VERTEL CORP, S-3/A, 1999-03-29

VERTEL CORP
S-3/A, 1999-03-29
COMPUTER COMMUNICATIONS EQUIPMENT

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<PAGE>

As filed with the Securities and Exchange Commission on March 29, 1999

Registration No. 333-69685
==============================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

___________

AMENDMENT NO. 1

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
___________
VERTEL CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
____________________

California 95-3948704
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
21300 Victory Boulevard, Suite 1200
Woodland Hills, CA 91367
(818) 227-1400
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)

____________________
Gordon L. Almquist
Vice President and Chief Financial Officer
Vertel Corporation
21300 Victory Boulevard, Suite 1200
Woodland Hills, CA 91367
(818) 227-1400
(Name, Address Including Zip Code, and Telephone Number Including Area Code, of
Agent for Service)
____________________

COPIES TO:

Elias J. Blawie
Sanjay K. Khare
VENTURE LAW GROUP, A PROFESSIONAL CORPORATION
2800 SAND HILL ROAD
MENLO PARK, CALIFORNIA 94025
(650) 854-4488
____________________

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.

____________________

If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]____________
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _________________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
securities act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

<PAGE>

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION INCLUDING THIS PROSPECTUS IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND ITS OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE SUCH AN OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED MARCH 29,1999

PROSPECTUS
- ----------

[VERTEL THE TMN COMPANY LOGO]

VERTEL CORPORATION

2,000,000 Shares of Common Stock

The 2,000,000 shares of Vertel common stock covered by this prospectus are
all being sold by the shareholders listed on page 8. We will not receive any
proceeds from these sales, but have agreed to bear certain costs associated with
selling the shares of approximately $60,000.

The selling shareholders may sell the shares from time to time on the
over-the-counter market in regular brokerage transactions, in transactions
directly with market makers or in privately-negotiated transactions.

The price to public, underwriting discounts and commissions and net
proceeds to the selling shareholders from the sale of the shares will depend on
the nature and timing of the sales and therefore will not be known until the
sales are actually made.

Vertel common stock trades on the Nasdaq Stock Market under the symbol
"VRTL." On March 23, 1999, the last closing price of Vertel common stock on
the Nasdaq Stock Market was $1.53125 per share.

_______________________________________

YOU SHOULD SEE THE SECTION ENTITLED "RISK FACTORS," BEGINNING ON PAGE 2,
FOR INFORMATION THAT SHOULD BE CONSIDERED BEFORE PURCHASING THE SHARES.
_______________________________________

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.

NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING OF THE SHARES TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS,
AND YOU SHOULD NOT RELY ON ANY SUCH INFORMATION OR REPRESENTATION AS HAVING BEEN
AUTHORIZED BY VERTEL OR ANY SELLING SHAREHOLDER. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.

The date of this prospectus is _______________________, 1999
<PAGE>

TABLE OF CONTENTS
<TABLE>

<S> <C>
Vertel Overview......................................... 1
Risk Factors............................................ 2
Sale of Common Stock to Selling Shareholders............ 6
Use of Proceeds......................................... 6
Determination of Offering Price; Plan of Distribution... 7
Selling Shareholders.................................... 8
Interests of Named Experts and Counsel.................. 9
Where You Can Find More Information..................... 9
</TABLE>

<PAGE>

VERTEL OVERVIEW

We develop and market software for the management and operation of
telecommunications equipment and networks. Our software and solutions
include:

. software that manages telecommunications equipment and networks;

. applications that process data from telecommunications equipment and
networks;

. platforms that allow third-parties to develop applications for
telecommunications equipment and networks; and

. programming and design services for telecommunications networks.

Our solutions are based upon the International Telecommunications Union's
telecommunications management network or "TMN" standard, and are designed to
let networks of telecommunications equipment operate effectively, despite the
fact that they use different types of equipment and different protocols. Our
customers include service providers, such as long distance and local phone
companies, and telecommunications equipment manufacturers.

In addition to our management software, we have developed applications, and
software platforms that allow third parties to develop applications, that
provide value added services such as:

. detecting and responding to faults in a telecommunications network;

. improving the configuration of a network from a central site;

. automating accounting and billing functions; and

. optimizing network traffic and security.

We also provide professional services that enable telecommunications
service providers to deploy and maintain a complete TMN solution. As a part of
our professional services, among other things, we:

. design and analyze telecommunications systems;

. port source code and interfaces between different operating systems,
platforms and communications standards;

. develop custom applications;

. test networks to certify their compliance with
standards; and

. provide technical support.

We were incorporated in California in 1985 and our principal offices are
located at 21300 Victory Boulevard, Suite 1200, Woodland Hills, California
91367. Our telephone number at that location is (818) 227-1400.

