Prospectus Summary
You should read the following summary together with the more detailed information regarding our company, the common stock being sold in this offering and our consolidated financial statements and notes to those statements appearing elsewhere in this prospectus. Except as set forth in the consolidated financial statements or as otherwise specified in this prospectus, all information in this prospectus assumes no exercise of the underwriters' over- allotment option.
Portal Software, Inc.
Our Business
We develop, market and support real-time, scalable customer management and billing software, or CM&B software, for providers of Internet-based services. Our Infranet software is a comprehensive solution that meets the complex, mission-critical provisioning, accounting, reporting and marketing needs of providers of Internet-based services. Our "Real Time No Limits" Infranet solution enables the real-time provisioning and reporting of services, including such functions as account creation, user authentication and authorization, activity tracking, pricing and rating, billing and customer service, including self-service, all on a scale of up to millions of users. We have built Infranet using an open architecture with fully documented application programming interfaces, or APIs, which facilitate customization, integration with existing software applications, and creation of new services by our customers, partners and third parties.
We were founded in 1985 as an on-line service and one of the first Internet service providers, or ISPs, and we began focusing in late 1993 on developing and marketing real-time CM&B software for the Internet. We shipped the first generally available version of Infranet in May 1996. Our approximately 130 Infranet customers include ISPs, such as Concentric Network Corporation and UUNET Technologies, Inc.; on-line enterprises, such as Juno Online Services, Inc. and 3Com Corporation's Palm.net; and on-line divisions of telecommunications carriers, such as BellSouth Corp. and U S West, Inc.
Our Market Opportunity Providers of Internet-based services and telecommunications carriers are demanding enhanced capabilities from their CM&B systems as the relentless pace of change and innovation mandates a new level of CM&B performance and functionality. Existing CM&B systems used by many traditional telecommunications carriers are not designed to accommodate "always on", data- oriented services and can generally be characterized as:
. inflexible;
. capable only of periodic processing or "batch-oriented";
. proprietary;
. centralized; and
. difficult to scale in an Internet environment.
Existing CM&B solutions have significant difficulties in adapting to the needs of providers of Internet-based services that continually introduce new services and programs.
We believe that providers of Internet-based services will increasingly require a CM&B solution that is real-time, distributed, scalable, flexible and easily adaptable to a vast number of emerging products and services. Infranet is designed to meet the critical functional requirements of scalability, enterprise-wide integration, including interoperability with legacy systems, comprehensive functionality, ease of use, flexibility and improved time to market. This enables service providers to capture the business benefits of increased revenue, reduced costs and improved customer service.
Our Strategy
Our strategy is to establish Portal as the CM&B platform of choice for providers of Internet-based services. Key elements of this strategy are:
Extend Market Leadership Position. Our objective is to extend our position as a leader in the Internet-based CM&B market to establish Portal as the broad platform of choice for providers of Internet-based services. We intend to take advantage of our technological leadership, strategic partnerships, significant customer relationships, broad-based sales and marketing efforts and scalable business model to create a widespread customer base that will be difficult for potential competitors to penetrate.
Target Leading Providers of Advanced Communications Services Worldwide. The scalability and flexibility of Infranet enables us to target a broad range of providers of Internet-based services, including on-line service divisions of major telecommunications providers worldwide, on-line service providers and companies that use the Internet to provide entirely new types of communications services.
Build a Long-Term, High Margin, Software-Driven Business Model. The scalability, comprehensive functionality and extensibility of Infranet, combined with our strategic partnerships, are designed to allow us to achieve and maintain a high margin, software-driven business, rather than the service- intensive, customer-specific approach of many of our competitors.
Leverage Partnerships and Alliances with Systems Integrators, and with Platform, Software and Services Providers. We have established a series of partnerships and alliances with systems integrators, such as Andersen Consulting LLP, Cap Gemini Group, NTT Software Corporation and PricewaterhouseCoopers LLP and hardware platform, software and services providers, such as Cisco Systems, Inc., Compaq Corporation, Hewlett-Packard Company, Microsoft Corporation, Oracle Corporation and Sun Microsystems, Inc. We believe that our partnership strategy is unique in breadth and scope within our market, provides us with a competitive advantage and serves as a "force multiplier" which leverages our own internal capabilities.
