e424b4
Filed Pursuant to Rule
424(b)(4)
Registration Nos. 333-162633 and
333-163164
PROSPECTUS
3,340,000 Shares
COMMON STOCK
We are offering 100,000 shares of our common stock
and the selling stockholders named in this prospectus are
offering 3,240,000 shares of common stock. We will not
receive any of the proceeds from the sale of shares of our
common stock by the selling stockholders.
Our common stock is traded on the New York Stock Exchange
under the trading symbol CML. On November 17,
2009, the last reported sale price of our common stock by the
New York Stock Exchange was $19.66 per share.
Investing in our common
stock involves risks. See Risk Factors beginning on
page 5.
PRICE $19.25 A SHARE
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Underwriting
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Proceeds, Before
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Proceeds, Before
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Discounts and
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Expenses, to
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Expenses, to the
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Price to Public
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Commissions
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Compellent
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Selling
Stockholders
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Per Share
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$19.25
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$0.9625
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$18.2875
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$18.2875
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Total
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$64,295,000
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$3,214,750
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$1,828,750
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$59,251,500
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We have granted the underwriters the right to purchase up to
an additional 500,000 shares of common stock to cover
over-allotments.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The underwriters expect to deliver the shares to purchasers
on November 23, 2009.
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MORGAN
STANLEY |
PIPER JAFFRAY |
THOMAS WEISEL
PARTNERS LLC
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MERRIMAN CURHAN
FORD & CO.
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CRAIG-HALLUM
CAPITAL GROUP
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November 18, 2009
TABLE OF
CONTENTS
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Page
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1
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5
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18
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19
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20
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20
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21
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22
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23
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27
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29
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32
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35
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35
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35
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You should rely only on the information contained in this
prospectus or in any free writing prospectus we may authorize to
be delivered or made available to you. Neither we, nor the
selling stockholders, nor the underwriters, have authorized
anyone to provide you with additional or different information.
We and the selling stockholders are offering to sell, and
seeking offers to buy, shares of our common stock only in
jurisdictions where offers and sales are permitted. The
information contained in or incorporated by reference into this
prospectus is accurate only as of the date of this prospectus,
regardless of the time of delivery of this prospectus or of any
sale of our common stock.
For investors outside the United States: Neither we, nor the
selling stockholders nor any of the underwriters have done
anything that would permit this offering or possession or
distribution of this prospectus in any jurisdiction where action
for that purpose is required, other than in the United States.
Persons outside the United States who come into possession of
this prospectus must inform themselves about, and observe any
restrictions relating to, the offering of the shares of common
stock and the distribution of this prospectus outside of the
United States.
PROSPECTUS
SUMMARY
This summary highlights information contained elsewhere in
this prospectus and does not contain all of the information that
you should consider in making your investment decision. You
should read the following summary together with the more
detailed information appearing in this prospectus and the
documents incorporated by reference herein, including our
financial statements and related notes incorporated by reference
in this prospectus, and the information set forth under the
heading Risk Factors beginning on page 5 before
deciding whether to purchase shares of our common stock. Unless
the context otherwise requires, we use the terms
Compellent, company, we,
us and our in this prospectus to refer
to Compellent Technologies, Inc. and, where appropriate, its
subsidiaries.
Compellent
Technologies, Inc.
Our
Company
We are a leading provider of enterprise-class network storage
solutions that are highly scalable, feature rich and designed to
be easy to use and cost effective. Our Storage Center is a
Storage Area Network, or SAN, that is designed to significantly
lower storage and infrastructure capital expenditures, reduce
the skill level and number of personnel required to manage
information and enable continuous data availability and storage
virtualization. Storage Center is based on our innovative
Dynamic Block Architecture, which enables users to intelligently
store, recover and manage large amounts of data. We combine our
sophisticated software with standards-based hardware into a
single integrated solution. We believe that Storage Center is
the most comprehensive enterprise-class network storage solution
available today, providing increased functionality and lower
total cost of ownership when compared to traditional storage
systems. According to IDC, the total market for SAN storage
system hardware in 2008 was $14.7 billion and the total
market for all storage software in 2008 was $11.8 billion.
In addition, according to Gartner, Inc., a third-party industry
analyst, between 2008 and 2013, storage demand, as measured by
terabyte capacity, is expected to increase by 800%.
We developed our Storage Center software and hardware solution
to target mid-size enterprises. We believe mid-size enterprises
are acutely impacted by the proliferation of data and their need
for a scalable and cost-effective storage solution has
historically been unmet. We believe our business model is highly
differentiated and provides us with several competitive
advantages. We sell our products through an all-channel assisted
sales model designed to enable us to quickly scale and cost
effectively increase sales. We also employ a virtual
manufacturing strategy, which significantly reduces inventory
and eliminates the need for in-house and outsourced
manufacturing.
We have achieved broad industry recognition for our innovative
storage solution. Compellent was awarded consecutive
Technology of the Year awards from InfoWorld,
including being named the Best SAN of 2008. In 2008,
Compellent was also named Microsofts Partner of the Year
for Advanced Infrastructure Solutions, Storage Solutions and
awarded Storage magazines Quality Award.
Gartner reported Compellent to be the fastest growing storage
area network company in 2006 and 2007, and TheInfoPro, an
independent research firm, recently cited Compellents
automated tiered storage as the No. 1 technology in use for
Information Lifecycle Management according to mid-sized end
users.
Risks
Associated with Our Business
Our business is subject to numerous risks and uncertainties,
including those highlighted in the section entitled Risk
Factors immediately following this prospectus summary.
Corporate
Information
We were incorporated in Minnesota in March 2002 and
reincorporated in Delaware in June 2002. The address of our
principal executive office is 7625 Smetana Lane, Eden Prairie,
Minnesota 55344, and our telephone number is
(952) 294-3300.
Our website address is www.compellent.com. Information found on,
or accessible through, our website is not part of, and is not
incorporated into, this prospectus. References in this
prospectus to Compellent, we,
us and our refer to Compellent
Technologies, Inc., a Delaware corporation, and our
subsidiaries, except where it is made clear that the term means
only the parent company.
Compellent and the Compellent logo are trademarks of Compellent
Technologies, Inc. All other trademarks, service marks and trade
names included or incorporated by reference into this prospectus
are the property of their respective owners.
1
THE
OFFERING
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Common stock offered by Compellent
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100,000 shares (or 600,000 shares if the underwriters
exercise their over-allotment option in full) |
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Common stock offered by the selling stockholders
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3,240,000 shares |
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Over-allotment option
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We are granting the underwriters a
30-day
option to purchase up to an additional 500,000 shares of
our common stock |
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Common stock to be outstanding after this offering
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31,041,059 shares (or 31,541,059 shares if the
underwriters exercise their over-allotment option in full) |
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Use of proceeds
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We expect the net proceeds to us from this offering, after
expenses, to be approximately $1.6 million. We intend to
use the net proceeds from this offering for sales and marketing
activities, for research and development activities, and to fund
working capital and other general corporate purposes, which may
also include acquisitions of or investments in complementary
businesses, technologies or other assets. We will not receive
any proceeds from the shares of common stock sold by the selling
stockholders. See the section titled Use of Proceeds. |
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Risk factors
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See Risk Factors beginning on page 5 and the
other information included in this prospectus for a discussion
of factors you should carefully consider before deciding to
invest in our common stock. |
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New York Stock Exchange symbol
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CML |
The number of shares of common stock to be outstanding after
this offering is based on 30,941,059 shares of common stock
outstanding at September 30, 2009, and excludes:
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an aggregate of 3,386,770 shares of common stock issuable
upon the exercise of outstanding options granted pursuant to our
2002 Stock Option Plan and our 2007 Equity Incentive Plan, at a
weighted average exercise price of $8.75 per share; and
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an aggregate of 6,004,881 shares of common stock reserved
for future issuance under our 2007 Equity Incentive Plan and
2007 Employee Stock Purchase Plan, as well as any automatic
increases in the number of shares of our common stock reserved
for future issuance under these benefit plans.
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Unless otherwise indicated, all information in this prospectus
assumes no exercise of the underwriters over-allotment
option to purchase up to an additional 500,000 shares of
our common stock.
2
SUMMARY
CONSOLIDATED FINANCIAL DATA
The following tables summarize our consolidated financial data.
We have derived the consolidated statements of operations data
for the years ended December 31, 2006, 2007 and 2008 from
our audited consolidated financial statements, which are
incorporated by reference into this prospectus. We have derived
the consolidated statements of operations data for the nine
months ended September 30, 2008 and September 30, 2009
and the consolidated balance sheet data as of September 30,
2009 from our unaudited condensed consolidated financial
statements, which are incorporated by reference into this
prospectus. The following information should be read in
conjunction with our consolidated financial statements and
related notes incorporated by reference in this prospectus, and
our historical financial statements and related notes contained
in our Annual Report on
Form 10-K,
Quarterly Reports on
Form 10-Q
and other information on file with the SEC. For more details on
how you can obtain our SEC reports and other information, you
should read the section of this prospectus entitled Where
You Can Find More Information.
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For the Nine Months Ended
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For the Year Ended
December 31,
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September 30,
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2006
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2007
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2008
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2008
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2009
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(unaudited)
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(in thousands, except per share
amounts)
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Consolidated Statements of Operations Data:
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Revenues
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Product
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$
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19,996
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$
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42,831
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$
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72,417
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$
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51,416
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$
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64,564
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Support and services
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3,337
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8,368
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18,479
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12,519
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24,437
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Total revenues
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23,333
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51,199
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90,896
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63,935
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89,001
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Cost of revenues
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Cost of product
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9,897
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21,554
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34,949
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24,716
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32,089
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Cost of support and services
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2,774
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4,423
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7,011
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5,078
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8,232
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Total cost of revenues
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12,671
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25,977
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41,960
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29,794
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40,321
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Gross profit
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10,662
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25,222
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48,936
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34,141
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48,680
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Operating expenses
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Sales and marketing
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10,562
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23,520
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35,834
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25,823
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32,052
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Research and development
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5,675
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7,632
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10,060
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7,111
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9,160
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General and administrative
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1,565
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3,324
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6,224
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5,087
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4,630
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Total operating expenses
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17,802
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34,476
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52,118
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38,021
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45,842
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Income (loss) from operations
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(7,140
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(9,254
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(3,182
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(3,880
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2,838
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Other income, net
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316
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1,425
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2,766
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2,125
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1,380
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Income (loss) before taxes
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(6,824
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(7,829
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(416
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(1,755
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4,218
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Income tax expense
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(699
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Net income (loss)
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(6,824
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(7,829
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(416
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(1,755
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3,519
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Accretion of redeemable convertible preferred stock
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6,330
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Net income (loss) attributable to common stockholders
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$
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(13,154
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$
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(7,829
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$
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(416
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$
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(1,755
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$
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3,519
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Net income (loss) per weighted average common share, basic
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$
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(3.29
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$
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(0.77
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$
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(0.01
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$
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(0.06
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$
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0.11
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Weighted average common shares, basic
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4,003
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10,219
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30,471
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30,434
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30,732
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Net income (loss) per weighted average common share, diluted
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$
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(3.29
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$
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(0.77
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$
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(0.01
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$
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(0.06
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$
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0.11
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Weighted averaged common shares, diluted
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4,003
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10,219
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30,471
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30,434
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31,682
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3
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As of September 30,
2009
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Actual
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As
Adjusted(1)
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(unaudited)
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Consolidated Balance Sheet Data:
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Cash, cash equivalents and short-term investments
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$
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61,105
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$
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62,734
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Working capital
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63,388
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65,017
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Long-term investments
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47,932
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47,932
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Total assets
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151,592
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153,221
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Total liabilities
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45,574
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45,574
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Total stockholders equity
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106,018
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107,647
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(1)
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The as adjusted balance sheet data
gives effect to the sale by us of 100,000 shares of our
common stock in this offering at the public offering price of
$19.25 per share, and after deducting underwriting discounts and
commissions and estimated offering expenses payable by us.
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4
RISK
FACTORS
Investing in our common stock involves a high degree of risk.
You should carefully consider the risk factors identified in
this prospectus, as well as in our most recent Annual Report on
Form 10-K
and Quarterly Reports on
Form 10-Q
filed with the SEC, in addition to the other information
contained in this prospectus and the documents incorporated by
reference herein, before deciding whether to purchase any of our
common stock. Each of the risk factors could adversely affect
our business, operating results and financial condition, as well
as adversely affect the value of an investment in our
securities, and you may lose all or part of your investment.
Risks
Related to Our Business
Unfavorable
economic and market conditions and a lessening demand in the
information technology market could adversely affect our
operating results.
Our operating results may be adversely affected by unfavorable
global economic and market conditions as well as a lessening
demand in the information technology, or IT, market. Customer
demand for our products is intrinsically linked to the strength
of the economy. A reduction in demand for storage and data
management products caused by weak
and/or
deteriorating economic conditions and customer decreases in
corporate spending, deferral or delay of IT projects, longer
time frames for IT purchasing decisions, the inability of
customers to obtain credit to finance purchases of our products
and generally reduced capital expenditures for IT storage
solutions will result in decreased revenues and lower revenue
growth rates for us. If the storage and data management markets
grow slower than anticipated or if IT spending is reduced,
demand for our products could decline and our operating results
could be materially and adversely affected.
We
have a limited operating history and a history of losses, and we
may not achieve or sustain profitability in the future on a
quarterly or annual basis.
We were established in March 2002 and sold our first product in
February 2004. We have not achieved profitability on an annual
basis and we incurred net losses of $6.8 million,
$7.8 million and $416,000 for the years ended
December 31, 2006, 2007 and 2008. We have achieved
profitability on a quarterly basis only for the three months
ended September 30, 2008, December 31, 2008,
March 31, 2009, June 30, 2009 and September 30,
2009. As of September 30, 2009, our accumulated deficit was
$46.3 million. We expect to make significant expenditures
related to the development of our products and expansion of our
business, including sales and marketing, research and
development and general and administrative expenses. We may also
encounter unforeseen difficulties, complications, product delays
and other unknown factors that require additional expenditures.
As a result of these increased expenditures, we will have to
generate and sustain substantially increased revenues to achieve
and maintain profitability, which we may never do. In addition,
the percentage growth rates we achieved in prior periods will
not be sustainable and we may not be able to increase our
revenues sufficiently in absolute dollars to ever reach annual
profitability or sustain quarterly profitability.
Our
quarterly operating results may fluctuate significantly, which
makes our future results difficult to predict.
Our quarterly operating results fluctuate due to a variety of
factors, many of which are outside of our control. Our future
revenues are difficult to predict. A significant portion of our
sales typically occurs during the last month of a quarter. As a
result, we typically cannot predict our revenues in any
particular quarter with any certainty until late in that
quarter. Our storage products typically are shipped shortly
after orders are received. As a result, revenues in any quarter
are substantially dependent on orders booked and shipped in that
quarter. Revenues for any future period are not predictable with
any significant degree of certainty. As a result, comparing our
operating results on a
period-to-period
basis may not be meaningful. You should not rely on our past
results as an indication of our future performance. Moreover,
spending on storage solutions has historically been cyclical in
nature, reflecting overall economic conditions as well as
budgeting and buying patterns of business enterprises. We
believe our recent rapid growth has masked the cyclicality and
seasonality of our business. The third quarter is generally the
slowest sales quarter in the storage industry. Our expense
levels are relatively fixed in the short term and are based, in
part, on our expectations as to future revenues. If revenue
levels are below our expectations, we may incur higher losses
and may
5
never reach annual profitability or sustain quarterly
profitability. Our operating results may be disproportionately
affected by a reduction in revenues because a proportionately
smaller amount of our expenses varies with our revenues. As a
result, our quarterly operating results are difficult to
predict, even in the near term. If our revenue or operating
results fall below the expectations of investors or securities
analysts or below any guidance we may provide to the market, the
price of our common stock would likely decline substantially.
In addition to other risk factors listed in this Risk
Factors section, factors that may affect our operating
results include:
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reductions in end users budgets for information technology
purchases and delays in their budgeting and purchasing cycles,
given current macroeconomic conditions;
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hardware and software configuration and mix;
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fluctuations in demand, including due to seasonality, for our
products and services;
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changes in pricing by us in response to competitive pricing
actions;
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the sale of Storage Center in the timeframes we anticipate,
including the number and size of orders in each quarter;
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our ability to develop, introduce and ship in a timely manner
new products and product enhancements that meet end user
requirements;
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the timing of product releases or upgrades by us or by our
competitors;
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any significant changes in the competitive dynamics of our
market, including new entrants or substantial discounting of
products;
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our ability to control costs, including our operating expenses
and the costs of the components we purchase;
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the extent to which our end users renew their service and
maintenance agreements with us;
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volatility in our stock price, which may lead to higher stock
compensation expenses; and
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general economic conditions in our domestic and international
markets.
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The
markets in which we compete are highly competitive and dominated
by large corporations and we may not be able to compete
effectively.
The storage market is intensely competitive and is characterized
by rapidly changing technology. This competition could make it
more difficult for us to sell our products, and result in
increased pricing pressure, reduced gross margin, increased
sales and marketing expense and failure to increase, or the loss
of, market share or expected market share which would likely
result in lower revenue.
Our ability to compete depends on a number of factors, including:
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our products functionality, scalability, performance, ease
of use, reliability, availability and cost effectiveness
relative to that of our competitors products;
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our success in utilizing new and proprietary technologies to
offer products and features previously not available in the
marketplace;
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our success in identifying new markets, applications and
technologies;
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our ability to attract and retain value-added resellers, which
we refer to as channel partners;
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our name recognition and reputation;
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our ability to recruit software engineers and sales and
marketing personnel; and
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our ability to protect our intellectual property.
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6
Potential end users may prefer to purchase from their existing
suppliers rather than a new supplier regardless of product
performance or features. In the event a potential end user
decides to evaluate a new storage system, the end user may be
more inclined to select one of our competitors whose product
offerings are broader than just storage systems. In addition,
potential end users may prefer to purchase from their existing
suppliers rather than a new supplier, regardless of product
performance or features. Most of our new end users have
installed storage systems, which gives an incumbent competitor
an advantage in retaining an end user because it already
understands the network infrastructure, user demands and
information technology needs of the end user, and also because
it is costly and time-consuming for end users to change storage
systems.
A number of very large corporations have historically dominated
the storage market. We consider our primary competitors to be
companies that provide Storage Area Network, or SAN products,
such as 3Par, Inc., Dell, Inc., EMC Corporation, Hewlett-Packard
Company, Hitachi Data Systems Corporation, IBM and NetApp, Inc.,
and Xiotech Corporation. Some of our competitors, including
Dell, EMC and NetApp, have made acquisitions of businesses that
allow them to offer more directly competitive and comprehensive
solutions than they had previously offered. Most of our
competitors have longer operating histories, greater name
recognition, larger customer bases and significantly greater
financial, technical, sales, marketing and other resources than
we have. We expect to encounter new competitors as we enter new
markets as well as increased competition, both domestically and
internationally, from other established and emerging storage
companies, original equipment manufacturers, and from systems
and network management companies. In addition, there may be new
technologies that are introduced that reduce demand for, or make
our, storage solution architecture obsolete. Our current and
potential competitors may also establish cooperative
relationships among themselves or with third parties and rapidly
acquire significant market share. Increased competition could
also result in price reductions and loss of market share, any of
which could result in lower revenue and reduced gross margins.
We are
dependent on a single product and the lack of continued market
acceptance of Storage Center would result in lower
revenue.
Storage Center accounts for all of our revenue and will continue
to do so for the foreseeable future. As a result, our revenue
could be reduced by:
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any decline in demand for Storage Center;
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the failure of Storage Center to achieve continued market
acceptance;
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the introduction of products and technologies that serve as a
replacement or substitute for, or represent an improvement over,
Storage Center;
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technological innovations or new communications standards that
Storage Center does not address; and
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our inability to release enhanced versions of Storage Center on
a timely basis.
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We are particularly vulnerable to fluctuations in demand for
storage area network products in general and Storage Center in
particular. If the storage markets grow more slowly than
anticipated or if demand for Storage Center does not grow as
quickly as anticipated, whether as a result of competition,
product obsolescence, technological change, unfavorable economic
conditions, uncertain geopolitical environments, budgetary
constraints of our end users or other factors, we may not be
able to increase our revenues sufficiently to ever reach annual
profitability or sustain quarterly profitability and our stock
price would decline.
Our
products must meet exacting specifications, and defects and
failures may occur, which may cause channel partners or end
users to return or stop buying our products.
Our channel partners and end users generally establish demanding
specifications for quality, performance and reliability that our
products must meet. However, our products are highly complex and
may contain undetected defects and failures when they are first
introduced or as new versions are released. We have in the past
and may in the future discover software errors in new versions
of Storage Center or new products or product enhancements after
their release or introduction, which could result in lost
revenue during the period required to correct such errors.
Despite testing by us and by current and potential end users,
errors may not be found in new releases or products
7
until after commencement of commercial shipments, resulting in
loss of or delay in market acceptance. Storage Center may also
be subject to intentional attacks by viruses that seek to take
advantage of these bugs, errors or other weaknesses. If defects
or failures occur in Storage Center, a number of negative
effects in our business could result, including:
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lost revenue;
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increased costs, including warranty expense and costs associated
with end user support;
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delays or cancellations or rescheduling of orders or shipments;
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product returns or discounts;
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diversion of management resources;
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damage to our reputation and brand equity;
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payment of damages for performance failures;
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reduced orders from existing channel partners and end
users; and
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declining interest from potential channel partners or end users.
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In addition, delays in our ability to fill product orders as a
result of quality control issues may negatively impact our
relationship with our channel partners and end users. Our
revenue could be lower and our expenses could increase if any of
the foregoing occurs.
Our end users utilize Storage Center to manage their data. As a
result, we could face claims resulting from any loss or
corruption of our end users data due to a product defect.
Our contracts with end users contain provisions relating to
warranty disclaimers and liability limitations, which may not be
upheld. Defending a lawsuit, regardless of its merit, is costly
and may divert managements attention and could result in
public perception that our products are not effective, even if
the occurrence is unrelated to the use of our products or
services. In addition, if our business liability insurance
coverage proves inadequate or future coverage is unavailable on
acceptable terms or at all, our costs to defend and cover such
claims, if any, will increase.
We
will not sustain our percentage growth rate, and we may not be
able to manage any future growth effectively.
We have experienced significant growth in a short period of
time. Our revenues increased from $3.9 million in 2004 to
$90.9 million in 2008, and our revenues were
$89.0 million for the nine months ended September 30,
2009. We may not experience growth rates in future periods to
the same degree as in past periods. You should not rely on our
operating results for any prior quarterly or annual periods as
an indication of our future operating performance. If we are
unable to maintain adequate revenue growth in dollars, we may
never achieve annual profitability or sustain quarterly
profitability and our stock price could decline.
Our future operating results depend to a large extent on our
ability to successfully manage our anticipated expansion and
growth. To manage our growth successfully and handle the
responsibilities of being a public company, we believe we must
effectively, among other things:
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increase our channel partners and end users in the mid-size
enterprise market;
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address new markets, such as large enterprise end users and end
users outside the United States;
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control expenses;
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recruit, hire, train and manage additional qualified engineers;
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add additional sales and marketing personnel;
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expand our international operations; and
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implement and improve our administrative, financial and
operational systems, procedures and controls.
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8
We intend to increase our investment in sales and marketing,
research and development and general and administrative and
other functions to grow our business. We are likely to recognize
the costs associated with these increased investments earlier
than some of the anticipated benefits and the return on these
investments may be lower, or may develop more slowly, than we
expect, which could increase our annual net losses.
If we are unable to manage our growth effectively, we may not be
able to take advantage of market opportunities or develop new
products or enhancements to existing products and we may fail to
satisfy end user requirements, maintain product quality, execute
on our business plan or respond to competitive pressures, which
could result in lower revenue and a decline in our stock price.
Our
gross margin may vary and such variation may make it more
difficult to forecast our earnings.
Our gross margin has been and may continue to be affected by a
variety of other factors, including:
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demand for Storage Center and related services;
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discount levels and price competition;
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average order system size and end user mix;
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hardware and software component mix;
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the cost of components;
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level of fixed costs of customer service personnel;
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the mix of services as a percentage of revenue;
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new product introductions and enhancements; and
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geographic sales mix.
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Changes in gross margin may result from various factors such as
continued investments in our Copilot Services, increases in our
fixed costs, changes in the mix between technical support
services and professional services, as well as the timing and
amount of maintenance agreement initiations and renewals.