<PAGE>

RISK FACTORS

Our Success is Dependent on Widespread, Timely Adoption of the TMN
Standard. Our software and services are all based on the TMN standard. If a
different protocol becomes the standard in the telecommunications industry,
service providers are unlikely to purchase our products. In recent years
standards that compete with TMN, such as SNMP and CMIP, have emerged. In
addition, telecommunications service providers have historically depended on
proprietary systems, which do not rely on any standards. While we invest
substantial efforts in encouraging service providers to adopt the TMN standard,
we do not have direct control over this process and we cannot provide any
assurance that the TMN standard will be adopted. Telecommunications service
providers could adopt a competing standard or no standard at all. Similarly,
they could adopt the TMN standard, but not do so within the timeframe that we
expect them to. If telecommunications service providers adopt a standard other
than TMN, adopt the TMN standard but not in a timely way or fail to adopt any
standard at all, our business, operating results, financial condition and
strategic position would be materially adversely affected.

We Need to Develop New Products to be Successful. The markets for our
products are characterized by rapidly changing technology and frequent new
product introductions. Therefore we believe that our future success will depend
on our ability to enhance our existing products and to develop and introduce in
a timely fashion new products that achieve market acceptance. We have, from
time to time, experienced delays in developing new products and enhancements,
and while these have not had a material adverse effect on our business, if in
the future, we are unable to develop and introduce new products or product
enhancements in a timely manner, this could have a material adverse effect on
our business, financial condition and results of operations. In addition if the
products we develop are not widely accepted by customers, we are not able to
identify, develop, manufacture, market or support new products successfully or
we are unable to respond effectively to technological changes, revisions in
industry standards or product announcements by competitors, our business,
operating results and financial condition would be adversely affected.

We Expect Our Revenue to be Primarily from New Products. We expect that new
products and related services will account for a substantial portion of our
revenues in the foreseeable future. Since we expect to rely less on existing
products for revenue, factors adversely affecting the pricing of or demand for
our newer TMN-related software and services, such as competition for new
products or lack of customer acceptance, could have a disproportionately adverse
effect on our business, operating results and financial condition.

Potential Future Products May Limit Current Product Sales. From time to
time we announce new products, capabilities or technologies that have the
potential to replace our existing product offerings. These announcements can
cause customers to defer purchasing or licensing our existing products, which
would adversely affect our business, operating results and financial
condition.

Changes in Governmental Regulations Could Make our Products Less
Marketable. The telecommunications industry is subject to regulation in the
United States and other countries, and therefore our products and the businesses
of our current and potential customers are required to receive regulatory
approvals from multiple organizations using different standards. The enactment
or amendment by federal, state or foreign governments of new laws or regulations
or changes in the interpretation of existing regulations could adversely affect
our products and the businesses of our current and potential customers, and
therefore affect our business, operating results and financial conditions.

Our Products are Targeted at Undeveloped Markets; Our Success Depends on
their Maturation. As part of our corporate strategy, we have targeted product
markets which are in the early stage of their development, including the TMN
market. If these markets do not mature as we expect them to, we will not have
the growth opportunities we currently hope for. We believe that the TMN
applications markets will take years to develop and that development of this
market will require: (1) a sufficient number of high quality, commercially
successful communications applications based on the TMN Standard, and (2) the
availability of software infrastructure products that allow telecommunications
equipment manufacturers and service providers to implement TMN in their
products. There can be no assurance that these conditions will be met in a
timely way, if at all. We cannot predict the size of the market or the rate at
which the market will grow and if the markets fail to grow, grow more
slowly

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than anticipated, or become saturated with competitors, our business, financial
condition and results of operations would be materially adversely affected.

Our Quarterly Results are Based on a Small Number of Large Orders that are
Subject to Many Factors Outside of Our Control. A substantial portion of our
software revenues have been, and will continue to be, derived from a small
number of large orders placed by large organizations after extended evaluation.
The timing of orders and their fulfillment has caused and will continue to cause
material fluctuations in our operating results, particularly on a quarterly
basis. In addition, our quarterly operating results have in the past and will in
the future vary significantly depending upon factors such as:

. capital spending patterns of our customers;

. changes in pricing policies by ourselves and our competitors;

. increased competition;

. the cancellation of service or maintenance agreements;

. changes in operating expenses, personnel changes, demand for our
products;

. the number, timing and significance of new product and product
enhancement announcements by either ourselves or our competitors;

. our ability to develop, introduce and market new and enhanced versions
of our products on a timely basis;

. the mix between U.S. and international sales;

. seasonality; and

. the mix of direct and indirect sales and general economic
factors.

Based upon all of these factors, we believe that quarterly revenues and
operating results are likely to vary significantly in the future and that
period-to-period comparisons of results of operations are not necessarily
meaningful and should not be relied upon as indications of future performance.
There can be no assurance that our revenue will increase or be sustained in
future periods or that we will be profitable in any future period. Further, it
is likely that in some future quarter our revenue or operating results will be
below the expectations of public market analysts and investors. In such event,
the price of our common stock is likely to be materially adversely
affected.

A Portion of Our Revenues Are Seasonal. Our sales in Europe are adversely
affected in the third quarter of each year as many customers and end-users
reduce their business activities during the summer months. These seasonal
factors may have an effect on our quarterly results of operations.

