Prospectus Summary
Prospectus Summary The following summary highlights information contained elsewhere in this prospectus and does not contain all of the information you should consider in making your investment decision. You should read this summary together with the more detailed information, including our financial statements and the related notes, elsewhere in this prospectus. You should carefully consider, among other things, the matters discussed in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” before making an investment decision. Unless otherwise indicated, “Sequans Communications S.A.”, “Sequans Communications”, “the Company”, “we”, “us” and “our” refer to Sequans Communications S.A. and its consolidated subsidiaries.Overview
We are a leading fabless designer, developer and supplier of 4G semiconductor solutions for wireless broadband applications. Our solutions incorporate baseband processor and radio frequency, or RF, transceiver integrated circuits, or ICs, along with our proprietary signal processing techniques, algorithms and software stacks. Our high performance ICs deliver high throughput, low latency, strong signal reach, low power consumption and high reliability in a small form factor and at a low cost.
We leverage our deep understanding of system-level architecture and our advanced wireless signal processing and RF expertise to provide 4G semiconductor solutions for a wide range of wireless broadband devices. Our solutions serve as the core wireless broadband communications platform in these devices, including smartphones; USB dongles; portable routers; embedded wireless modems for laptops, netbooks, tablets, and other consumer multimedia and industrial devices; consumer premises equipment, or CPE, such as residential gateways; and basestations. Since 2005 through 2010, we have shipped over 6.3 million semiconductor solutions, which have been deployed by leading wireless carriers around the world. Our solutions are incorporated into the highly successful HTC EVO 4G, the first mass-market 4G smartphone, which was launched by Sprint in the United States in June 2010, as well as the HTC EVO Shift smartphone, launched by Sprint in January 2011. In February 2011, KDDI announced that the HTC EVO WiMAX smartphone, which also incorporates our solutions, is expected to be introduced in Japan in April 2011. In addition, on March 22, 2011, Sprint announced the HTC EVO View 4G 7” tablet computer and the HTC EVO 3D smartphone, both of which incorporate our solutions.
According to ABI Research, the number of 4G chipsets shipped annually will increase from 14.5 million in 2010 to 245.9 million in 2014, representing a compound annual growth rate, or CAGR, of approximately 103%. Our semiconductor solutions support the two commonly accepted wireless broadband 4G protocols, Worldwide Interoperability for Microwave Access, or WiMAX, and Long-Term Evolution, or LTE. Our products have been deployed by many wireless carriers worldwide, including 7 of the 10 largest WiMAX carriers globally by number of subscribers according to BWA Research UK. Given that WiMAX and LTE share a common technology platform, we have also leveraged our leadership in WiMAX to successfully develop LTE semiconductor solutions that are being deployed globally as existing 2G and 3G networks are upgraded to 4G. Our LTE solutions are currently in trials with wireless carriers in the United States and China, where China Mobile has successfully demonstrated its LTE capabilities using our solution at the World Expo in Shanghai and at the Asian Games in Guangzhou, which were both held in 2010. Our solutions are incorporated into devices sold by many leading original equipment manufacturers, or OEMs, and original design manufacturers, or ODMs, including HTC, Huawei, MitraStar Technology (a spin-off of Zyxel), Gemtek, Sagemcom, Teltonika, Accton Wireless Broadband and ZTE.
For 2008 and 2010, our total revenue increased from $22.7 million to $68.5 million and our annual net loss decreased from $8.3 million to $2.7 million. One customer, HTC, accounted for 66% of our total revenue in 2010.
Industry Overview
The use of wireless communications devices has increased dramatically in the past decade, and mobile phones and wireless data services have become an integral part of day-to-day communication. Wireless technologies have evolved through successive generations of protocols driven by the need for more efficient networks with greater bandwidth and adequate capacity to handle a rising number of subscribers and increasing usage of data services. Unable to effectively address the fast growing demand for wireless broadband services in a cost-effective manner using 2G and 3G networks that are constrained by legacy technologies that were originally designed for voice traffic, many wireless carriers are moving to 4G networks using WiMAX or LTE, which provide peak downlink data capacity of 46 megabits per second, or Mbps, and of 173 Mbps, respectively, to enable higher data throughput.