We
receive a substantial portion of our revenue from a limited
number of channel partners, and the loss of, or a significant
reduction in, orders from one or more of our major channel
partners would result in lower revenue.
Our future success is highly dependent upon establishing and
maintaining successful relationships with a variety of channel
partners. We market and sell Storage Center through an
all-channel assisted sales model and we derive substantially all
of our revenue from these channel partners. We generally enter
into agreements with our channel partners outlining the terms of
our relationship, including channel partner sales commitments,
installation and configuration training requirements, and the
channel partners acknowledgement of the existence of our
sales registration process for registering potential systems
sales to end users. These contracts typically have a term of one
year and are terminable without cause upon written notice to the
other party. Our reseller agreements with our channel partners
do not prohibit them from offering competitive products or
services. Many of our channel partners also sell our
competitors products. If our channel partners give higher
priority to our competitors storage products, we may be
unable to grow our revenue and we may continue to incur annual
net losses.
We receive a substantial portion of our revenue from a limited
number of channel partners. For 2006, 2007 and 2008, our top ten
channel partners accounted for 49%, 45% and 47% of our revenue,
respectively, and for the nine months ended September 30,
2008 and 2009, our top ten channel partners accounted for 49%
and 41% of our revenue, respectively. We anticipate that we will
continue to be dependent upon a limited number of channel
partners for a significant portion of our revenue for the
foreseeable future and, in some cases, the portion of our
revenue attributable to individual channel partners may increase
in the future. The loss of one or more key channel partners or a
reduction in sales through any major channel partner would
reduce our revenue. Further, in order to develop and expand our
channels, we must continue to scale and improve our processes
and procedures that support our channel partners, including
investments in systems and training, and those processes and
procedures may
9
become increasingly complex and difficult to manage. If we fail
to maintain existing channel partners or develop relationships
with new channel partners, our revenue opportunities will be
reduced.
The
loss of any key suppliers or the failure to accurately forecast
demand for our products or successfully manage our relationships
with our key suppliers could negatively impact our ability to
sell our products.
We maintain relatively low inventory, generally only for repairs
and evaluation and demonstration units, and acquire components
only as needed on a purchase order basis, and neither we nor our
key suppliers enter into supply contracts for these components.
As a result, our ability to respond to channel partner or end
user orders efficiently may be constrained by the then-current
availability, terms and pricing of these components. Our
industry has experienced component shortages and delivery delays
in the past, and we may experience shortages or delays of
critical components in the future as a result of strong demand
in the industry or other factors. If we or our suppliers
inaccurately forecast demand for our products, our suppliers may
have inadequate inventory, which could increase the prices we
must pay for substitute components or result in our inability to
meet demand for our products, as well as damage our channel
partner or end user relationships.
We currently rely on a limited number of suppliers for
components such as system controllers, enclosures, disk drives
and switches utilized in the assembly of Storage Center. We
generally purchase components on a purchase order basis and do
not have long-term supply contracts with these suppliers. In
particular, we rely on Bell Microproducts, Inc., a value-added
distributor, to provide us with customized system controllers,
which Bell Microproducts generally obtains from Supermicro
Computer, Inc., a server and component manufacturer. We also
rely on Xyratex Corporation, a provider of data storage
subsystems, to provide us with their custom enclosures and disk
drives. Xyratex purchases most of the disk drives that it
supplies to us from Seagate Technology, Inc., a disk drive
manufacturer. Our reliance on these key suppliers reduces our
control over the manufacturing process, exposing us to risks,
including reduced control over product quality, production
costs, timely delivery and capacity. It also exposes us to the
potential inability to obtain an adequate supply of required
components, because we do not have long-term supply commitments
and generally purchase our products on a purchase order basis.
Component quality is particularly significant with respect to
our suppliers of disk drives. We have in the past and may in the
future experience disk drive failures, which could cause our
reputation to suffer, our competitive position to be impaired
and our customers to select other vendors. To meet our product
performance requirements, we must obtain disk drives of
extremely high quality and capacity. In addition, there are
periodic
supply-and-demand
issues for disk drives that could result in component shortages,
selective supply allocations and increased prices of such
components. We may not be able to obtain our full requirements
of components, including disk drives, that we need for our
storage products or the prices of such components may increase.
If we fail to effectively manage our relationships with our key
suppliers, or if our key suppliers increase prices of
components, experience delays, disruptions, capacity
constraints, or quality control problems in their manufacturing
operations, our ability to ship products to our channel partners
or end users could be impaired and our competitive position and
reputation could be adversely affected. Qualifying a new key
supplier is expensive and time-consuming. If we are required to
change key suppliers or assume internal manufacturing
operations, we may lose revenue and damage our channel partner
or end user relationships.
If our
third-party repair service fails to timely and correctly resolve
hardware failures experienced by our end users, our reputation
will suffer, our competitive position will be impaired and our
expenses could increase.
We rely upon Anacomp Inc., or Anacomp, a third-party hardware
maintenance provider, which specializes in providing
vendor-neutral support of storage equipment, network devices and
peripherals, to provide repair services to our end users. We
currently have limited capabilities in-house to resolve hardware
failures or other issues experienced by our end users. If
Anacomp fails to timely and correctly resolve hardware failures
or issues experienced by our end users, our reputation will
suffer, our competitive position will be impaired and our
expenses could increase. In May 2008, we entered into a five
year agreement with Anacomp. Our agreement with Anacomp will
automatically renew for successive one-year terms, unless either
party notifies the other, in writing, of its intention to
terminate or renegotiate the agreement at least 180 days
prior to the end of the initial five-year term or any successive
one-year term. In addition, either party may immediately
terminate the agreement for a material
10
default by the other party that is not cured within
30 days. If our relationship with Anacomp were to end, we
would have to engage a new third-party provider of hardware
support, and the transition could result in delays in effecting
repairs and damage our reputation and competitive position as
well as increase our operating expenses.
If we
are unsuccessful in developing and selling new products,
services and product enhancements, our competitive position will
be adversely affected and our ability to grow our revenue will
be impaired.
We operate in a dynamic environment characterized by rapid
technological change, changing end user needs, frequent new
product introductions and evolving industry standards. The
introduction of products embodying new technologies and the
emergence of new industry standards could render our existing
products obsolete and unmarketable. Our competitiveness and
future success depend on our ability to anticipate, develop,
market and support new products and product enhancements on a
timely and cost effective basis that keep pace with
technological developments and emerging industry standards and
that address the increasingly sophisticated needs of our end
users. We may fail to develop and market products and services
that respond to technological changes or evolving industry
standards, experience difficulties that could delay or prevent
the successful development, introduction and marketing of these
products and services, or fail to develop products and services
that adequately meet the requirements of the marketplace or
achieve market acceptance. Our failure to develop and market
such products and services on a timely basis would erode our
competitive position and impair our ability to grow our revenue.
If our
channel partners fail to timely and correctly install and
configure our storage systems, or face disruptions in their
business, our reputation will suffer, our competitive position
could be impaired and we could lose customers.
In addition to our small team of installation personnel, we rely
upon some of our channel partners to install Storage Center at
our end user locations. Our channel partner agreements generally
contain provisions requiring installation and configuration
training by the channel partners, which we may waive at our
discretion. Although we train and certify our channel partners
on the installation and configuration of Storage Center, end
users have in the past encountered installation and
configuration difficulties. In addition, if one or more of our
channel partners suffers an interruption in its business, or
experiences delays, disruptions or quality control problems in
its operations, or we have to change or add additional channel
partners, installation and configuration of Storage Center to
our end users could be delayed, our revenue could be reduced and
our ability to compete could be impaired. As a significant
portion of our sales occur in the last month of a quarter, our
end users may also experience installation delays following a
purchase if we or our channel partners have too many
installations in a short period of time. If we or our channel
partners fail to timely and correctly install and configure
Storage Center, end users may not purchase additional products
and services from us, our reputation could suffer and our
revenue could be reduced. In addition, we will incur additional
expenses to correctly install and configure Storage Center to
meet the expectations of our end users.
If we
fail to attract or retain engineering or sales and marketing
personnel or if we lose the services of our founders or key
management, our ability to grow our business and our competitive
position would be impaired.
We believe our future success will depend in large part upon our
ability to attract, retain and motivate highly skilled
managerial, research and development, sales and marketing
personnel. Our management, research and development, sales and
marketing personnel represent a significant asset and serve as
the source of our business strategy, technological and product
innovations, and sales and marketing initiatives. As a result,
our success is substantially dependent upon our ability to
attract additional personnel for all areas of our organization,
particularly in our research and development department and our
sales and marketing department. Competition for qualified
personnel is intense, and we may not be successful in attracting
and retaining such personnel on a timely basis or on competitive
terms. Any failure to adequately expand our management, research
and development, sales and marketing personnel will impede our
growth. In addition, many qualified personnel are located
outside of the Minneapolis geographic area where our
headquarters are located, and some qualified personnel that we
may recruit
11
may not be interested in relocating. If we are unable to attract
and retain the necessary personnel on a cost-effective basis,
our ability to grow our business and our competitive position
would be impaired.
In particular, we are highly dependent on the contributions of
our three founders, Philip E. Soran, our Chairman, President and
Chief Executive Officer, John P. Guider, our Chief Operating
Officer, and Lawrence E. Aszmann, our Chief Technology Officer.
The loss of any of our founders could make it more difficult to
manage our operations and research and development activities,
reduce our employee retention and revenue and impair our ability
to compete. If any of our founders were to leave us
unexpectedly, we could face substantial difficulty in hiring
qualified successors and could experience a loss in productivity
during the search for and while any such successor is integrated
into our business and operations. The loss of any of our
founders or the inability to attract, retain or motivate
qualified personnel, including research and development and
sales and marketing personnel, could delay the development and
introduction of, and impair our ability to, sell our products.
We
expect to face numerous challenges as we attempt to grow our
operations, and our channel partner and end user base
internationally.
Historically, we have conducted only a small portion of our
business internationally. We have two international sales
offices and revenue from international sales was 5%, 11% and 16%
during 2006, 2007 and 2008, respectively, and 15% and 17% of
total revenue for the nine months ended September 30, 2008
and 2009, respectively. Although we expect that part of our
future revenue growth will be from channel partners and end
users located outside of the United States, we may not be able
to increase international market demand for Storage Center. In
January 2008, we entered into a marketing agreement with AMEX,
Inc., an export firm, pursuant to which we granted AMEX
exclusive distribution rights to resell Storage Center to
resellers and end users internationally, except in Canada. In
January 2009, we entered into a new marketing agreement with
AMEX containing exclusive distribution rights similar to those
contained in the January 2008 agreement. AMEX agrees to use its
best efforts to further the promotion, marketing and sale of
Storage Center. The marketing agreement is renewable on an
annual basis each January unless either party notifies the other
party in writing of an intention to discontinue the relationship
at least 90 days prior to the renewal date. If AMEX is not
successful in helping us expand our international distribution
channel, our revenue and our ability to compete internationally
could be impaired.
We expect to face numerous challenges as we attempt to grow our
operations, channel partner relationships and end user base
internationally, in particular attracting and retaining channel
partners with international capabilities or channel partners
located in international markets. Our revenue and expenses could
be adversely affected by a variety of factors associated with
international operations some of which are beyond our control,
including:
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difficulties of managing and staffing international offices, and
the increased travel, infrastructure and legal compliance costs
associated with international locations;
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greater difficulty in collecting accounts receivable and longer
collection periods;
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difficulty in contract enforcement;
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regulatory, political or economic conditions in a specific
country or region;
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compliance with local laws and regulations and unanticipated
changes in local laws and regulations, including tax laws and
regulations;
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export and import controls; trade protection measures and other
regulatory requirements;
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effects of changes in currency exchange rates;
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potentially adverse tax consequences;
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service provider and government spending patterns;
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reduced protection of our intellectual property and other assets
in some countries;
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greater difficulty documenting and testing our internal controls;
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differing employment practices and labor issues; and
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man-made problems such as computer viruses and acts of terrorism
and international conflicts.
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In addition, we expect that we may encounter increased
complexity and costs of managing international operations,
including difficulties in staffing international operations,
local business and cultural factors that differ from our normal
standards and practices, differing employment practices and
labor issues, and work stoppages, any of which could result in
lower revenue and higher expenses.
If we
fail to protect our intellectual property rights adequately, our
ability to compete effectively or to defend ourselves from
litigation could be impaired which could reduce our revenue and
increase our costs.
We rely primarily on patent, copyright, trademark and trade
secret laws, as well as confidentiality and non-disclosure
agreements and other methods, to protect our proprietary
technologies and know-how. We have three issued patents in the
United States, one international patent and additional patents
pending in the United States and in foreign countries. The
rights granted to us under our issued patents and, if the
pending patent applications are granted, those applications may
not be meaningful or provide us with any commercial advantage
and they could be opposed, contested, circumvented or designed
around by our competitors or be declared invalid or
unenforceable in judicial or administrative proceedings. The
failure of our patents to adequately protect our technology
might make it easier for our competitors to offer similar
products or technologies. Foreign patent protection is generally
not as comprehensive as U.S. patent protection and may not
protect our intellectual property in some countries where our
products are sold or may be sold in the future. Many
U.S.-based
companies have encountered substantial intellectual property
infringement in foreign countries, including countries where we
sell or intend to sell products. Even if foreign patents are
granted, effective enforcement in foreign countries may not be
available.
Monitoring unauthorized use of our intellectual property is
difficult and costly. Although we are not aware of any
unauthorized use of our intellectual property in the past, it is
possible that unauthorized use of our intellectual property may
have occurred or may occur without our knowledge. The steps we
have taken may not prevent unauthorized use of our intellectual
property. Our failure to effectively protect our intellectual
property could reduce the value of our technology in licensing
arrangements or in cross-licensing negotiations, and could
impair our ability to compete. We may in the future need to
initiate infringement claims or litigation. Litigation, whether
we are a plaintiff or a defendant, can be expensive,
time-consuming and may divert the efforts of our technical staff
and managerial personnel, which could result in lower revenue
and higher expenses, whether or not such litigation results in a
determination favorable to us.
Assertions
by third parties of infringement by us of their intellectual
property rights could result in a significant diversion of
managements time and increased expenses.
The storage industry is characterized by vigorous protection and
pursuit of intellectual property rights and positions, which has
resulted in protracted and expensive litigation for many
companies. Litigation can be expensive, lengthy, and disruptive
to ordinary business operations. Moreover, the results of
complex legal proceedings are difficult to predict. We have
received and expect that in the future we may receive
communications from various industry participants alleging our
infringement of their patents, trade secrets or other
intellectual property rights
and/or
offering licenses to such intellectual property. Any lawsuits
resulting from such allegations could subject us to significant
liability for damages and invalidate our proprietary rights. Any
intellectual property litigation also could force us to do one
or more of the following:
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stop selling products or using technology that contains the
allegedly infringing intellectual property;
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lose the opportunity to license our technology to others or to
collect royalty payments based upon successful protection and
assertion of our intellectual property against others;
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incur significant legal expenses;
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pay substantial damages to the party whose intellectual property
rights we may be found to be infringing;
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redesign those products that contain the allegedly infringing
intellectual property; or
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13
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attempt to obtain a license to the relevant intellectual
property from third parties, which may not be available on
reasonable terms or at all.
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We expect that companies in the storage market will increasingly
be subject to infringement claims as the number of products and
competitors in our industry segment grows and the functionality
of products in different industry segments overlaps. Our channel
partners and end users could also become the target of
litigation relating to patent and other intellectual property
rights of others. This could trigger technical support and
indemnification obligations in our licenses and maintenance
agreements. These obligations could results in substantial
expenses, including the payment by us of costs and damages.
If we
fail to comply with the terms of our open source software
license agreement, we could be required to release portions of
our software codes, which could impair our ability to compete
and result in lower revenue.
Storage Center utilizes a software application called eCos, an
open source, royalty-free, real-time operating
system intended for embedded applications. eCos is licensed to
us under a modified version of version 2.0 of the GNU General
Public License. Open source software is often made available to
the public by its authors
and/or other
third parties under licenses, such as the GNU General Public
License, which impose certain obligations on licensees in the
event such licensees re-distribute
and/or make
derivative works of the open source software. The terms of our
license to the eCos application require us to make source code
for the derivative works freely available to the public,
and/or
license such derivative works under a particular type of
license, rather than the forms of commercial license customarily
used to protect our intellectual property. In addition, there is
little or no legal precedent for interpreting the terms of
certain of these open source licenses, including the
determination of which works are subject to the terms of such
licenses. While we believe we have complied with our obligations
under the various applicable licenses for open source software
to avoid subjecting our proprietary products to conditions we do
not intend, in the event the copyright holder of any open source
software were to successfully establish in court that we had not
complied with the terms of a license for a particular work, we
could be required to release the source code of that work to the
public, stop distribution of that work
and/or
recall our products that include that work. In this event, we
could be required to seek licenses from third parties in order
to continue offering our products, to make generally available,
in source code form, proprietary code that links to certain open
source modules, to re-engineer our products, or to recall
and/or
discontinue the sale of our products if re-engineering could not
be accomplished on a timely basis, any of which could impair our
ability to compete, result in lower revenue and increase our
expenses.
We may
need to raise additional funds in the future, which may not be
available to us on terms acceptable to us, or at
all.
We may need to raise additional funds in the future. Any
required additional financing may not be available on terms
acceptable to us, or at all. If we raise additional funds by
issuing equity securities or convertible debt, investors may
experience significant dilution of their ownership interest, and
the newly-issued securities may have rights senior to those of
the holders of our common stock. If we raise additional funds by
obtaining loans from third parties, the terms of those financing
arrangements may include negative covenants or other
restrictions on our business that could impair our operational
flexibility, and would also require us to fund additional
interest expense. If additional financing is not available when
required or is not available on acceptable terms, we may be
unable to successfully develop or enhance our storage products
in order to take advantage of business opportunities or respond
to competitive pressures, which could result in lower revenue
and reduce the competitiveness of our storage product offerings.
We may
engage in future acquisitions that could disrupt our business,
cause dilution to our stockholders, reduce our financial
resources and result in increased expenses.
In the future, we may acquire other businesses, products or
technologies. We have not made any acquisitions to date.
Accordingly, our ability as an organization to make acquisitions
is unproven. We may not be able to find suitable acquisition
candidates, and we may not be able to complete acquisitions on
favorable terms, if at all. If we do complete acquisitions, we
may not strengthen our competitive position or achieve our
goals, or these acquisitions may be viewed negatively by channel
partners, end users, financial markets or investors. In
addition, any
14
acquisitions that we make could lead to difficulties in
integrating personnel, technologies and operations from the
acquired businesses and in retaining and motivating key
personnel from these businesses. Acquisitions may disrupt our
ongoing operations, divert management from
day-to-day
responsibilities and increase our expenses. Future acquisitions
may reduce our cash available for operations and other uses, and
could result in an increase in amortization expense related to
identifiable assets acquired, potentially dilutive issuances of
equity securities or the incurrence of debt. We cannot forecast
the number, timing or size of future acquisitions, or the effect
that any such acquisitions might have on our operating or
financial results.
Risks
Related to this Offering and Ownership of Our Common
Stock
Our
stock price is volatile and purchasers of our common stock could
incur substantial losses.
The market price of our common stock and the securities of other
technology companies has been and may continue to be highly
volatile. The market price of our common stock may fluctuate
significantly in response to a number of factors, including:
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quarterly variations in our results of operations or those of
our competitors;
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fluctuations in the valuation of companies perceived by
investors to be comparable to us;
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economic developments in the storage industry as a whole;
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general economic conditions and slow or negative growth of
related markets;
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changes in financial estimates including our ability to meet our
future revenue and operating profit or loss projections;
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changes in earnings estimates or recommendations by securities
analysts;
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announcements by us or our competitors of acquisitions, new
products, significant contracts, commercial relationships or
capital commitments;
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our ability to develop and market new and enhanced products on a
timely basis;
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commencement of, or our involvement in, litigation;
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disruption to our operations;
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any major change in our board of directors or
management; and
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changes in governmental regulations.
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In addition, the stock market in general, and the market for
technology companies in particular, has experienced extreme
price and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of those
companies. These broad market and industry factors may cause the
market price of our common stock to decrease, regardless of our
actual operating performance. These trading price fluctuations
may also make it more difficult for us to use our common stock
as a means to make acquisitions or to use options to purchase
our common stock to attract and retain employees. In addition,
in the past, following periods of volatility in the overall
market and the market price of a companys securities,
securities class action litigation has often been instituted
against these companies. This litigation, if instituted against
us, could result in substantial costs and a diversion of our
managements attention and resources.
If
securities analysts or industry analysts downgrade our stock,
publish negative research or reports, or do not publish reports
about our business, our stock price and trading volume could
decline.
The trading market for our common stock will be influenced by
the research and reports that industry or securities analysts
publish about us, our business and our market. If one or more
analysts adversely change their recommendation regarding our
stock or our competitors stock, our stock price would
likely decline. If one or more analysts cease coverage of us or
fail to regularly publish reports on us, we could lose
visibility in the financial markets, which in turn could cause
our stock price or trading volume to decline.
15
A
limited number of stockholders will have the ability to
influence the outcome of director elections and other matters
requiring stockholder approval.
As of October 31, 2009, our directors and executive
officers and their affiliates beneficially own approximately
38.2% of our common stock. These stockholders, if they acted
together, could exert substantial influence over matters
requiring approval by our stockholders, including electing
directors, adopting new compensation plans and approving
mergers, acquisitions or other business combination
transactions. This concentration of ownership may discourage,
delay or prevent a change of control of our company, which could
deprive our stockholders of an opportunity to receive a premium
for their stock as part of a sale of our company and might
reduce our stock price. These actions may be taken even if they
are opposed by our other stockholders.
Management
will have broad discretion over the use of the net proceeds from
this offering.
We currently anticipate spending a portion of the net proceeds
for sales and marketing activities, research and development
activities, and to fund working capital and for general
corporate purposes. In addition, we may use a portion of the net
proceeds to acquire or invest in complementary businesses or
products or to obtain the right to use complementary
technologies. We have not reserved or allocated specific amounts
for these purposes and we cannot specify with certainty how we
will use the net proceeds. Accordingly, our management will have
considerable discretion in the application of the net proceeds
and you will not have the opportunity, as part of your
investment decision, to assess whether the proceeds are being
used appropriately. The net proceeds may be used for corporate
purposes that do not increase our operating results or market
value. Until the net proceeds are used, they may be placed in
investments that do not produce income or that lose value.
Delaware
law and our amended and restated certificate of incorporation
and bylaws contain provisions that could delay or discourage
takeover attempts that stockholders may consider favorable and
result in a lower market price for our common
stock.
Provisions in our amended and restated certificate of
incorporation and bylaws may have the effect of delaying or
preventing a change of control or changes in our management.
These provisions include the following:
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the division of our board of directors into three classes;
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the right of the board of directors to elect a director to fill
a vacancy created by the expansion of the board of directors or
due to the resignation or departure of an existing board member;
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the prohibition of cumulative voting in the election of
directors, which would otherwise allow less than a majority of
stockholders to elect director candidates;
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the requirement for the advance notice of nominations for
election to the board of directors or for proposing matters that
can be acted upon at a stockholders meeting;
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the ability of our board of directors to alter our bylaws
without obtaining stockholder approval;
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the ability of the board of directors to issue, without
stockholder approval, up to 10,000,000 shares of preferred
stock with terms set by the board of directors, which rights
could be senior to those of our common stock;
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the elimination of the rights of stockholders to call a special
meeting of stockholders and to take action by written consent in
lieu of a meeting; and
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the required approval of at least
662/3%
of the shares entitled to vote at an election of directors to
adopt, amend or repeal our bylaws or repeal the provisions of
our amended and restated certificate of incorporation regarding
the election and removal of directors.
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In addition, because we are incorporated in Delaware, we are
governed by the provisions of Section 203 of the Delaware
General Corporation Law. These provisions may prohibit large
stockholders, particularly those owning 15% or more of our
outstanding voting stock, from merging or combining with us.
These provisions in our amended and restated certificate of
incorporation and amended and restated bylaws and under Delaware
law could discourage
16
potential takeover attempts, could reduce the price that
investors are willing to pay for shares of our common stock in
the future and could potentially result in the market price
being lower than they would without these provisions.
If you
purchase shares of common stock sold in this offering, you will
experience substantial dilution as a result of this offering and
future equity issuances.
The public offering price per share in this offering is
substantially higher than the pro forma net tangible book value
per share of our common stock outstanding prior to this
offering. As a result, investors purchasing common stock in this
offering will experience immediate substantial dilution of
$15.78 a share. In addition, we have issued options to acquire
common stock at prices below the public offering price. To the
extent outstanding options are ultimately exercised, there will
be further dilution to investors in this offering. This dilution
is due in large part to the fact that our earlier investors paid
substantially less than the public offering price when they
purchased their shares of common stock. In addition, if the
underwriters exercise their option to purchase additional shares
or if we issue additional equity securities, you will experience
additional dilution.
17
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference
herein contain forward-looking statements that are based on our
managements beliefs and assumptions and on information
currently available to us. Discussions containing these
forward-looking statements may be found, among other places, in
Business and Managements Discussion and
Analysis of Financial Condition and Results of Operations
incorporated by reference from our most recent Annual Report on
Form 10-K
and in our Quarterly Reports on
Form 10-Q,
as well as any amendments thereto reflected in subsequent
filings with the SEC. All statements other than historical facts
contained in this prospectus and the documents incorporated by
reference, including statements regarding our future results of
operations and financial positions, business strategy, plans and
our objectives for future operations, are forward-looking
statements. When used in this prospectus the words
anticipate, believe, can,
could, estimate, expect,
intend, is designed to, may,
might, objective, plan,
potential, predict, should,
or the negative of these words and similar expressions identify
forward-looking statements. Forward-looking statements include,
but are not limited to, statements about:
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our expectations regarding our revenue, gross margin and
expenses;
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our ability to compete in our industry;
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our ability to maintain and grow our channel partner
relationships;
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our growth strategy and our growth rate;
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our ability to protect our intellectual property rights;
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pricing and availability of our suppliers
products; and
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assumptions underlying or related to any of the foregoing.
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These statements reflect our current views with respect to
future events and are based on assumptions and subject to risk
and uncertainties. We operate in a very competitive and rapidly
changing environment. New risks emerge from time to time. Given
these risks and uncertainties, you should not place undue
reliance on these forward-looking statements. While we believe
our plans, intentions and expectations reflected in those
forward-looking statements are reasonable, we cannot assure you
that these plans, intentions or expectations will be achieved.
Our actual results, performance or achievements could differ
materially from those contemplated, expressed or implied by the
forward-looking statements contained in this prospectus,
including those under the heading Risk Factors.
All forward-looking statements attributable to us or persons
acting on our behalf are expressly qualified in their entirety
by the cautionary statements set forth in this prospectus. Other
than as required by applicable securities laws, we are under no
obligation to update any forward-looking statement, whether as
result of new information, future events or otherwise.
This prospectus and the documents incorporated by reference
herein also contain statistical data and estimates that we
obtained from industry publications and reports generated by
Gartner, Inc. and TheInfoPro. These industry publications and
reports generally indicate that the information contained
therein was obtained from sources believed to be reliable, but
do not guarantee the accuracy and completeness of such
information. Although we believe that the publications and
reports are reliable, we have not independently verified the
data.
18
USE OF
PROCEEDS
We estimate that our net proceeds from the sale of the shares of
our common stock in this offering will be approximately
$1.6 million, or approximately $10.8 million if the
underwriters exercise their right to purchase additional shares
of common stock to cover over-allotments in full, based upon the
public offering price of $19.25 per share, and after deducting
underwriting discounts and commissions and estimated offering
expenses payable by us.
We currently intend to use our net proceeds from this offering
for sales and marketing activities, for research and development
activities, and to fund working capital and other general
corporate purposes.
We may also use a portion of the net proceeds of this offering
to expand our current business through acquisitions of or
investments in other complementary businesses, products or
technologies. However, we have no agreements or commitments with
respect to any acquisitions at this time. Pending these uses, we
intend to invest the net proceeds in investment-grade,
interest-bearing securities. We will not receive any proceeds
from the sale of common stock to be offered by the selling
stockholders.
19
PRICE
RANGE OF OUR COMMON STOCK
Our common stock is traded on the New York Stock Exchange under
the symbol CML. The following table sets forth, for
the periods indicated, the high and low sales prices per share
of our common stock as reported by the New York Stock Exchange
Arca with respect to the period from January 1, 2008
through March 20, 2009 and by the New York Stock Exchange
for the period from March 23, 2009 through
November 17, 2009.
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Prices
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High
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Low
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Year Ended December 31, 2008
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First Quarter
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$
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12.90
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$
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7.62
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Second Quarter
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13.93
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9.33
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Third Quarter
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15.20
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10.00
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Fourth Quarter
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12.68
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7.15
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Year Ending December 31, 2009
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First Quarter
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14.18
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9.83
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Second Quarter
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15.80
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9.94
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Third Quarter
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18.68
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13.83
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Fourth Quarter (through November 17, 2009)
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21.24
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17.23
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As of September 30, 2009, there were approximately 185
holders of record of our common stock. On November 17,
2009, the last sale price of our common stock was $19.66 per
share as reported by the New York Stock Exchange.
DIVIDEND
POLICY
We have never declared or paid any cash dividends on our capital
stock. We currently intend to retain all available funds and any
future earnings to support our operations and finance the growth
and development of our business. We do not intend to pay cash
dividends on our common stock for the foreseeable future. Any
future determination related to dividend policy will be made at
the discretion of our board of directors.
20
CAPITALIZATION
The following table sets forth our cash, cash equivalents and
short-term investments and capitalization as of
September 30, 2009:
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on an actual basis; and
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on an as adjusted basis to reflect the sale of
100,000 shares of our common stock in this offering at the
public offering price of $19.25 per share, and after deducting
underwriting discounts and commissions and estimated offering
expenses payable by us.
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You should read the information in this table together with our
financial statements and accompanying notes and
Managements Discussion and Analysis of Financial
Condition and Results of Operations from our most recent
Annual Report on
Form 10-K,
and in our most recent Quarterly Report on
Form 10-Q,
each of which is incorporated by reference herein.
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As of September 30,
2009
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Actual
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As
Adjusted
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(unaudited)
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(in thousands, except share and
per share data)
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Cash, cash equivalents and short-term investments
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$
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61,105
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$
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62,734
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Stockholders equity:
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Preferred stock, $0.001 par value; 10,000,000 shares
authorized, no shares issued and outstanding, actual;
$0.001 par value, 10,000,000 shares authorized, no
shares issued and outstanding, as adjusted
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Common stock, $0.001 par value; 300,000,000 shares
authorized, 30,941,059 shares issued and outstanding,
actual; $0.001 par value, 300,000,000 shares
authorized, 31,041,059 shares issued and outstanding, as
adjusted
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31
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31
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Additional paid-in capital
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152,045
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153,674
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Accumulated deficit
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(46,336
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)
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(46,336
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Accumulated other comprehensive income
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|
|
278
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|
|
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278
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Total stockholders equity
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106,018
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|
|
|
107,647
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Total capitalization
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$
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106,018
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$
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107,647
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The outstanding share information in the table above excludes,
as of September 30, 2009:
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3,386,770 shares of common stock issuable upon the exercise
of outstanding options with a weighted average exercise price of
$8.75 per share; and
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an aggregate of up to 6,004,881 shares of common stock
reserved for future issuance under our 2007 Equity Incentive
Plan and 2007 Employee Stock Purchase Plan, as well as any
automatic increases in the number of shares of our common stock
reserved for future issuance under these benefit plans.
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21
DILUTION
If you invest in our common stock in this offering, your
interest will be diluted to the extent of the difference between
the public offering price per share of our common stock and the
net tangible book value per share of our common stock after this
offering. Our net tangible book value as of September 30,
2009 was $106.0 million, or $3.43 per share. Our net
tangible book value per share represents the amount of our total
tangible assets reduced by the amount of our total liabilities
and divided by the total number of shares of common stock
outstanding as of September 30, 2009.
Net tangible book value dilution per share to new investors
represents the difference between the amount per share paid
by purchasers of shares of common stock in this offering and the
net tangible book value per share of common stock immediately
after completion of this offering. After giving effect to our
sale of 100,000 shares of common stock in this offering at
the public offering price of $19.25 per share, and after
deducting underwriting discounts and commissions and estimated
offering expenses payable by us, our net tangible book value as
of September 30, 2009 would have been $107.6 million,
or $3.47 per share. This represents an immediate increase in net
tangible book value of $0.04 per share attributable to new
investors and an immediate dilution in net tangible book value
of $15.78 per share to purchasers of common stock in this
offering, as illustrated in the following table:
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Public offering price per share
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$
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19.25
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Historical net tangible book value per share as of
September 30, 2009 before giving effect to this offering
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$
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3.43
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Increase in historical net tangible book value per share
attributable to new investors purchasing shares in this offering
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0.04
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Net tangible book value per share after giving effect to this
offering
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3.47
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Dilution per share to new investors in the offering
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$
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15.78
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If the underwriters exercise their over-allotment option in
full, the net tangible book value per share after the offering
would be $3.70 per share, the increase in net tangible book
value per share to existing stockholders would be $0.27 per
share and the dilution to new investors purchasing shares in
this offering would be $15.55 per share.
The above discussion and tables also assumes no exercise of any
outstanding stock options. As of
September
30, 2009, there were:
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3,386,770 shares of common stock issuable upon the exercise
of outstanding options with a weighted average exercise price of
$8.75 per share; and
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an aggregate of up to 6,004,881 shares of common stock
reserved for future issuance under our 2007 Equity Incentive
Plan and 2007 Employee Stock Purchase Plan, as well as any
automatic increases in the number of shares of our common stock
reserved for future issuance under these benefit plans.
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To the extent outstanding stock options are exercised, there
will be further dilution to new investors.
22
UNDERWRITERS
Under the terms and subject to the conditions contained in an
underwriting agreement dated the date of this prospectus, the
underwriters named below, for whom Morgan Stanley &
Co. Incorporated and Piper Jaffray & Co. are serving
as the representatives, have severally agreed to purchase, and
we and the selling stockholders have severally agreed to sell to
the underwriters the number of shares of our common stock
indicated in the table below:
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Name
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|
Number of
Shares
|
|
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Morgan Stanley & Co. Incorporated
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1,670,000
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Piper Jaffray & Co.
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835,000
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Thomas Weisel Partners LLC
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|
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167,000
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Needham & Company, LLC
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|
|
167,000
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Pacific Crest Securities LLC
|
|
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167,000
|
|
Merriman Curhan Ford & Co.
|
|
|
167,000
|
|
Craig-Hallum Capital Group
|
|
|
167,000
|
|
|
|
|
|
|
Total
|
|
|
3,340,000
|
|
|
|
|
|
|
The underwriters are offering the shares of our common stock
subject to their acceptance of the shares from us and the
selling stockholders and subject to prior sale. The underwriting
agreement provides that the obligations of the several
underwriters to pay for and accept delivery of the shares of our
common stock offered by this prospectus are subject to the
approval of certain legal matters by their counsel and to
certain other conditions. The underwriters are obligated to take
and pay for all of the shares of our common stock offered by us
and the selling stockholders pursuant to this prospectus if any
such shares are taken, except that, the underwriters are not
required to take or pay for the shares covered pursuant to the
exercise of the underwriters over-allotment option
described below.
The underwriters initially propose to offer a portion of the
shares of our common stock directly to the public at the public
offering price listed on the cover page of this prospectus and a
portion of such shares to certain dealers at a price that
represents a concession not in excess of $0.5775 per share under
the public offering price. After the initial offering of the
shares of our common stock, the offering price and other selling
terms may from time to time be varied by the representatives.
Pursuant to the underwriting agreement, we have granted to the
underwriters an option, which we refer to as an over-allotment
option, exercisable for 30 days from the date of this
prospectus, to purchase from us up to an aggregate of 500,000
additional shares of our common stock at the public offering
price listed on the cover page of this prospectus, less
underwriting discounts and commissions. The underwriters may
exercise this option solely for the purpose of covering
over-allotments, if any, made in connection with the offering of
the shares of our common stock offered by this prospectus. To
the extent that such over-allotment option is exercised, each
underwriter will be obligated, subject to certain conditions, to
purchase approximately the same percentage of the additional
shares of our common stock as the number listed next to the
underwriters name in the preceding table bears to the
total number of shares of our common stock listed next to the
names of all underwriters in the preceding table. If the
over-allotment option is exercised in full, the total price to
the public would be $73.9 million, the total amount of
underwriting discounts and commissions paid by us and the
selling stockholders would be $578,000 and $3.1 million,
respectively, and the total proceeds to us and the selling
stockholders, after deducting estimated offering expenses
payable by us, would be $10.8 million and
$59.3 million, respectively.