The Timing of Our Orders May Result in Large Swings in Quarterly Operating
Results. We typically realize a significant portion of our software license
revenues in the last month of a quarter, and frequently in the last weeks or
even days of a quarter. Since our revenues are based in large part on a limited
number of large orders, small delays in a limited number of orders can have a
dramatic effect on quarterly results.

Certain Portions of Our Costs are Fixed in the Short Term. We currently
intend to increase funding of research and product development, increase sales
and market development activities and expand our distribution channels which
will increase our expense rates. Because only a small portion of our expenses
varies with revenue in the short term, net income may be disproportionately
affected by a reduction in revenue, particularly since reductions in revenue may
not be apparent until the last days of a quarter. Similarly, to the extent
additional expenses are not subsequently followed by increased revenues, our
business, operating results and financial condition could be materially and
adversely affected. If revenue levels are below expectations, operating results
are likely to be materially adversely affected.

Lengthy Sales Cycles Make Predictions of Revenues Difficult. Our sales
cycle is subject to a number of significant delays over which we have little
control. Therefore, significant delays in implementation, or delays in
purchases by customers, whether or not such delays are within our control, could
materially adversely affect our business, operating results and financial
condition. Our products are complex and generally involve significant

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<PAGE>

investment decisions after extended evaluations by prospective customers.
Accordingly, we must engage in a lengthy sales cycle to provide a significant
level of education regarding the use and benefits of our products to potential
customers. Our customers often must secure executive level approval to license
our products and our license agreements often involve lengthy negotiation. In
addition, the implementation of our software products involves a significant
commitment by customers over an extended period of time.

Our Fixed Price Arrangements Could Result in Losses. From time to time we
enter into fixed price arrangements for professional services. Fixed price
arrangements could in the future result in losses due to delays in the
implementation process or other complexities associated with completion of the
project underlying these arrangements, such as unknown characteristics of the
customer software for which we are providing services.

Increased Sales and Marketing Expenditures May Not Be Effective. During
1999, we plan to increase our number of direct sales and marketing personnel to
support the further development of TMN market opportunities. As we hire new
sales and marketing personnel we anticipate that there will be a delay before
they become effective. There can be no assurance that we will be successful in
attracting or retaining qualified sales and marketing personnel, that this
expansion will result in sales of our products, that the costs of this expansion
will not exceed the revenues generated, or that our sales and marketing
organization will successfully compete against the larger and better funded
sales and marketing organizations of our competitors.

Our Markets are Very Competitive and Many of Our Competitors are Larger
than We Are. We experience significant competition in telecommunications network
management from TCSI, OSI, IBM, Sun Microsystems, DSET and major
telecommunication vendors such as AT&T, all of whom have longer operating
histories and have greater financial, technical, sales, marketing and other
resources than we do. There can be no assurance that we will be able to
identify, develop, manufacture, market or support products successfully or that
we will be able to respond effectively to technological changes or product
announcements by our competitors. Moreover, our current and potential
competitors may respond more quickly than we do to new or emerging technologies
or changes in customer requirements. In addition, as the market develops, a
number of companies with significantly greater resources than us could attempt
to increase their presence in the market by acquiring or forming strategic
alliances with our competitors resulting in increased competition. There can be
no assurance that we will be able to compete successfully with these
competitors.

Our Software is Complex and Therefore is Prone to Bugs. The development,
enhancement and implementation of our products entail risks of product defects
or failures. In the past we have discovered software bugs in certain of our
products and software solutions. Although to date we have not experienced
material adverse effects resulting from any bugs, there can be no assurance that
errors will not be found in existing or new products or releases after
commencement of commercial licensing, which may result in delay or loss of
revenue, loss of market share, failure to achieve market acceptance, or may
otherwise adversely impact our business, operating results and financial
condition. Moreover, the complexities involved in implementing and customizing
our software solutions entail additional risks of performance failures.

Our Software Operates with Third-Party Software Which May Not be Year 2000
Compliant. New releases of our software have been designed to address
processing for the Year 2000 to the extent it has been required. We have
completed a review of all of our developed products and believe that all of our
products will be Year 2000 compliant by March 1999. However, to the extent that
others, such as system integrators, make use of our software in developing
solutions for third parties, we may have no knowledge as to the Year 2000
readiness of those third party products. In addition it is possible that third
parties could assert claims against us or our customers concerning Year 2000
issues and regardless of their merits or lack thereof, any claims could be
material.

Our Internal Systems May Not Be Year 2000 Compliant. As with other
organizations, our internal computer systems and programs were originally
designed to recognize calendar years by their last two digits. Calculations
performed using these truncated fields would not work properly with dates from
the Year 2000 and beyond. We have completed an evaluation of Year 2000 issues
associated with our internal computer systems. Most of our computer systems are
already Year 2000 compliant. Other internal computer and other systems that
have been identified as non-compliant and will be upgraded to be Year 2000
compliant by June 1999, however if

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<PAGE>

we are unsuccessful in completing these upgrades in a timely way, our business
could be materially adversely affected.

Our Suppliers' Systems May Not Be Year 2000 Compliant We have also
completed an evaluation of the possible effects on our operations of the Year
2000 readiness of our key suppliers. We rely on third party manufacturers for
the proper functioning of our information systems, software and products. The
failure of those manufacturers to address Year 2000 issues could have a material
impact on our operations and financial results; however, the potential impact
and related costs are not known at this time.

Our Stock Price Could be Volatile. Announcement of new products by us or
our competitors and quarterly variations in financial results could cause the
market price of our common stock to fluctuate substantially. In addition, the
stock market has experienced price and volume fluctuations from time to time
that have affected the market prices of many technology-based companies and that
are not necessarily related to the operating performance of these companies.

Our Stock May be Delisted. The Nasdaq Stock Market has announced a policy
of delisting securities that trade below the price of $1.00 per share for more
than 10 business days. While our stock price has not been below $1.00 at any
time in the past, it has approached $1.00 in recent periods. If the price of
our common stock falls below $1.00 and our common stock is subsequently delisted
our shares would become highly illiquid. In addition, we could spend material
financial and management resources in an attempt to avoid delisting.

Our International Sales are Subject to Factors Outside of Our Control.
Sales to customers outside of the United States accounted for a substantial
fraction of our net revenues for 1996, 1997 and 1998 and we expect that
international sales will continue to be a significant portion of our business.
International sales and operations are subject to many factors outside of our
control, such as the imposition of governmental controls, export license
requirements, restrictions on the export of critical technology, political
instability, trade restrictions and tariffs. Furthermore, because we have to
maintain sales offices in different countries in order to make these sales, our
management must address differences in regulatory environments and cultures. If
we are unable to address these differences successfully our business, financial
condition and results of operations would be adversely affected.

Our International Sales are Subject to Currency Fluctuations. Although our
international sales are typically denominated in U.S. Dollars, they still may be
adversely affected by exchange rate fluctuations if the relative cost of our
products becomes higher. Fluctuations in exchange rates could also result in
exchange losses. The impact of future exchange rate fluctuations cannot be
predicted adequately. To date, we have not sought to hedge the risks associated
with fluctuations in exchange rates, but may begin hedging in the future. There
can be no assurance that our results of operations will not be materially
adversely affected by exchange rate fluctuations.

We Depend on Third-Parties for Key Elements of Our Technology. We license
certain technology included in our products. While we do not believe that any
of this technology could not be replaced, it might require substantial time and
effort to do so. If we become unable to utilize this technology our operations
could be adversely affected.

Losing a Limited Number of Key Employees Could Adversely Affect Our
Business. Our success depends to a significant degree upon the continued
contributions of key management, sales, marketing, engineering and research and
development personnel, many of whom would be difficult to replace. If certain of
these employees were to leave, we would be adversely affected.

Recruiting the Type of Employees We Require is Difficult. We believe our
future success will also depend in large part upon our ability to attract and
retain highly skilled software engineers, and managerial, sales and marketing
personnel. Competition for these types of personnel is intense and there can be
no assurance that we will be successful in attracting and retaining the
necessary personnel. To the extent we are not successful in attracting or
retaining key personnel, we could also be adversely affected.

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Our Current Efforts to Protect Our Intellectual Property May Be
Insufficient. We regard our products as proprietary and rely primarily on a
combination of statutory and common law copyright, trademark and trade secret
laws, customer licensing agreements, employee and third-party nondisclosure
agreements and other methods to protect our proprietary rights. We also
generally enter into confidentiality and invention assignment agreements with
our employees and consultants. Additionally, we enter into confidentiality
agreements with certain of our customers and potential customers and limit
access to, and distribution of, our source code and other proprietary
information. Despite these precautions, it may be possible for a third party to
copy or otherwise obtain and use our technologies without authorization, or to
develop similar technologies independently. Furthermore, the laws of certain
countries in which we do business, such as China and Korea do not protect our
software and intellectual property rights to the same extent as do the laws of
the United States. We do not include in our software any mechanisms to prevent
or inhibit unauthorized use, but generally either require the execution of an
agreement that restricts copying and use of our products or provides for the
same in a break-the-seal license agreement. If unauthorized copying or misuse of
our products were to occur to any substantial degree, our business, financial
condition and results of operations could be materially adversely affected. We
cannot provide any assurance that our means of protecting our proprietary rights
will be adequate or that our competitors will not independently develop similar
technology.

It is Possible that We Infringe the Intellectual Property of Third Parties.
While we have not received claims alleging infringement of the proprietary
rights of third parties which we believe would have a material adverse effect on
our business, financial condition or results of operations, nor are we aware of
any similar threatened claims, we cannot provide any assurance that third
parities will not claim that our current or future products infringe the
proprietary rights of others. Any claim, with or without merit, could result in
costly litigation or might require us to enter into royalty or licensing
agreements. Royalty or licensing agreements, if required, may not be available
on reasonable terms, or at all.