4G architecture represents a fundamental technological change in the design of wireless communication networks. 2G and 3G networks were originally designed to support voice communications and utilize older circuit switching technology based on wireline telephone system design concepts. Circuit switching technology is inflexible as it requires a continuous dedicated connection between the source and destination of the communication, and is inefficient as network capacity is wasted on connections that are established but not in continuous use. 4G, which employs concepts such as packet switching and internet protocol, or IP, improves the efficiency, scalability and performance of data networks. Packet switching technology makes more efficient use of network capacity for data communication by transmitting data in packets over multiple shared connections as compared to a dedicated connection. Orthogonal Frequency Division Multiple Access, or OFDMA, and Multiple-Input Multiple-Output, or MIMO, have emerged as key technologies that increase efficient use of spectrum, signal reliability, throughput and range in 4G networks compared to 2G and 3G networks. Both commonly accepted 4G protocols, WiMAX and LTE, are IP-based, share the same OFDMA and MIMO technologies and have very similar radio designs, coding schemes and signal processing algorithms.
Suppliers of 4G semiconductor solutions face significant execution challenges due to the ongoing evolution of wireless protocols, rapid product lifecycles and extensive certification processes, which require sustained product development excellence and ongoing collaboration with carriers to meet technology needs. In addition, high performance standards, system integration, power efficiency, shrinking form factors and the need to reduce cost create challenges that 4G semiconductor solution suppliers must overcome.
Our Competitive Strengths
We believe the following competitive strengths enable us to address the challenges faced by 4G wireless semiconductor providers:
Our Strategy
Our goal is to be the leading provider of next-generation wireless semiconductors by providing best-in-class solutions that enable mass-market adoption of 4G technologies worldwide. Key elements of our strategy include:
Risk Factors
Our business is subject to a number of risks, which you should understand before making an investment decision. These risks are discussed more fully in the section entitled “Risk Factors” following this prospectus summary. The following is a summary of some of the principal risks we face:
Corporate Information
We were incorporated as a société anonyme under the laws of the French Republic on October 7, 2003, for a period of 99 years. We are registered at the Nanterre Commerce and Companies Register under the number 450 249 677. Our principal executive offices are located at 19 Le Parvis, 92073 Paris-La Défense, France, and our telephone number is +33 1 70 72 16 00. Our agent for service of process in the U.S. is GKL Corporate/Search, Inc., 915 L Street, Suite 1250, Sacramento, California 95814.
Our website is www.sequans.com. The information on, or that can be accessed through, our website is not part of this prospectus.
The Offering
Qatalyst is not acting as an underwriter and will not sell or offer to sell any securities in this offering, nor will it identify or solicit potential investors in this offering. For its services, Qatalyst will receive 1% of the gross proceeds of this offering. Qatalyst will also be reimbursed for its reasonable out-of-pocket expenses in an amount up to $12,500.The number of our ordinary shares outstanding after this offering is based on 27,720,013 ordinary shares, assuming conversion of all outstanding preference shares into ordinary shares as described below, outstanding at December 31, 2010, and excludes, at December 31, 2010:
Unless otherwise noted, all information in this prospectus, except for the Consolidated Financial Statements, reflects or assumes the following:
Summary Consolidated Financial Information
The following tables summarize our consolidated financial information for the periods indicated. The consolidated statements of operations data for each of the three years ended December 31, 2008, 2009 and 2010, and the consolidated statements of financial position data at December 31, 2010, are derived from, and qualified by reference to, our audited Consolidated Financial Statements included elsewhere in this prospectus. You should read all of this information in conjunction with our Consolidated Financial Statements and the accompanying notes and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere in this prospectus. Our historical results are not necessarily indicative of results to be expected for future periods.
Our Consolidated Financial Statements included in this prospectus were prepared in U.S. dollars in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board.
The following table presents consolidated statements of financial position data at December 31, 2010: