Prospectus Summary
This following summary highlights basic information about us and this offering contained more fully elsewhere in this prospectus. Because it is a summary, it does not contain all of the information that you should consider before investing. You should read this entire prospectus carefully, including the section entitled "Risk Factors" and the financial statements and the related notes to those statements included in this prospectus. This prospectus contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward- looking statements as a result of factors described under the heading "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" as well as discussions elsewhere in this prospectus.
Virata Corporation
Virata provides communications processors which are combined with a comprehensive suite of software for digital subscriber line equipment manufacturers. These tightly integrated products enable our customers to develop a diverse range of digital subscriber line, or DSL, equipment including modems, gateways and routers targeted at the broadband access market. We believe our systems expertise, products and support services enable DSL equipment manufacturers to simplify product development, speed time-to-market and focus resources on product differentiation.
Significant growth in demand for broadband access is being driven by consumers and business users who find current dial-up Internet access too slow and faster frame relay or T1/E1 services too expensive. Digital subscriber line, technologies enable service providers to offer a range of affordable broadband access services using the existing copper wire telephone infrastructure.
To meet the demands of the rapidly growing DSL market, original equipment manufacturers, or OEMs, encounter a number of challenges. These include evolving technical standards, an expanding range of feature expectations and shorter product life cycles. In response to these challenges, OEMs are increasingly relying upon third party specialists to supply key technology components including semiconductors and software. However, integration of these individual elements can be a complex, costly and time-consuming task.
The combination of our communications processors and software replaces numerous software elements and semiconductors which would otherwise have to be sourced from multiple vendors and then integrated and tested. Our standards compliant products are based on a flexible architecture that:
. simplifies the addition of features;
. can be used with a range of third party DSL physical layer transceivers; and . offers compelling price/performance.
By adopting our solutions, our customers enjoy numerous benefits including:
. faster time-to-market;
. reduced product cost;
. opportunity to focus their engineering resources on product differentiation;
. ability to design multiple products using different subsets of our modular software; and . re-use of software extensions they develop on future generations of their products.
Our objective is to be the leading supplier of communications processors and integrated software to broadband access OEMs. We intend to achieve this objective by:
. initially focusing on DSL markets;
. leveraging our flexible semiconductor and software architectures to introduce an expanding range of communications processors and software modules;
. licensing our software to all our customers; and . pursuing strategic acquisitions.
We outsource the manufacturing of our semiconductors, which allows us to focus our resources on the design, development and marketing of our products. To date we have licensed our software to 27 companies. These customers have developed, or are developing, 74 designs of which 28 are currently shipping. Leading DSL customers include Netopia, Orckit Communications and Westell Technologies. In July 1998, we completed the acquisition of RSA Communications, our first strategic acquisition.
Our commercial, financial and operations headquarters are in Santa Clara, California. Research and development facilities and sales offices are located in Raleigh, North Carolina, and Cambridge, England. The address of our principal executive office is 2933 Bunker Hill Lane, Suite 201, Santa Clara, California 95054 where the telephone number is (408) 566-1000. Our Internet address on the worldwide web is http://www.virata.com. Information contained on our website does not constitute part of this prospectus.
The Offering
Common stock offered by us............ shares Common stock to be outstanding after the offering......................... shares Use of proceeds....................... We intend to use the net proceeds of this offering primarily for working capital and general corporate purposes, including expenditures for research and development of new products and sales and marketing efforts. See "Use of Proceeds."
Proposed Nasdaq National Market symbol............................... VRTA The common stock outstanding after this offering is based on the number of shares outstanding on August 31, 1999, after giving effect to:
. the cancellation of all of the outstanding ordinary and preference shares of Virata Limited, the issuance of new ordinary shares of Virata Limited to Virata Corporation and the issuance of shares of common stock of Virata Corporation to the former shareholders of Virata Limited; and . a for 1 reverse stock split of our common stock.
These transactions will take place immediately prior to the consummation of this offering and, except for the reverse stock split, will be effected pursuant to a share reconstruction under Section 425 of the United Kingdom Companies Act of 1985. Any securities that are convertible or exercisable into ordinary shares or preference shares of Virata Limited will become convertible or exercisable into shares of our common stock upon consummation of the share reconstruction.
The common stock outstanding after this offering excludes 21,996,978 shares of our common stock which may be issued upon exercise of currently outstanding stock options and warrants outstanding as of August 31, 1999, with a weighted average exercise price of $0.66 per share; and shares of common stock reserved for issuance under our stock plans. See "Capitalization," "Management--Director Compensation," "--Employee Stock Option Plan" and "-- Employee Stock Purchase Plan" and "Description of Capital Stock."
Summary Consolidated Financial Information (in thousands, except for per share data)
Three Months
Year Ended March 31, Ended June 30,
1997 1998 1999 1998 1999
(unaudited)
Consolidated Statement of Operations Data: Revenues: Semiconductors ............... $ 2,105 $ 3,281 $ 6,779 $ 2,010 $ 2,066 Systems, license, services and royalty...................... 4,848 5,650 2,477 754 599 Total revenues............... 6,953 8,931 9,256 2,764 2,665 Total cost of revenues....... 3,939 3,787 3,997 918 1,273 Gross profit.................... 3,014 5,144 5,259 1,846 1,392 Operating expenses: Research and development...... 3,518 3,987 8,323 1,202 2,549 Sales and marketing........... 4,753 4,076 2,917 532 923 General and administrative.... 3,410 4,917 5,567 759 903 Non-recurring charges, amortization of intangibles and stock compensation....... -- 2,270 7,203 306 460 Total operating expenses........ 11,681 15,250 24,010 2,799 4,835 Loss from operations............ (8,667) (10,106) (18,751) (953) (3,443) Interest and other income (expense), net................. 127 (172) 1594 10 428 Net loss........................ $(8,540) $(10,278) $(17,157) $ (943) $(3,015) Net loss per share: Basic and diluted............. $ (0.80) $ (0.90) $ (1.33) $ (0.08) $ (0.23) Weighted average shares....... 10,676 11,482 12,881 11,765 13,346 Pro forma net loss per share: Basic and diluted............. $ (0.21) $ (0.04) Weighted average shares....... 80,900 84,646
As of June 30, 1999 Pro Pro Forma Actual Forma As Adjusted (unaudited)
Consolidated Balance Sheet Data: Cash and cash equivalents............................. $ 6,509 Working capital....................................... 5,180 Total assets.......................................... 16,311 Total long term liabilities........................... 995 Total stockholders' equity ........................... 9,611
See notes 1 and 12 of the notes to the consolidated financial statements included in this prospectus for an explanation of the determination of the number of shares used in computing per share data.
The pro forma numbers reflect the following:
. the cancellation of all of the outstanding ordinary and preference shares of Virata Limited, the issuance of new ordinary shares of Virata Limited to Virata Corporation and the issuance of shares of common stock of Virata Corporation to the former shareholders of Virata Limited; and . a for 1 reverse stock split of our common stock;
The pro forma as adjusted numbers give effect to our receipt of the net proceeds from the sale of shares of common stock offered in this offering at an assumed initial public offering price of $ per share, after deducting underwriting discounts and commissions and estimated offering expenses. See "Use of Proceeds" and "Capitalization."