This Prospectus contains statements regarding the future including, among
other things, our expectations, beliefs, intentions and strategies. All of
these statements are based on information available to us as of the date of this
Prospectus, and we are not obligating ourselves to update the public with
respect to these statements in the event of future developments. Our actual
results could differ materially from our expectations as a result of, among
other things, the risk factors described below and in the documents incorporated
by reference from our filings with the SEC. You should carefully consider the
following risk factors in addition to the risk factors set forth in our filings
with the SEC before making a decision to purchase any shares.

SALE OF COMMON STOCK TO SELLING SHAREHOLDERS

On September 29, 1998 we sold the shares being registered in this
prospectus to the selling shareholders at a price per share of $1.50, which was
equal to the average closing price of our common stock on the Nasdaq Stock
Market for the five (5) trading days immediately preceding the closing. Under
the terms of that agreement we agreed to file the registration statement that
includes this prospectus to maintain the effectiveness of that registration
statement until all of the shares were sold. We also agreed to bear the
registration expenses incurred in connection with the registration and sale of
the shares. We also agreed with the selling shareholders that we would indemnify
one another for any misstatements in the information we provided to one another
for inclusion in the registration statement.

USE OF PROCEEDS

All of the shares of common stock offered hereby are being sold by the
shareholders listed on page 8. We will not receive any proceeds from the
offering.

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DETERMINATION OF OFFERING PRICE; PLAN OF DISTRIBUTION

The shares are being registered for sale on a continuous basis under Rule
415 of the Securities Act of 1933. The selling shareholders will pay selling
commissions or brokerage fees, if any, with respect to the sale of the shares in
amounts customary for the type of transaction effected. The selling shareholders
will also pay all applicable transfer taxes and all fees and disbursements of
counsel for the selling shareholders incurred in connection with the sale of the
shares.

The selling shareholders, and any other persons who participate in the sale
of the shares, may be deemed to be "Underwriters" as defined in the Securities
Act of 1933. Any commissions paid or any discounts or concessions allowed to
them, and any profits received on resale of the shares, may be deemed to be
underwriting discounts and commissions under the Securities Act of 1933.

The selling shareholders may distribute, donate or transfer the shares held
by them to third-parties, including family members and limited partners, which
parties may sell the shares received by them using this Prospectus. Following
any transfer, but prior to any sale by a transferee, we will amend this
Prospectus, as required by the SEC, to reflect that distribution, donation or
transfer.

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SELLING SHAREHOLDERS

The following table sets forth certain information as of March 1, 1999 with
respect to the selling shareholders. There were 25,002,362 shares outstanding as
of March 1, 1999. Except as indicated, none of the selling shareholders has held
any position or office or had a material relationship with Vertel or any of its
affiliates within the past three years other than as a result of the ownership
of our common stock. We may amend or supplement this prospectus from time to
time to update the disclosure set forth herein, including as a result of any
transfers or distributions of the shares by the selling shareholders.

Shares Beneficially Owned Shares Offered Shares Beneficially Owned
Name of Selling Shareholder Prior to the Offering After the Offering
- --------------------------- Number Percent Hereby Number Percent
--------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C>
Sierra Ventures V, L.P........................ 4,457,627 17.8% 1,000,000 3,457,627 13.8%
3000 Sand Hill Road
Building 4, Suite 210
Menlo Park, CA 94025
Attention: Jeffrey M. Drazan

Jeffrey M. Drazan (1)......................... 4,499,025 18.0 1,000,000 3,499,025 14.0
Sierra Ventures
3000 Sand Hill Road
Building 4, Suite 210
Menlo Park, CA 94025

Pequot Private Equity Fund, L.P............... 887,618 3.6 887,618 -- *
c/o Dawson-Samberg Capital
Management, Inc.
354 Pequot Avenue.
Southport, CT 06490
Attention: Amiel Peretz

Pequot Offshore Private Equity Fund, L.P...... 112,382 0.5 112,382 -- *
c/o Dawson-Samberg Capital
Management, Inc.
354 Pequot Avenue.
Southport, CT 06490
Attention: Amiel Peretz
</TABLE>
- -------------------------
* Less than one percent (1%)

(1) Includes 4,457,627 shares held by Sierra Ventures V, L.P. Mr. Drazan, a
director of Vertel is a general partner of Sierra Ventures V, L.P. but
specifically disclaims beneficial ownership of such shares except to the
extent of his pecuniary interest therein. Also includes options to purchase
78,223 shares of the Vertel's common stock, 41,398 of which are exercisable
within sixty (60) days of the date of this table.

