Prospectus Summary
This summary highlights selected information contained elsewhere in this prospectus. This summary may not contain all of the information that you should consider before investing in our common stock. You should carefully read the entire prospectus including "Risk Factors" and the financial statements, before making an investment decision.
Our Business
Foundry Networks designs, develops, manufactures and markets a comprehensive suite of high performance networking products for enterprises and Internet service providers. Our Gigabit Ethernet Layer 2, Layer 3 and Layer 4-7 switches enable our customers to build and maintain efficient, high performance networks. Layer 2 switches provide dedicated bandwidth, while Layer 3 switches route network traffic. Layer 4-7 switches, a new generation of networking devices, provide the intelligence to control information delivery. Our products provide solutions for many types of networks, including local area networks or LANs, metropolitan area networks or MANs, and wide area networks or WANs. This product breadth allows us to provide solutions throughout a customer's network, from the wiring closet edge of an enterprise LAN to the LAN core, and from the WAN edge of an Internet service provider to its network of Internet servers.
By using customized semiconductors, known as application-specific integrated circuits, or ASICs, we provide switching products that offer better performance at a lower cost than traditional software-based routers. Our Layer 2 and Layer 3 switches provide the bandwidth required to support the increasing use of bandwidth-intensive and Internet-based applications. Our high performance Layer 4-7 switching products allow enterprises and Internet service providers to direct traffic flow more efficiently, based on application type and end user, while also allowing Internet service providers to offer their customers differentiated, fee-based quality of service. By providing high levels of performance and network intelligence capabilities at leading price points we provide a comprehensive solution to address the rapidly growing networking market.
The emergence of the Internet and bandwidth-intensive applications has posed new demands on the networks of enterprises and Internet service providers. The number of Internet users and volume of network traffic have grown exponentially, with the majority of traffic now traversing LAN boundaries to WANs and the Internet. In addition, the complexity of traffic has also increased with the pervasiveness of new applications that incorporate increasing amounts of data, voice, video and graphics. To satisfy these demands, enterprises and Internet service providers require networking solutions with superior performance and intelligence capabilities, resulting in the emergence of a large market for a broad range of high performance, cost- effective switching solutions with network intelligence capabilities.
Collaborative Research, an independent research and consulting firm specializing in the Layer 4-7 switching market, estimates in a February 1999 report that the Layer 4-7 switching market totaled $130 million in 1998 and is expected to grow to $1 billion in 2002. Dell'Oro Group, an independent networking industry research and consulting firm, estimates in a March 1999 report that the Layer 3 switching market totaled $637 million in 1998 and is expected to increase to $3.9 billion in 2002.
Our solution to address this market provides the following benefits:
Breadth of Product Line. We are one of the few networking companies to provide a full suite of Gigabit Ethernet Layer 2, Layer 3 and Layer 4-7 products applicable to LANs, MANs and WANs, enabling us to provide solu- tions throughout a customer's network.
Performance. Our products provide a high level of performance to allow enterprises and Internet service providers to build highly reliable networks that support unpredictable traffic flows, bandwidth-intensive applications and dynamic end-user needs.
Intelligence. Our products provide the intelligence required to transport unpredictable traffic and bandwidth-intensive applications, which improves the performance, reliability and manageability of networks.
Leading Price Points. Our products are designed to offer superior perfor- mance and network intelligence capabilities at leading price points.
Flexibility of Architecture. Our products are based on a uniform hardware architecture that is compatible with all major existing network products. This allows customers to integrate our products into their networks without an extensive and expensive replacement of their existing network components.
Since inception, our products have received the following awards:
FastIron. Network Magazine "1998 Gigabit Ethernet Product of the Year" award granted in April 1998, LAN Times "Best of LAN Times" award granted in October 1997 and Network Computing "Editor's Choice" award granted in October 1997.
FastIron II. Network Computing "Editor's Choice" award for mid-range Layer 3 switches granted in March 1999.
NetIron. Network Computing "Editor's Choice" award granted in January 1998 and Data Communications "Tester's Choice" award granted in November 1997 for Layer 3 switches.
BigIron. Rated by PC Week as the highest performing Gigabit chassis switch in February 1999; Data Communications "Tester's Choice" award granted in November 1998 and Business Communications "Best-in-Test" award granted in September 1998.
ServerIron. Network Week "Infrastructure Product of the Year" award granted in June 1999 and Network Computing "Flying Colors" award granted in June 1998.
We sell our products through a direct sales force, resellers and an OEM. Our products have been deployed in enterprises spanning many industries, educational institutions and government agencies and in Internet service providers.
We were incorporated in Delaware on May 22, 1996, and changed our name to Foundry Networks, Inc. on January 22, 1997. Our principal executive offices are located at 680 W. Maude Avenue, Suite 3, Sunnyvale, CA 94086. Our telephone number at that location is (408) 530-3300. References in the prospectus to "we," "our," and "us" refer to Foundry. Our web site is located at www.foundrynetworks.com. The information contained on our web site does not constitute part of this prospectus.
The Offering
Common stock offered by Foundry..... shares Common stock to be outstanding after this offering...................... shares Use of proceeds..................... For working capital and general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market symbol............................. "FDRY" The number of shares of common stock to be outstanding upon completion of this offering is based on the number of shares outstanding as of June 30, 1999. This number excludes as of June 30, 1999: (1) 3,508,969 shares subject to outstanding options and 295,334 shares available for future options grants under our 1996 Stock Plan; (2) 353,000 shares subject to non-plan options; and (3) 30,000 shares subject to warrants to purchase Series A preferred stock which will convert to warrants to purchase common stock upon completion of this offering. This number also excludes 950,000 shares reserved for issuance under our 1999 Directors' Stock Option Plan and 1999 Employee Stock Purchase Plan and 2,000,000 additional shares available for future option grants under our 1996 Stock Plan which were authorized in July 1999.
Summary Financial Data (in thousands, except per share data)
Period from
May 22, 1996 Six Months
(Inception) Year Ended Ended
to December 31, June 30,
December 31, --------------- ---------------
1996 1997 1998 1998 1999
(unaudited)
Statement of Operations Data: Revenue, net..................... $ -- $3,381 $17,039 $4,203 $39,487 Gross profit..................... -- 1,546 8,606 2,121 21,146 Income (loss) from operations.... (2,140) (9,129) (9,765) (4,443) 3,870 Net income (loss)................ (2,013) (9,007) (9,352) (4,230) 2,912 Diluted net income (loss) per share........................... (1.04) 0.08 Weighted average shares used in computing diluted net income (loss) per share................ 8,992 34,880 Pro forma basic net income (loss) per share....................... (0.41) 0.11 Weighted average shares used in computing pro forma basic net income (loss) per share......... 22,882 27,170
June 30, 1999 (unaudited) Pro Forma Actual Pro Forma As Adjusted
Balance Sheet Data: Cash and cash equivalents........................ $12,340 $12,340 $ Working capital.................................. 21,319 21,319 Total assets..................................... 36,453 36,453 Total stockholders' equity (deficit)............. (9,351) 21,734
See Note 2 of the Notes to Financial Statements for an explanation of the determination of the number of shares and share equivalents used in computing pro forma per share amounts.
The pro forma balance sheet data summarized above assumes the conversion of all outstanding shares of preferred stock into common stock upon completion of this offering. The pro forma as adjusted data above adjusts the pro forma amounts to reflect the application of the net proceeds from the sale of shares of common stock offered by Foundry at an assumed initial public offering price of $ per share, after deducting the estimated underwriting discount and the estimated offering expenses.