The underwriters have informed us that they do not intend sales
to discretionary accounts to exceed five percent of the total
number of shares of common stock offered by them.
23
The following table shows the per share and total underwriting
discounts and commissions that we and the selling stockholders
are to pay to the underwriters in connection with this offering.
These amounts are shown assuming both no exercise and full
exercise of the underwriters over-allotment option.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid by
|
|
|
|
|
|
|
Paid by Us
|
|
|
Selling Stockholders
|
|
|
Total
|
|
|
|
No
Exercise
|
|
|
Full
Exercise
|
|
|
No
Exercise
|
|
|
Full
Exercise
|
|
|
No
Exercise
|
|
|
Full
Exercise
|
|
|
Per share
|
|
$
|
0.9625
|
|
|
$
|
0.9625
|
|
|
$
|
0.9625
|
|
|
$
|
0.9625
|
|
|
$
|
0.9625
|
|
|
$
|
0.9625
|
|
Total
|
|
$
|
96,250
|
|
|
$
|
577,500
|
|
|
$
|
3,118,500
|
|
|
$
|
3,118,500
|
|
|
$
|
3,214,750
|
|
|
$
|
3,696,000
|
|
The estimated offering expenses payable by us, not including
underwriting discounts and commissions, are estimated to be
approximately $200,000, which includes legal, accounting and
printing costs and various other fees associated with the
registration and listing of our common stock.
We, the selling stockholders and all of our directors and
officers have agreed that, without the prior written consent of
Morgan Stanley & Co. Incorporated, on behalf of the
underwriters, we and they will not, during the period ending
90 days after the date of this prospectus (i) offer,
pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of
common stock or any securities convertible into or exercisable
or exchangeable for common stock; or (ii) enter into any
swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of our
common stock, whether any such transaction described above is to
be settled by delivery of common stock or such other securities,
in cash or otherwise. Subject to certain exceptions, these
restrictions do not apply to:
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|
|
|
|
the sale of shares by us to the underwriters;
|
|
|
|
the exercise of any outstanding options to acquire our common
stock or conversion of any convertible security into our common
stock;
|
|
|
|
transactions by any person other than us relating to shares of
our common stock or other securities acquired in open market
transactions after the completion of the offering of our common
stock;
|
|
|
|
the establishment of a trading plan pursuant to
Rule 10b5-1
under the Exchange Act for the transfer of shares of our common
stock if sales under such plan do not occur until after the
expiration of the
90-day
restricted period;
|
|
|
|
transfers of shares of our common stock or any security
convertible into our common stock as a bona fide gift;
|
|
|
|
distributions of shares of our common stock or any security
convertible into our common stock by a partnership, trust,
corporation or similar entity to its limited partners, members
or stockholders; or
|
|
|
|
transfers of shares of our common stock or any security
convertible into our common stock by will or intestate
succession to a member or members of his or her immediate family
or to a trust, formed for the benefit of any such person,
|
provided that, in the case of each of the last three types of
transactions, each donee, distributee, transferee or recipient
agrees to accept the restrictions described in this paragraph
and, in the case of each of the last four types of transactions,
no filing under Section 16 of the Exchange Act reporting a
reduction of beneficial ownership of shares of common stock is
required or voluntarily made in connection with these
transactions during this
90-day
restricted period, except for a Form 5 which may report a
reduction in beneficial ownership of shares of our common stock
through gifts, which is required to be filed within 45 days
of December 31, 2009.
In order to facilitate this offering of our common stock, the
underwriters may engage in transactions that stabilize, maintain
or otherwise affect the price of our common stock. Specifically,
the underwriters may sell more shares than they are obligated to
purchase under the underwriting agreement, creating a short
position. A short sale is covered if the short position is no
greater than the number of shares available for purchase by the
underwriters under the over-allotment option. The underwriters
can close out a covered short sale by exercising the over-
24
allotment option or purchasing shares in the open market. In
determining the source of shares to close out a covered short
sale, the underwriters will consider, among other things, the
open market price of shares compared to the price available
under the over-allotment option. The underwriters may also sell
shares in excess of the over-allotment option, creating a naked
short position. The underwriters must close out any naked short
position by purchasing shares in the open market. A naked short
position is more likely to be created if the underwriters are
concerned that there may be downward pressure on the price of
the common stock in the open market after pricing that could
adversely affect investors who purchase in the offering. In
addition, to stabilize the price of the common stock, the
underwriters may bid for, and purchase, shares of common stock
in the open market. Finally, the underwriting syndicate may
reclaim selling concessions allowed to an underwriter or a
dealer for distributing the common stock in the offering, if the
syndicate repurchases previously distributed common stock to
cover syndicate short positions or to stabilize the price of the
common stock. These activities may raise or maintain the market
price of the common stock above independent market levels or
prevent or retard a decline in the market price of the common
stock. The underwriters are not required to engage in these
activities, and may end any of these activities at any time.
We and the selling stockholders have agreed to indemnify the
underwriters against certain liabilities, including liabilities
under the Securities Act, or to contribute to payments the
underwriters may be required to make in connection with such
liabilities.
A prospectus in electronic format may be made available on the
web sites maintained by one or more underwriters. Other than the
prospectus in electronic format, the information on the
underwriters websites is not part of this prospectus. The
underwriters may agree to allocate a number of shares to
underwriters for sale to their online brokerage account holders.
Internet distributions will be allocated by Morgan
Stanley & Co. Incorporated and Piper
Jaffray & Co. to underwriters that may make Internet
distributions on the same basis as other allocations.
Each of the underwriters has represented and agreed that:
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|
|
|
|
it has not made or will not make an offer of shares to the
public in the United Kingdom within the meaning of
section 102B of the Financial Services and Markets Act 2000
(as amended), or the FSMA, except to legal entities which are
authorized or regulated to operate in the financial markets or,
if not so authorized or regulated, whose corporate purpose is
solely to invest in securities or otherwise in circumstances
which do not require the publication by us of a prospectus
pursuant to the Prospectus Rules of the Financial Services
Authority, or the FSA;
|
|
|
|
it has only communicated or caused to be communicated and will
only communicate or cause to be communicated an invitation or
inducement to engage in investment activity (within the meaning
of section 21 of FSMA) to persons who have professional
experience in matters relating to investments falling within
Article 19(5) of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2005 or in circumstances in
which section 21 of FSMA does not apply to us; and
|
|
|
|
it has complied with and will comply with all applicable
provisions of FSMA with respect to anything done by it in
relation to the shares in, from or otherwise involving the
United Kingdom.
|
In relation to each Member State of the European Economic Area
that has implemented the Prospectus Directive, each
representative has represented and agreed that with effect from
and including the date on which the Prospectus Directive is
implemented in that Member State it has not made and will not
make an offer of our shares of common stock to the public in
that Member State prior to the publication of a prospectus in
relation to the shares which has been approved by the competent
authority in that Member State or, where appropriate, approved
in another Member State, all in accordance with the Prospectus
Directive, except that it may, with effect from and including
such date, make an offer of such shares to the public in that
Member State:
|
|
|
|
|
at any time to legal entities which are authorized or regulated
to operate in the financial markets or, if not so authorized or
regulated, whose corporate purpose is solely to invest in
securities;
|
|
|
|
at any time to any legal entity which has two or more of:
(1) an average of at least 250 employees during the
last financial year; (2) a total balance sheet of more than
43,000,000; and (3) an annual net turnover of more
than 50,000,000, as shown in its last annual or
consolidated accounts; or
|
|
|
|
at any time in any other circumstances which do not require the
publication by us of a prospectus pursuant to Article 3 of
the Prospectus Directive.
|
25
For the purposes of the above, the expression an offer of
our shares of common stock to the public in relation to
any such shares in any Member State means the communication in
any form and by any means of sufficient information on the terms
of the offer and such shares to be offered so as to enable an
investor to decide to purchase or subscribe such shares, as the
same may be varied in that Member State by any measure
implementing the Prospectus Directive in that Member State and
the expression Prospectus Directive means Directive 2003/71/EC
and includes any relevant implementing measure in that Member
State.
Other
Relationships
Certain of the underwriters and their respective affiliates
have, from time to time, performed, and may in the future
perform, various financial advisory and investment banking
services for the company, for which they received or will
receive customary fees and expenses. The underwriters may, from
time to time in the future, engage in transactions with and
perform services for us in the ordinary course of their business.
26
PRINCIPAL
AND SELLING STOCKHOLDERS
The following table sets forth information regarding the
beneficial ownership of our common stock as of October 31,
2009, and as adjusted to reflect the sale of the common stock in
this offering, for:
|
|
|
|
|
each person, or group of affiliated persons, known by us to
beneficially own more than 5% of our common stock, or our
principal stockholders;
|
|
|
|
each of our selling stockholders;
|
|
|
|
each of our named executive officers;
|
|
|
|
each of our directors; and
|
|
|
|
all of our current executive officers and directors as a group.
|
The percentage ownership information shown in the table is based
upon 30,943,573 shares of common stock outstanding as of
October 31, 2009 and the issuance of 100,000 shares of
common stock by Compellent in this offering. The percentage
ownership information assumes no exercise of the
underwriters over-allotment option.
Information with respect to beneficial ownership has been
furnished by each director, officer, selling stockholder or
beneficial owner of more than 5% of our common stock or
determined by review of Schedule 13D and 13G filings with
the Securities and Exchange Commission. We have determined
beneficial ownership in accordance with the rules of the
Securities and Exchange Commission. These rules generally
attribute beneficial ownership of securities to persons who
possess sole or shared voting power or investment power with
respect to those securities. In addition, the rules include
common stock issuable pursuant to the exercise of stock options
that are either immediately exercisable or exercisable on or
before December 30, 2009, which is 60 days after
October 31, 2009. These shares are deemed to be outstanding
and beneficially owned by the person holding those options for
the purpose of computing the percentage ownership of that
person, but they are not treated as outstanding for the purpose
of computing the percentage ownership of any other person. None
of the selling stockholders are affiliated with a broker dealer.
Except as otherwise noted below, the address for each person or
entity listed in the table is
c/o Compellent
Technologies, Inc., 7625 Smetana Lane, Eden Prairie, MN 55344.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Shares Beneficially Owned
|
|
|
Shares
|
|
|
Shares Beneficially Owned
|
|
|
|
Prior to
Offering(1)
|
|
|
Being
|
|
|
After Offering
|
|
Name of
Beneficial Owner
|
|
Number
|
|
|
Percentage
|
|
|
Offered
|
|
|
Number
|
|
|
Percentage
|
|
|
Principal and Selling Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entities Affiliated with El Dorado
Ventures(2)
|
|
|
3,941,113
|
|
|
|
12.7
|
%
|
|
|
1,750,000
|
|
|
|
2,191,113
|
|
|
|
7.1
|
%
|
Entities Affiliated with Crescendo
Ventures(3)
|
|
|
4,030,205
|
|
|
|
13.0
|
|
|
|
850,000
|
|
|
|
3,180,205
|
|
|
|
10.2
|
|
Eagle Asset Management,
Inc.(4)
|
|
|
2,213,420
|
|
|
|
7.2
|
|
|
|
|
|
|
|
2,213,420
|
|
|
|
7.1
|
|
Cargill
Incorporated(5)
|
|
|
1,487,013
|
|
|
|
4.8
|
|
|
|
350,000
|
|
|
|
1,137,013
|
|
|
|
3.7
|
|
Directors and Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles
Beeler(6)
|
|
|
3,982,031
|
|
|
|
12.9
|
|
|
|
1,750,000
|
|
|
|
2,232,031
|
|
|
|
7.2
|
|
Sherman L.
Black(7)
|
|
|
4,355
|
|
|
|
*
|
|
|
|
|
|
|
|
4,355
|
|
|
|
*
|
|
David
Spreng(8)
|
|
|
4,071,123
|
|
|
|
13.1
|
|
|
|
850,000
|
|
|
|
3,221,123
|
|
|
|
10.4
|
|
Sven A.
Wehrwein(9)
|
|
|
44,918
|
|
|
|
*
|
|
|
|
|
|
|
|
44,918
|
|
|
|
*
|
|
Duston M.