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INTEREST OF NAMED EXPERTS AND COUNSEL

Venture Law Group, A Professional Corporation, 2800 Sand Hill Road, Menlo
Park, California 94025 will be providing Vertel with an opinion that the shares
being offered in this prospectus are legally and validly issued, fully paid and
nonassessable. Craig W. Johnson a director of Venture Law Group, is also a
director of Vertel and as such is entitled to receive periodic grants under
Vertel's Directors' Stock Option Plan. As of the date of this prospectus, Mr.
Johnson holds options to purchase 68,733 shares of Vertel common stock.

WHERE YOU CAN FIND MORE INFORMATION

This prospectus is part of a Registration Statement on Form S-3 filed by us
with the SEC under the Securities Act of 1933. This prospectus does not contain
all of the information in the registration statement, certain parts of which are
omitted in accordance with the rules and regulations of the SEC. For further
information about Vertel and the shares offered under this prospectus, you
should review the registration statement. Statements in this prospectus
concerning the provisions of any document are not necessarily complete and we
recommend that you review the complete copy of such document filed with the SEC.
The registration statement, including exhibits, may be inspected without charge
and can be copied at the public reference facilities maintained by the SEC
located at 450 Fifth Street, N.W., Washington, D.C. 20549, and at its regional
offices located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and 7 World Trade Center, Suite 1300, New York, New
York 10048. In addition, we are an electronic filer and copies of such material
may be retrieved from the web site maintained by the SEC (http://www.sec.gov).
We are also subject to the informational requirements of the Securities Exchange
Act of 1934 and therefore file proxy statements, reports and other information
with the SEC. Reports, proxy and information statements, and other information
filed by us with the SEC may be inspected as described above or at the Nasdaq
Stock Market, 1735 K Street, N.W., Washington, DC 20006-1506.

The following documents filed by us with the SEC are incorporated by
reference in this prospectus:

1. Our Annual Report on Form 10-K for the year ended December 27,
1997.

2. Our definitive Proxy Statement dated March 6, 1998, filed in
connection with our March 31, 1998 Annual Meeting of
Shareholders.

3. Our Quarterly Report on Form 10-Q for the quarter ended March 28,
1998.

4. Our Current Report on Form 8-K dated April 13, 1998.

5. Our Quarterly Report on Form 10-Q for the quarter ended June 27,
1998.

6. Our Quarterly Report on Form 10-Q for the quarter ended September 26,
1998.

7. Our Current Report on Form 8-K dated December 3, 1998.

8. Our Current Report on Form 8-K dated January 15, 1999.

9. The description of Vertel common stock which is contained in Items 1
and 2 of our Registration Statement on Form 8-A filed under Section 12
of the Exchange Act on November 11, 1991.

10. The description of Vertel Preferred Share Purchase Rights which is
contained in Items 1 and 2 of our Registration Statement on Form 8-A
filed under Section 12 of the Exchange Act on April 30, 1997.

11. All documents filed by us under 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 this offering.

-9-
<PAGE>

Any statement contained in a document incorporated by reference shall be
deemed to be modified or superseded to the extent that a statement contained in
this prospectus (or in any other subsequently filed document which is
incorporated by reference) modifies or supersedes such statement. Any such
statement so modified or superseded shall not be a part of this prospectus,
except as so modified or superseded.

We will furnish to each person, including any beneficial owner, to whom
this prospectus is delivered, on the written or oral request of such person, a
copy of any or all of the documents incorporated by reference, other than
exhibits to such documents, without charge. Requests should be directed to
Vertel Corporation, 21300 Victory Blvd., Suite 1200, Woodland Hills, California
91367, telephone: (818) 227-1400, Attn: Investor Relations.

-10-
<PAGE>

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses payable by Vertel in
connection with the sale and distribution of the common stock being registered.
Selling commissions and brokerage fees and any applicable transfer taxes and
fees and disbursements of counsel for the selling shareholders are payable
individually by the selling shareholders. All amounts are estimates except the
registration fee.

<TABLE>
<CAPTION>
Amount
To be Paid
--------------
<S> <C>
Registration Fee.................................................................. $ 1,042.50

Nasdaq Fee for Listing of Additional Shares....................................... 17,500.00

Legal Fees and Expenses........................................................... 20,000.00

Accounting Fees and Expenses...................................................... 10,000.00

Miscellaneous..................................................................... 11,457.50

Total.......................................................................... $60,000.00
</TABLE>

Item 15. Indemnification of Directors and Officers

Section 317 of the California Corporations Code authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the "Securities
Act"). Our Bylaws provide that we shall indemnify its directors and officers to
the fullest extent permitted by California law, including circumstances in which
indemnification is otherwise discretionary under California law. We have
entered into indemnification agreements with its officers and directors
containing provisions that are in some respects broader than the specific
indemnification provisions contained in the California Corporations Code.

