Prospectus Summary
This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, especially the “Risk Factors” section beginning on page 7 and our consolidated financial statements and the related notes appearing at the end of this prospectus, before making an investment decision.
AIRVANA, INC.
Overview
Airvana is a leading provider of network infrastructure products used by wireless carriers to provide mobile broadband services. Our software and hardware products, which are based on Internet Protocol, or IP, technology, enable wireless networks to deliver broadband-quality multimedia services to mobile phones, laptop computers and other mobile devices. These services include Internet access, e-mail, music downloads, video, IP-TV, gaming, push-to-talk and voice-over-IP, or VoIP. Broadband multimedia services are growing rapidly as business users and consumers increasingly use mobile devices to work, communicate, play music and video, and access the Internet.
Our products leverage our expertise in three technologies — wireless communications, IP and broadband networking. IP technology is the foundation of our solutions. Our solutions enable new services and deliver carrier-grade mobility, scalability and reliability with relatively low operating and capital costs. As a result, our products have advantages over products based on circuit-switched or legacy communication protocols.
Our current mobile broadband network products are based on a wireless communications standard called CDMA2000 1xEV-DO, or EV-DO. In 2002, we began delivering products based on the first generation EV-DO standard known as Revision 0, or Rev 0, which has been deployed throughout the networks of many wireless carriers. Our next version of software is based on the second generation EV-DO standard known as Revision A, or Rev A, which provides increased data speeds and supports push-to-talk and VoIP. Certain major wireless carriers are currently deploying this new, faster technology in their networks.
We are developing new products to address the markets for fixed-mobile convergence, or FMC, and in-building mobile broadband services. We recently commenced trials of our first FMC product. Our FMC products will enable carriers to take advantage of wireline broadband connections that already exist in most offices and homes to deliver wireless services through a combination of cellular and Wi-Fi networks. Our FMC products under development include versions to support CDMA, UMTS and WiMAX networks. We also utilize our mobile broadband technology and products in specialized applications, such as military and public safety communications, that require their own mobile networks.
We sell our EV-DO products primarily through an original equipment manufacturer, or OEM, agreement with Nortel Networks. Through Nortel Networks, we have sold EV-DO product licenses for use by over 30 carriers worldwide, including Alltel, Bell Mobility, Sprint Nextel, Telefonica, Telus and Verizon Wireless. Also, we have entered into OEM agreements with Alcatel-Lucent to develop and sell additional EV-DO products and with Qualcomm to sell EV-DO systems.
We collaborate with our OEM customers to develop and negotiate pricing for specific features for future product releases and specified software upgrades. Because we do not sell the same products and upgrades to more than one customer, we are unable to establish fair value for these products and upgrades. As a result, we are required to defer most of our revenue from sales to our OEM customers until we ship specified upgrades that were committed to the OEM customer at the time of sale. Because of this deferral, we believe that our product and service billings are a better reflection of our sales activity in any period.
In fiscal 2006, our revenue was $170.3 million, our product and service billings were $140.6 million, our cash flow from operating activities was $25.1 million and our operating income was $57.1 million. In fiscal 2006, Nortel Networks accounted for 95% of our revenue and 94% of our billings. Our research and development team is comprised of approximately 380 engineers, and we have spent over $180.0 million on the development of our products over the past seven years.
End box 1 END LOGICAL PAGE PAGEBREAK BEGIN LOGICAL PAGE Begin box 1Market Opportunity
Mobile broadband services fulfill needs of both consumers and business users. For consumers, mobile broadband presents an opportunity to access on their mobile phones all of the multimedia services they normally access from their home or office using their wireline broadband connection. These services include music downloads, video streaming, gaming, information access (searches, news, weather, financial data) and electronic commerce. For business users, mobile broadband provides high-speed access to email, file downloads and online information through their mobile phones, smart phones and laptop computers.
By delivering wireless broadband services, carriers are increasing their data services revenue, thereby mitigating the decline in voice revenue caused by heightened competition. We expect that the introduction of VoIP telephony services on mobile broadband networks, coupled with the accelerated use of other multimedia applications, will increasingly make mobile broadband networks the primary method for mobile communications and entertainment.
Traditional circuit-switched networks cannot effectively deliver mobile multimedia services, which require a technology optimized for the Internet and capable of transmission at broadband speed. Wireless carriers therefore need a new solution — a mobile broadband architecture based on IP technology. This solution must be deployable at relatively low cost, sufficiently scalable to support millions of users and capable of delivering carrier-grade reliability. The development of these solutions requires a combination of three disciplines: wireless communications, IP and broadband networking.
Our Solution
We have developed a suite of IP-based wireless infrastructure products that allow carriers to provide users of mobile phones, laptop computers and other mobile devices with access to mobile broadband services. Our products:
Our Strategy
Our strategy is to enhance our leadership in the mobile broadband infrastructure market by growing our EV-DO business, expanding our current product offering, acquiring new customers and seeking selected acquisition opportunities. Principal elements of our strategy include the following:
End box 1 END LOGICAL PAGE PAGEBREAK BEGIN LOGICAL PAGE Begin box 1Our Corporate Information
We were incorporated in Delaware on March 13, 2000. Our corporate headquarters are located at 19 Alpha Road, Chelmsford, Massachusetts 01824, and our telephone number is (978) 250-3000. Our website address is www.airvana.com. The information contained on our website or that can be accessed through our website is not part of this prospectus, and investors should not rely on any such information in making the decision whether to purchase our common stock.
Unless the context otherwise requires, we use the terms “our company,” “we,” “us” and “our” in this prospectus to refer to Airvana, Inc. and its subsidiaries.
End box 1 END LOGICAL PAGE PAGEBREAK BEGIN LOGICAL PAGE Begin box 1