Williams(10)
|
|
|
20,708
|
|
|
|
*
|
|
|
|
|
|
|
|
20,708
|
|
|
|
*
|
|
Lawrence E.
Aszmann(11)
|
|
|
923,737
|
|
|
|
3.0
|
|
|
|
50,000
|
|
|
|
873,737
|
|
|
|
2.8
|
|
Brian P.
Bell(12)
|
|
|
160,309
|
|
|
|
*
|
|
|
|
10,000
|
|
|
|
150,309
|
|
|
|
*
|
|
John P.
Guider(13)
|
|
|
1,385,384
|
|
|
|
4.5
|
|
|
|
100,000
|
|
|
|
1,285,384
|
|
|
|
4.1
|
|
John R.
Judd(14)
|
|
|
136,217
|
|
|
|
*
|
|
|
|
|
|
|
|
136,217
|
|
|
|
*
|
|
Philip E.
Soran(15)
|
|
|
1,409,567
|
|
|
|
4.5
|
|
|
|
130,000
|
|
|
|
1,279,567
|
|
|
|
4.1
|
|
All current executive officers and directors as a group
(10 persons)(16)
|
|
|
12,138,349
|
|
|
|
38.2
|
|
|
|
2,890,000
|
|
|
|
9,248,349
|
|
|
|
29.0
|
|
(footnotes appear on following page)
27
|
|
|
*
|
|
Less than one percent.
|
(1)
|
|
Unless otherwise indicated in the
footnotes to this table and subject to community property laws
where applicable, we believe that each of the stockholders named
in this table has sole voting and investment power with respect
to the shares indicated as beneficially owned.
|
(2)
|
|
Consists of 3,824,469 shares
held by El Dorado Ventures VI, L.P. and 116,644 shares held
by El Dorado Technology 01, L.P., collectively, the El
Dorado Entities. Charles Beeler, M. Scott Irwin and Thomas
H. Peterson are the managing members of El Dorado Venture
Partners VI, LLC, which is the general partner of each of the El
Dorado Entities, and are deemed to have shared voting and
investment power of the shares held by each of the El Dorado
Entities; however, each person disclaims beneficial ownership of
these shares except to the extent of their pecuniary interest
therein. Mr. Beeler is a member of our board of directors.
In this offering, El Dorado Ventures VI, L.P. will sell
1,698,205 shares and El Dorado Technology 01, L.P.
will sell 51,795 shares. The address of El Dorado Ventures
is 2440 Sand Hill Road, Suite 200, Menlo Park, CA 94025.
|
(3)
|
|
Consists of 3,690,764 shares
held by Crescendo IV, L.P., 75,794 shares held by
Crescendo IV Entrepreneurs Fund, L.P. and
29,243 shares held by Crescendo IV Entrepreneurs
Fund A, L.P., collectively, the Crescendo Entities, and
234,404 shares held by Crescendo IV AG & Co.
Beteiligungs KG. David R. Spreng is the managing member of
Crescendo Ventures IV, LLC, which is the general partner of each
of the Crescendo Entities, and the managing member of Crescendo
German Investments, IV, LLC, which is the general partner of
Crescendo IV AG & Co. Beteiligungs KG, and is deemed
to have sole voting and investment power of the shares held by
each of the Crescendo Entities and Crescendo IV AG &
Co. Beteiligungs KG; however, Mr. Spreng disclaims
beneficial ownership of these shares except to the extent of his
pecuniary interest therein. Mr. Spreng is a member of our
board of directors. In this offering, Crescendo IV, L.P. will
sell 766,204 shares, Crescendo IV AG & Co.
Beteiligungs KG will sell 48,662 shares, Crescendo IV
Entrepreneurs Fund, L.P. will sell 23,800 shares and
Crescendo IV Entrepreneurs Fund A, L.P. will sell
11,334 shares. The address of Crescendo Ventures is
600 Hansen Way, Suite 300, Palo Alto, CA 94304.
|
(4)
|
|
Eagle Asset Management, Inc. is an
investment advisor registered under Section 203 of the
Investment Advisors Act of 1940. Eagle Asset Management, Inc.
possesses sole voting and investment power with respect to such
shares. Burt Boksen, serving as portfolio manager, exercises
voting and investment power with respect to these shares.
Mr. Boksen disclaims beneficial ownership of these shares.
The address of Eagle Asset Management, Inc. is 880 Carillon
Parkway, St. Petersburg, Florida 33716.
|
(5)
|
|
Black River Asset Management LLC is
the investment advisor for Cargill, Incorporated and has sole
voting and investment control over the shares owned by Cargill.
James Sayre, serving as senior portfolio manager, exercises
voting and investment power with respect to these shares.
Mr. Sayre disclaims beneficial ownership of these shares.
The address of Cargill is
c/o Black
River Asset Management, 12700 Whitewater Drive, Minnetonka, MN
55343.
|
(6)
|
|
Consists of (a) the shares
described in Note (2) above and (b) stock options for
40,918 shares of our common stock exercisable within
60 days of October 31, 2009. The shares shown as being
sold by Mr. Beeler are being sold by El Dorado Ventures VI,
L.P. and El Dorado Technology 01, L.P. Mr. Beeler
disclaims beneficial ownership of shares held and being sold by
El Dorado Ventures VI, L.P. and El Dorado Technology 01,
L.P., except to the extent of his pecuniary interest therein.
|
(7)
|
|
Represents stock options for shares
of our common stock exercisable within 60 days of
October 31, 2009.
|
(8)
|
|
Consists of (a) the shares
described in Note (3) above and (b) stock options for
40,918 shares of our common stock exercisable within
60 days of October 31, 2009. The shares shown as being
sold by Mr. Spreng are being sold by Crescendo Ventures IV,
L.P., Crescendo IV AG & Co. Beteiligungs KG,
Crescendo IV Entrepreneurs Fund, L.P. and Crescendo IV
Entrepreneurs Fund A, L.P. Mr. Spreng disclaims
beneficial ownership of shares held and being sold by Crescendo
Ventures IV, L.P., Crescendo IV AG & Co.
Beteiligungs KG, Crescendo IV Entrepreneurs Fund, L.P. and
Crescendo IV Entrepreneurs Fund A, L.P., except to the
extent of his pecuniary interest therein.
|
(9)
|
|
Includes stock options for
40,918 shares of our common stock exercisable within
60 days of October 31, 2009.
|
(10)
|
|
Represents stock options for shares
of our common stock exercisable within 60 days of
October 31, 2009.
|
(11)
|
|
Includes stock options for
179,012 shares of our common stock exercisable within
60 days of October 31, 2009.
|
(12)
|
|
Includes stock options for
127,157 shares of common stock exercisable within
60 days of October 31, 2009 and 4,166 shares of
common stock subject to our right of repurchase in the event
Mr. Bells employment with us terminates 60 days
from October 31, 2009.
|
(13)
|
|
Consists of
(a) 211,144 shares of common stock held by
Mr. Guider, (b) 600,000 shares of common stock
held by the John P. Guider Revocable Trust, of which
Mr. Guider is trustee, (c) 388,856 shares held by
the Guider 2008 Grantor Retained Annuity Trust, of which
Mr. Guider is trustee and (d) stock options for
185,384 shares of our common stock exercisable within
60 days of October 31, 2009. In this offering,
Mr. Guider will sell 100,000 shares held in the name
of the John P. Guider Revocable Trust.
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(14)
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Includes stock options for
62,467 shares of common stock exercisable within
60 days of October 31, 2009 and 11,250 shares of
common stock subject to our right of repurchase in the event
Mr. Judds employment with us terminates 60 days
from October 31, 2009.
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(15)
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Consists of
(a) 710,248 shares of common stock held by
Mr. Soran, of which 13,882 shares are subject to our
right of repurchase in the event Mr. Sorans
employment with us terminates 60 days from October 31,
2009, (b) 194,922 shares of common stock held by the
Soran 2007 Grantor Retained Annuity Trust, of which
Mr. Soran is trustee, (c) 142,539 shares of
common stock held by the Soran 2008 Five-Year Grantor Retained
Annuity Trust, of which Mr. Soran is trustee,
(d) 142,539 shares of common stock held by the Soran
2008 Two-Year Grantor Retained Annuity Trust, of which
Mr. Soran is trustee, (e) 123,200 shares of
common stock held by Mr. Sorans immediate family
members over which Mr. Soran is deemed to have beneficial
ownership and (f) options to purchase 96,119 shares of
common stock exercisable within 60 days of October 31,
2009. In this offering, Mr. Soran will sell
130,000 shares held in his name.
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(16)
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Includes 7,971,318 shares held
by entities affiliated with certain of our directors and
4,015,214 shares beneficially owned by our executive
officers, of which (a) stock options for
650,139 shares of common stock are exercisable within
60 days of October 31, 2009 and
(b) 29,298 shares of which are subject to our right of
repurchase in the event such executive officers employment
with us terminates 60 days from October 31, 2009.
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28
MATERIAL
U.S. FEDERAL TAX CONSIDERATIONS
FOR NON-U.S.
HOLDERS OF COMMON STOCK
This section summarizes certain material U.S. federal
income and estate tax considerations relating to the ownership
and disposition of common stock to
non-U.S. holders.
This summary does not provide a complete analysis of all
potential tax considerations. The information provided below is
based on existing authorities. These authorities may change with
retroactive effect or the IRS might interpret the existing
authorities differently. In either case, the tax considerations
of owning or disposing of common stock could differ from those
described below. For purposes of this summary, a
non-U.S. holder
is any holder other than a citizen or resident of the United
States, a corporation organized under the laws of the United
States or any state, a trust that is (i) subject to the
primary supervision of a U.S. court and the control of one
of more U.S. persons or (ii) has a valid election in
effect under applicable U.S. Treasury regulations to be
treated as a U.S. person or an estate whose income is
subject to U.S. income tax regardless of source. If a
partnership or other flow-through entity is a holder or
beneficial owner of common stock, the tax treatment of a partner
in the partnership or an owner of the entity will depend upon
the status of the partner or other owner and the activities of
the partnership or other entity. Accordingly, partnerships and
flow-through entities that hold our common stock and partners or
owners of such partnerships or entities, as applicable, should
consult their own tax advisors. The summary generally does not
address tax considerations that may be relevant to particular
investors because of their specific circumstances, or because
they are subject to special rules, including, without
limitation, banks, insurance companies, or other financial
institutions; persons subject to the alternative minimum tax;
controlled foreign corporations or passive foreign investment
companies; tax-exempt organizations; dealers in securities or
currencies; traders in securities that elect to use a
mark-to-market
method of accounting for their securities holdings; persons that
own, or are deemed to own, more than five percent of our company
(except to the extent specifically set forth below); certain
former citizens or long-term residents of the United States;
hybrid entities (entities treated as flow-through
entities in one jurisdictions but as opaque in another) and
their owners; persons who hold our common stock as a position in
a hedging transaction, straddle, conversion
transaction or other risk reduction transaction; or
persons deemed to sell our common stock under the constructive
sale provisions of the Internal Revenue Code. Finally, the
summary does not describe the effects of any applicable foreign,
state or local laws.
INVESTORS CONSIDERING THE PURCHASE OF COMMON STOCK SHOULD
CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE
U.S. FEDERAL INCOME AND ESTATE TAX LAWS TO THEIR PARTICULAR
SITUATIONS AND THE CONSEQUENCES OF FOREIGN, STATE, OR LOCAL TAX
LAWS, AND TAX TREATIES.
Dividends
We have not made any distributions on our common stock, and we
do not plan to make any distributions for the foreseeable
future. However, if we do make distributions on our common
stock, those payments will constitute dividends for
U.S. tax purposes to the extent paid from our current and
accumulated earnings and profits, as determined under
U.S. federal income tax principles. To the extent those
distributions exceed our current and accumulated earnings and
profits, they will constitute a return of capital and will first
reduce a
non-U.S. holders
basis in our common stock, but not below zero, and then will be
treated as gain from the sale of stock. Any dividend paid to a
non-U.S. holder
on our common stock will generally be subject to
U.S. withholding tax at a 30 percent rate. The
withholding tax might apply at a reduced rate under the terms of
an applicable income tax treaty between the United States and
the
non-U.S. holders
country of residence. A
non-U.S. holder
must demonstrate its entitlement to treaty benefits by
certifying eligibility. A
non-U.S. holder
can meet this certification requirement by providing a
Form W-8BEN
or appropriate substitute form to us or our paying agent. If the
holder holds the stock through a financial institution or other
agent acting on the holders behalf, the holder will be
required to provide appropriate documentation to the agent. The
holders agent will then be required to provide
certification to us or our paying agent, either directly or
through other intermediaries. For payments made to a foreign
partnership or other flow-through entity, the certification
requirements generally apply to the partners or other owners as
well as to the partnership or other entity, and the partnership
or other entity must provide the partners or other
owners documentation to us or our paying agent. Special
rules, described below, apply if a dividend is effectively
connected with a U.S. trade or business conducted by the
non-U.S. holder.
