident of the
Republic of Korea (as the term is defined under the Foreign Exchange Management
Law of the Republic of Korea), or in the Republic of Korea, except pursuant to
applicable laws and regulations of the Republic of Korea.
The Underwriting Agreement provides that the Company and the Selling
Stockholders will indemnify the several Underwriters against certain liabilities
including civil liabilities under the Securities Act of 1933, as amended, or
will contribute to payments the Underwriters may be required to make in respect
thereof.
In connection with the Offering, the Company and, except for Jerry L.
Fiddler and David N. Wilner, each of the Company's directors and executive
officers have agreed not to offer, sell or otherwise dispose of any shares of
Common Stock for a period of 90 days after the later of: (i) the date of this
Prospectus; or (ii) the first date on which shares of Common Stock are offered
hereby to the public, without the prior written consent of Deutsche Morgan
Grenfell/C.J. Lawrence Inc. Messrs. Fiddler and Wilner and the other Selling
Stockholders have agreed not to offer, sell or otherwise dispose of any shares
of Common Stock for a period of 120 days after the later of (i) the date of this
Prospectus or (ii) the first date on which shares of Common Stock are offered
hereby to the public, without the prior written consent of Deutsche Morgan
Grenfell/C.J. Lawrence Inc.
Pursuant to regulations promulgated by the Securities and Exchange
Commission, market makers in the Common Stock who are Underwriters or
prospective underwriters ("passive market makers") may, subject to certain
limitations, make bids for or purchases of shares of Common Stock until the
earlier of the time of commencement (the "Commencement Date") of offers or sales
of the Common Stock contemplated by this Prospectus or the time at which a
stabilizing bid for such shares is made. In general, on and after the date two
business days prior to the Commencement Date (i) such passive market maker's net
daily purchases of the Common Stock may not exceed 30% of its average daily
trading volume in such stock for the two full consecutive calendar months
immediately preceding the filing date of the Registration Statement of which
this Prospectus forms a part, (ii) such passive market maker may not effect
transactions in, or display bids for, the Common Stock at a price that exceeds
the highest bid for the Common Stock by persons who are not passive market
makers and (iii) bids made by passive market makers must be identified as such.
29
<PAGE>
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company and the Selling Stockholders by Cooley
Godward Castro Huddleson & Tatum, Palo Alto, California. Certain legal matters
in connection with this offering will be passed upon for the Underwriters by
Venture Law Group, A Professional Corporation, Menlo Park, California.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-K of Wind River Systems, Inc., as
amended by the Form 10-K/A, for the year ended January 31, 1996, have been so
incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
ADDITIONAL INFORMATION
A registration statement on Form S-3 with respect to the Common Stock
offered hereby (the "Registration Statement") has been filed with the Commission
under the Act. This Prospectus does not contain all of the information contained
in such Registration Statement and the exhibits and schedules thereto, certain
portions of which have been omitted pursuant to the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement and the
exhibits and schedules thereto. Statements contained in this Prospectus
regarding the contents of any contract or any other document are not necessarily
complete and, in each instance, reference is hereby made to the copy of such
contract or document filed as an exhibit to the Registration Statement. The
Registration Statement, including exhibits thereto, may be inspected without
charge at the Securities and Exchange Commission's principal office in
Washington, D.C., and copies of all or any part thereof may be obtained from the
Public Reference Section, Securities and Exchange Commission, Washington, D.C.,
20549, upon payment of the prescribed fees.
30
<PAGE>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF ANY OFFER TO BUY, THE COMMON STOCK IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
Prospectus Summary........................................................ 3
The Company............................................................... 4
Risk Factors.............................................................. 5
Use of Proceeds........................................................... 11
Price Range of Common Stock and Dividend Policy........................... 11
Capitalization............................................................ 12
Selected Consolidated Financial Data...................................... 13
Business.................................................................. 15
Management................................................................ 24
Principal and Selling Stockholders........................................ 26
Underwriting.............................................................. 27
Legal Matters............................................................. 30
Experts................................................................... 30
Additional Information.................................................... 30
</TABLE>
[LOGO]
3,300,000 SHARES
COMMON STOCK
DEUTSCHE MORGAN GRENFELL
HAMBRECHT & QUIST
UBS SECURITIES
WESSELS, ARNOLD & HENDERSON
PROSPECTUS
, 1996
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 19, 1996
[LOGO]
3,300,000 SHARES
COMMON STOCK
Of the 3,300,000 shares of Common Stock, $.001 par value, offered hereby,
825,000 shares are being offered initially outside the United States (the
"International Offering") by the International Underwriters and 2,475,000
shares are being offered initially in the United States (the "U.S. Offering"
and together with the International Offering, the "Offering") by the U.S.
Underwriters (together with the International Underwriters, the
"Underwriters"). See "Underwriting." Of the shares offered hereby, 1,650,000
shares are being sold by Wind River Systems, Inc. ("Wind River" or the
"Company"), and 1,650,000 shares are being sold by certain stockholders of the
Company (the "Selling Stockholders"). The Company will not receive any of the
proceeds from the sale of shares by the Selling Stockholders. See "Principal
and Selling Stockholders."
The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "WIND." On June 14, 1996, the last reported sales price of the
Company's Common Stock on the Nasdaq National Market was $30.50 per share. See
"Price Range of Common Stock and Dividend Policy."
FOR INFORMATION CONCERNING CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS, SEE "RISK FACTORS" COMMENCING ON PAGE 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C> <C>
UNDERWRITING PROCEEDS
PRICE DISCOUNTS AND PROCEEDS TO TO SELLING
TO PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
Per Share $ $ $ $
Total(3) $ $ $ $
</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $ .
(3) The Company has granted the Underwriters a 30-day option to purchase up
to an additional 495,000 shares of Common Stock solely to cover
over-allotments. If all such shares are purchased, the total Price to
Public, Underwriting Discounts and Commissions, Proceeds to Company and
Proceeds to Selling Stockholders will be $ , $ , $ and
$ , respectively. See "Underwriting."
The shares of Common Stock are offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by them, and subject to the
approval of certain legal matters by counsel and certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the shares
of Common Stock will be made in New York, New York against payment therefor on
or about , 1996.
DEUTSCHE MORGAN GRENFELL
HAMBRECHT & QUIST
UBS LIMITED
WESSELS, ARNOLD & HENDERSON
The date of this Prospectus is , 1996
<PAGE>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF ANY OFFER TO BUY, THE COMMON STOCK IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
Prospectus Summary........................................................ 3
The Company............................................................... 4
Risk Factors.............................................................. 5
Use of Proceeds........................................................... 11
Price Range of Common Stock and Dividend Policy........................... 11
Capitalization............................................................ 12
Selected Consolidated Financial Data...................................... 13
Business.................................................................. 15
Management................................................................ 24
Principal and Selling Stockholders........................................ 26
Underwriting.............................................................. 27
Legal Matters............................................................. 30
Experts................................................................... 30
Additional Information.................................................... 30
</TABLE>
[LOGO]
3,300,000 SHARES
COMMON STOCK
DEUTSCHE MORGAN GRENFELL
HAMBRECHT & QUIST
UBS LIMITED
WESSELS, ARNOLD & HENDERSON
PROSPECTUS
, 1996