Grow with Customers and the Internet. Our strategy is to maximize opportunities for long-term revenue growth by targeting service providers with excellent growth prospects and capitalizing on additional sales opportunities with our customers through the addition of subscribers, add-on component sales, additional service revenues and maintenance and support agreements. We intend to continue to evolve and refine our business to track the growth of Internet- based services, so that as these services proliferate, our revenue growth opportunities will also increase.
Corporate Information Portal Software, Inc. was incorporated in California in March 1994 as Portal Information Network, Inc. In December 1995, Portal Communications Company, a company founded by John E. Little, Portal's Chief Executive Officer, and incorporated in California in May 1985, was merged with and into Portal Information Network, Inc. In October 1997, Portal Information Network, Inc. changed its name to Portal Software, Inc. Portal Software, Inc. reincorporated in Delaware in April 1999. References in this prospectus to "Portal", "we", "our" and "us" refer to Portal Software, Inc., a Delaware corporation, its predecessors, and each of its subsidiaries. Portal's principal executive offices are located at 20883 Stevens Creek Boulevard, Cupertino, California 95014 and Portal's telephone number is (408) 343-4400. Information contained on Portal's Web site does not constitute part of this prospectus.
Portal(R) and Infranet(R) are registered trademarks of Portal and the Portal logo, Infranet IPT(TM), Real Time No Limits(TM), Infranet FreeServ(TM) and Infranet DNA(TM) are trademarks of Portal. Each trademark, tradename or service mark of any other company appearing in this prospectus belongs to its holder.
The Offering
Common stock offered by Portal........................ 2,000,000 shares Common stock offered by the selling stockholders. .... 3,000,000 shares Common stock to be outstanding after the offering .... 77,440,381 shares Use of proceeds....................................... For general corporate purposes, working capital, including sales and marketing activities, product development and support and capital expenditures. See "Use of Proceeds". Portal will not receive any proceeds from the sale of common stock by any selling stockholders.
Nasdaq National Market symbol......................... PRSF The common stock outstanding after this offering excludes: . 9,562,830 shares of common stock issuable upon exercise of stock options and warrants outstanding as of July 31, 1999 at a weighted average exercise price of $7.09 per share . 4,028,872 shares of common stock available for grant under our 1999 Stock Incentive Plan and . 1,800,000 shares of common stock reserved for issuance under our 1999 Employee Stock Purchase Plan.
See "Capitalization", "Management--Benefit Plans", "Description of Capital Stock" and Note 6 of Notes to Consolidated Financial Statements. Summary Consolidated Financial Data (in thousands, except per share amounts)
Six Months
Year Ended January 31, Ended July 31,
1995 1996 1997 1998 1999 1998 1999
(unaudited) (unaudited)
Consolidated Statement of Operations Data: Total revenues.......... $ 1,517 $ 1,862 $ 5,045 $ 9,416 $ 26,669 $ 8,353 $35,975 Total costs and expenses............... 1,717 2,347 7,299 16,802 43,797 15,145 46,274 Loss from operations.... (200) (485) (2,254) (7,386) (17,128) (6,792) (10,299) Net loss................ (197) (535) (2,274) (7,587) (17,408) (6,656) (6,310) Pro forma basic and diluted net loss per share (unaudited)...... $ (0.30) $(0.12) $ (0.10) Shares used in computing pro forma basic and diluted net loss per share (unaudited)...... 58,084 55,687 66,244 July 31, 1999 Actual As Adjusted (unaudited)
Consolidated Balance Sheet Data: Cash and cash equivalents.................................. $ 71,044 $ Working capital............................................ 84,847 Total assets............................................... 139,898 Long-term obligations, net of current portion.............. 2,119 2,119 Stockholders' equity....................................... 95,502
The consolidated balance sheet data is set forth on an actual basis and as adjusted to reflect the sale of 2,000,000 shares of common stock in this offering at the initial price to public of per share and after deducting the estimated underwriting discount and the estimated offering expenses. See "Use of Proceeds" and "Capitalization".