Item 16. Exhibits
<TABLE>
<CAPTION>

Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
2.1 Share Purchase Agreement dated December 31, 1998 among the Registrant,
Newbridge (Barbados) Corporation and Sonoma Systems.(15)

3.3 Amended and Restated Articles of Incorporation of the Registrant.(4)

3.4 Bylaws of the Registrant, as amended to date.(12)

3.5 Certificate of Amendment to Registrant's Articles of Incorporation.(13)

5.1 Legal Opinion of Venture Law Group, A Professional Corporation.(16)

10.2 1988 Stock Option Plan and forms of option agreements thereunder.(5)

10.4 1991 Directors' Stock Option Plan and forms of option agreements thereunder, as amended to date.(7)

10.5 1991 Employee Stock Purchase Plan and form of subscription agreement thereunder.(2)
</TABLE>

II-1
<PAGE>

<TABLE>
<S> <C>
10.6 Form of Indemnification Agreement.(1)

10.22 Lease Agreement between the Registrant and Moorpark Associates, a California Limited Partnership,
dated February 5, 1993.(3)

10.27 Lease Agreement between the Registrant and OMA El Segundo Properties, a California general
partnership, dated May 23, 1995.(6)

10.28 Employment Agreement between M.Y. Stephan and Retix, dated September 27, 1995.(6)

10.29 Employment Agreement between Philip Mantle and Retix, dated November 1, 1995.(6)

10.30 Common Stock and Warrant Purchase Agreement by and between Retix and Sierra Ventures V.LP., dated
January 30, 1996.(6)

10.31 Master Agreement dated February 28, 1996 for Spin-Off of Open Systems Interconnection Technology
between Telaware Corporation and Retix.(6)

10.32 1996 Directors' Stock Option Plan and forms of option agreement thereunder.(12)

10.33 Form of Exercise Notice and Stock Purchase Agreement between the Company and M.Y. Stephan, dated
January 30, 1996.(7)

10.34 Form of Exercise Notice and Stock Purchase Agreement between the Company and M.Y. Stephan, dated
March 18, 1996.(7)

10.35 Form of Exercise Notice and Stock Purchase Agreement between the Company and M.Y. Stephan, dated
March 18, 1996.(7)

10.36 Form of Exercise Notice and Stock Purchase Agreement between the Company and Philip Mantle, dated
January 30, 1996.(7)

10.37 Form of Exercise Notice and Stock Purchase Agreement between the Company and Philip Mantle, dated
March 18, 1996.(7)

10.38 Form of Exercise Notice and Stock Purchase Agreement between the Company and Steven M. Waszak,
dated March 18, 1996.(7)

10.39 Form of Exercise Notice and Stock Purchase Agreement between the Company and Steven M. Waszak,
dated January 30, 1996.(7)

10.40 Form of Exercise Notice and Stock Purchase Agreement between the Company and Steven M. Waszak,
dated February 21, 1996.(7)

10.41 Form of Exercise Notice and Stock Purchase Agreement between the Company and Steven M. Waszak,
dated March 26, 1996.(7)

10.42 Form of Exercise Notice and Stock Purchase Agreement between the Company and Steven M. Waszak,
dated March 26, 1996.(7)

10.43 Form of Exercise Notice and Stock Purchase Agreement between the Company and Steven M. Waszak,
dated March 26, 1996.(7)

10.44 Form of Exercise Notice and Stock Purchase Agreement between the Company and Steven M. Waszak,
dated March 26, 1996.(7)

10.45 Sublease Agreement dated May, 1996 between Value Behavioral Health and Retix.(8)

10.46 Master Agreement between Retix and Internetworking Solutions dated May 31, 1996.(8)

10.47 Master Agreement between Retix and Wireless Solutions dated May 31, 1996.(8)

10.48 Lease Agreement between the Registrant and Nomura-Warner Center Associates, L.P., dated November
26, 1996.(9)
</TABLE>

II-2
<PAGE>

<TABLE>
<S> <C>
10.49 Stock Transfer Agreement between Retix, Vertel Corporation and Wireless Solutions dated June 10,
1997.(10)

10.50 Surrender of Lease between Cofton Irish Investments and Retix B.V., dated August 21, 1997.(11)

10.51 Sub-Sublease Agreement between TSN, L.L.C., and Retix, dated August 22, 1997.(11)

10.52 Executive Separation Agreement between Retix and M.Y. Stephan dated December 27, 1997. (12)

10.53 Executive Separation Agreement between Retix and Philip Mantle dated December 27, 1997.(12)

10.54 Executive Separation Agreement between Retix and Steve Waszak dated December 27, 1997.(12)

10.55 Amended and Restated Articles of Incorporation of Sonoma Systems, Inc., and related documents
dated January 7, 1998.(12)

10.56 Sub-sublease between Retix and Sonoma Systems, Inc., dated December 28, 1997.(12)

10.57+ Sale and License Agreement between the Company and AMP Incorporated, dated July 27, 1998, and an
Amendment dated October 9, 1998 (14)

10.58 Common Stock Purchase Agreement between the Company and Pequot Private Equity Fund, L.P. and
Pequot Offshore Private Equity Fund, Inc. and Sierra Ventures V, L.P., dated September 29, 1998
(14)

21.1 Subsidiaries of the Registrant. (12)

23.1 Independent Auditors' Consent

23.2 Consent of Counsel (included in Exhibit 5.1)

24.1 Power of Attorney (see page II-5).

27.1 Financial Data Schedule.(14)
</TABLE>
- ---------------------------------------------------

+ Confidential Treatment Requested
(1) Incorporated by reference to identically numbered exhibits filed
in response to Item 16(a), "Exhibits," of the Registrants
Registration Statement on Form S-1 and Amendment No. 1 thereto
(File No. 33-43544) which became effective on December 9, 1991.

(2) Incorporated by reference to identically numbered exhibits filed
in response to Item 6(a), "Exhibits," of the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
September 26, 1992.

(3) Incorporated by reference to identically numbered exhibits filed
in response to Item 14(a)(3), "Exhibits," of the Registrant's
Annual Report on Form 10-K for the fiscal year ended January 2,
1993.

(4) Incorporated by reference to identically numbered exhibit filed
in response to Item 6(a), "Exhibits," of the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
October 1, 1994.

(5) Incorporated by reference from Registrant's Registration
Statement on Form S-8 (No. 33-82154) filed on July 28, 1994.

(6) Incorporated by reference to identically numbered exhibits filed
in response to Item 14(a)(3), "Exhibits," of the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1995.

(7) Incorporated by reference to identically numbered exhibit filed
in response to Item 6(a), "Exhibits," of the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended March
30, 1996.

(8) Incorporated by reference to identically numbered exhibit filed
in response to Item 6(a), "Exhibits," of the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 1996.

(9) Incorporated by reference to identically numbered exihibits filed
in response to Item 14(a)(3), "Exhibits," of the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 28,
1996.

II-3
<PAGE>

(10) Incorporated by reference to identically numbered exhibit filed
in response to Item 6(a), "Exhibits," of the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended June
28, 1997.

(11) Incorporated by reference to identically numbered exhibit filed
in response to Item 6(a), "Exhibits," of the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
September 27, 1997.

(12) Incorporated by reference to identically numbered exhibits filed
in response to Item 14(a)(3), "Exhibits," of the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 27,
1997.

(13) Incorporated by reference to identically numbered exhibit filed
in response to Item 7, "Financial Statements and Exhibits," of
the Registrant's Current Report on Form 8-K filed on April 13,
1998.

(14) Incorporated by reference to identically numbered exhibit filed
in response to Item 6(a), "Exhibits," of the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
September 27, 1998.

(15) Incorporated by reference to identically numbered exhibit filed
in response to Item 7, "Financial Statements and Exhibits," of
the Registrant's Current Report on Form 8-K filed on January 15,
1999.

(16) Previously filed with this Registration Statement.

Item 17. Undertakings

The undersigned Registrant hereby undertakes:

(1) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.

(4) That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act) that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referred to in Item 15 above or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted against the Registrant by such director, officer
or controlling person in connection with the securities being registered
hereunder, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Woodland Hills, State of California, on the 29 day
of March, 1999.

VERTEL CORPORATION

By: /s/ Bruce W. Brown
-----------------------------
Bruce W. Brown
President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:

<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------------------ ------------------------------------------------- -----------------------
<S> <C> <C>
/s/ Bruce W. Brown President, Chief Executive Officer and March 29, 1999
- ------------------------------------------ Director (Principal Executive Officer)
(Bruce W. Brown)

/s/ Gordon L. Almquist Vice President Finance and Chief Financial March 29, 1999
- ------------------------------------------ Officer (Principal Financial and Accounting
(Gordon L. Almquist) Officer)

Director
- ------------------------------------------
(Howard Orlnger)

*
- ------------------------------------------ Director March 29, 1999
(Craig W. Johnson)

*
- ------------------------------------------ Director March 29, 1999
(Jeffrey Drazan)

*
- ------------------------------------------ Director March 29, 1999
(Gilbert Williamson)

*
- ------------------------------------------ Director March 29, 1999
(Ralph Ungermann)

*By: /s/ Gordon L. Almquist
-------------------------------------
Gordon L. Almquist,
Attorney-in-Fact
</TABLE>

II-5
<PAGE>

Vertel Corporation

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------------ ----------------------
<C> <S>
2.1 Share Purchase Agreement dated December 31, 1998 among the Registrant,
Newbridge (Barbados) Corporation and Sonoma Systems.(15)

3.3 Amended and Restated Articles of Incorporation of the Registrant.(4)

3.4 Bylaws of the Registrant, as amended to date.(12)

3.5 Certificate of Amendment to Registrant's Articles of Incorporation.(13)

5.1 Legal Opinion of Venture Law Group, A Professional Corporation.(16)

10.2 1988 Stock Option Plan and forms of option agreements thereunder.(5)

10.4 1991 Directors' Stock Option Plan and forms of option agreements thereunder, as amended to date.(7)

10.5 1991 Employee Stock Purchase Plan and form of subscription agreement thereunder.(2)

10.6 Form of Indemnification Agreement.(1)