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Sale of
Common Stock
Non-U.S. holders
generally will not be subject to U.S. federal income tax on
any gains realized on the sale, exchange, or other disposition
of common stock. This general rule, however, is subject to
several exceptions. For example, the gain would be subject to
U.S. federal income tax if:
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the gain is effectively connected with the conduct by the
non-U.S. holder
of a U.S. trade or business (in which case the special
rules described below apply);
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the
non-U.S. holder
is an individual who holds our common stock as a capital asset
(generally, an asset held for investment purposes) and who is
present in the U.S. for a period or periods aggregating
183 days or more during the calendar year in which the sale
or disposition occurs and certain other conditions are met;
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the
non-U.S. holder
was a citizen or resident of the United States and thus is
subject to special rules that apply to expatriates; or
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the rules of the Foreign Investment in Real Property Tax Act, or
FIRPTA (described below), treat the gain as effectively
connected with a U.S. trade or business.
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An individual
non-U.S. holder
described in the second bullet point immediately above will be
subject to a flat 30% tax on the gain derived from the sale,
which may be offset by U.S. source capital losses, even
though the individual is not considered a resident of the
U.S. If a
non-U.S. holder
is described in the third bullet point above, the
non-U.S. holder
should consult its own tax advisor to determine the
U.S. federal, state, local and other tax consequences that
may be relevant to such holder.
The FIRPTA rules may apply to a sale, exchange or other
disposition of common stock if we are, or were within five years
before the transaction, a U.S. real property holding
corporation, or a USRPHC. In general, we would be a USRPHC
if interests in U.S. real estate comprised most of our
assets. We do not believe that we are a USRPHC or that we will
become one in the future. If we are, or become a USRPHC, so long
as our common stock is regularly traded on an established
securities market, only a
non-U.S. holder
who, actually or constructively, holds or held (at any time
during the shorter of the five year period preceding the date of
disposition or the holders holding period) more than 5% of
our common stock will be subject to U.S. federal income tax
on the disposition of our common stock.
Dividends
or Gain Effectively Connected With a U.S. Trade or
Business
If any dividend on our common stock, or gain from the sale,
exchange or other disposition of our common stock, is
effectively connected with a U.S. trade or business
conducted by the
non-U.S. holder,
then the dividend or gain will be subject to U.S. federal
income tax at the regular graduated rates. If the
non-U.S. holder
is eligible for the benefits of a tax treaty between the United
States and the holders country of residence, any
effectively connected dividend or gain generally
would be subject to U.S. federal income tax only if it is
also attributable to a permanent establishment or fixed base
maintained by the holder in the United States. Payments of
dividends that are effectively connected with a U.S. trade
or business, and therefore included in the gross income of a
non-U.S. holder,
will not be subject to the 30% withholding tax. To claim
exemption from withholding, the holder must certify its
qualification, which can be done by providing a
Form W-8ECI.
If the
non-U.S. holder
is a corporation, that portion of its earnings and profits that
is effectively connected with its U.S. trade or business
would generally be subject to a branch profits tax.
The branch profits tax rate generally is 30%, although an
applicable income tax treaty might provide for a lower rate.
Backup
Withholding and Information Reporting
The Internal Revenue Code and the Treasury regulations require
those who make specified payments to report such payments to the
IRS. Among the specified payments are dividends and proceeds
paid by brokers to their customers. The required information
returns enable the IRS to determine whether the recipient
properly included the payments in income. This reporting regime
is reinforced by backup withholding rules. These
rules require the payors to withhold tax from payments subject
to information reporting if the recipient fails to cooperate
with the reporting regime by failing to provide a taxpayer
identification number to the payor, furnishing an incorrect
30
identification number, or repeatedly failing to report interest
or dividends on tax returns. The withholding tax rate is
currently 28 percent. The backup withholding rules do not
apply to payments to corporations, whether domestic or foreign.
Payments to
non-U.S. holders
of dividends on our common stock generally will not be subject
to backup withholding, and payments of proceeds made to
non-U.S. holders
by a broker upon a sale of our common stock will not be subject
to information reporting or backup withholding, in each case so
long as the
non-U.S. holder
certifies its nonresident status. Some of the common means of
certifying nonresident status are described under
Dividends. We must report annually to
the IRS any dividends paid to each
non-U.S. holder
and the tax withheld, if any, with respect to such dividends.
Copies of these reports may be made available to tax authorities
in the country where the
non-U.S. holder
resides.
Any amounts withheld from a payment to a holder of common stock
under the backup withholding rules generally can be credited
against any U.S. federal income tax liability of the holder.
U.S.
Federal Estate Tax
The estates of nonresident alien individuals are generally
subject to U.S. federal estate tax on property with a
U.S. situs. Because we are a U.S. corporation, our
common stock will be U.S. situs property and therefore will
be included in the taxable estate of a nonresident alien
decedent. The U.S. federal estate tax liability of the
estate of a nonresident alien may be affected by a tax treaty
between the United States and the decedents country of
residence.
THE PRECEDING DISCUSSION OF U.S. FEDERAL INCOME AND ESTATE
TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY. IT IS NOT
TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX
ADVISOR REGARDING THE PARTICULAR U.S. FEDERAL, STATE,
LOCAL, AND FOREIGN TAX CONSEQUENCES OF PURCHASING, HOLDING, AND
DISPOSING OF OUR COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY
PROPOSED CHANGE IN APPLICABLE LAWS.
31
DESCRIPTION
OF CAPITAL STOCK
Our authorized capital stock consists of 300,000,000 shares
of common stock, par value $0.001 per share, and
10,000,000 shares of preferred stock, par value $0.001 per
share. As of September 30, 2009, there were
30,941,059 shares of common stock issued and outstanding
and no shares of preferred stock issued and outstanding.
The following summary description of our common and preferred
stock is based on the provisions of our amended and restated
certificate of incorporation, our amended and restated bylaws
and the applicable provisions of the Delaware General
Corporation Law. This information may not be complete in all
respects and is qualified entirely by reference to the
provisions of our amended and restated certificate of
incorporation, our amended and restated bylaws and the Delaware
General Corporation Law. For information on how to obtain copies
of our amended and restated certificate of incorporation and
amended and restated bylaws, which are exhibits to the
registration statement of which this prospectus forms a part,
see Where You Can Find More Information.
Common
Stock
Outstanding Shares. Based on
30,941,059 shares of common stock outstanding as of
September 30, 2009 and no exercise of outstanding options,
there will be 31,041,059 shares of common stock outstanding
upon the closing of this offering. As of September 30,
2009, we had approximately 185 record holders of our common
stock.
Voting Rights. Each holder of common stock is
entitled to one vote for each share of common stock held on all
matters submitted to a vote of the stockholders, including the
election of directors. Our amended and restated certificate of
incorporation and amended and restated bylaws do not provide for
cumulative voting rights. Because of this, the holders of a
majority of the shares of common stock entitled to vote in any
election of directors can elect all of the directors standing
for election, if they should so choose.
Dividends. Subject to preferences that may be
applicable to any then outstanding preferred stock, the holders
of our outstanding shares of common stock are entitled to
receive dividends, if any, as may be declared from time to time
by our board of directors out of legally available funds.
Liquidation. In the event of our liquidation,
dissolution or winding up, holders of common stock will be
entitled to share ratably in the net assets legally available
for distribution to stockholders after the payment of all of our
debts and other liabilities, subject to the satisfaction of any
liquidation preference granted to the holders of any outstanding
shares of preferred stock.
Other Rights and Preferences. Holders of our
common stock have no preemptive, conversion or subscription
rights, and there are no redemption or sinking fund provisions
applicable to our common stock. The rights, preferences and
privileges of the holders of common stock are subject to, and
may be adversely affected by, the rights of the holders of
shares of any series of our preferred stock that we may
designate and issue in the future.
Fully Paid and Nonassessable. All of our
outstanding shares of common stock are, and the shares of common
stock to be issued in this offering will be, fully paid and
nonassessable.
Preferred
Stock
Our amended and restated certificate of incorporation provides
that our board of directors has the authority, without further
action by our stockholders, to issue up to
10,000,000 shares of preferred stock none of which are
outstanding. Our board of directors may issue preferred stock in
one or more series and has the authority to establish from time
to time the number of shares to be included in each such series,
to fix the rights, preferences and privileges of the shares of
each wholly unissued series and any qualifications, limitations
or restrictions thereon, and to increase or decrease the number
of shares of any such series, but not below the number of shares
of such series then outstanding. Our board of directors may
authorize the issuance of preferred stock with voting or
conversion rights that could adversely affect the voting power
or other rights of the holders of our common stock. The issuance
of preferred stock, while providing flexibility in connection
with possible acquisitions and other corporate purposes, could,
among other things, have the effect of delaying, deferring or
preventing a change in control of us and may adversely affect
the market price of our common stock and the voting and other
rights of the holders of our common stock.
32
Stock
Options
As of September 30, 2009, there were 3,386,770 shares
of our common stock issuable upon the exercise of outstanding
stock options, having a weighted-average exercise price of $8.75
per share. As of September 30, 2009, an aggregate of
6,004,881 shares of our common stock were reserved for
future issuance under our 2007 Equity Incentive Plan and our
2007 Employee Stock Purchase Plan.
Registration
Rights
Under our amended and restated investor rights agreement, the
holders of 9,275,561 shares of common stock or their
transferees, have the right to require us to register their
shares with the Securities and Exchange Commission so that those
shares may be publicly resold, or to include their shares in any
registration statement we file, in each case as described below.
Demand Registration Rights. The holders of at
least a majority of the shares having registration rights have
the right to demand that we file up to two registration
statements. These registration rights are subject to specified
exceptions, conditions and limitations, including the right of
the underwriters of such registration, if any, to limit the
number of shares included in any such registration under certain
circumstances.
Form S-3
Registration Rights. The holders of at least
17.5% of shares having registration rights have the right to
demand that we file a registration statement for such holders on
Form S-3
so long as the aggregate offering price, net of any
underwriters discounts or commissions, of securities to be
sold under the registration statement on
Form S-3
is at least $500,000. We are obligated to file up to two
registration statements on
Form S-3
in any twelve month period. These registration rights are
subject to specified exceptions, conditions and limitations,
including the right of the underwriters of such registration, if
any, to limit the number of shares included in any such
registration under certain circumstances.
Piggyback Registration Rights. In
the event we propose to register any securities for public sale,
a stockholder with registration rights will have the right to
include their shares in the registration statement. The
underwriters of any underwritten offering will have the right to
limit the number of shares having registration rights to be
included in the registration statement, but not below 30% of the
total number of shares included in the registration statement.
Expenses of Registration. We will pay all
expenses, other than underwriting discounts and commissions,
relating to all demand registrations,
Form S-3
registrations and piggyback registrations.
Expiration of Registration Rights. The
registration rights described above will terminate upon the
earlier of either October 15, 2012 or as to a given holder
of registrable securities, when such holder of registrable
securities can sell all of such holders registrable
securities pursuant to Rule 144 promulgated under the
Securities Act or when such holder holds 1% or less of our
outstanding common stock and all of such holders
registrable securities can be sold in any three-month period
pursuant to Rule 144 promulgated under the Securities Act.
Delaware
Anti-Takeover Law and Provisions of our Amended and Restated
Certificate of Incorporation and Amended and Restated
Bylaws
Delaware Anti-Takeover Law. We are subject to
Section 203 of the Delaware General Corporation Law.
Section 203 generally prohibits a public Delaware
corporation from engaging in a business combination
with an interested stockholder for a period of three
years after the date of the transaction in which the person
became an interested stockholder, unless:
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prior to the date of the transaction, the board of directors of
the corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an
interested stockholder;
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the interested stockholder owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of
shares outstanding (a) shares owned by persons who are
directors and also officers and (b) shares owned by
employee stock plans in which employee participants do not have
the right to determine confidentially whether shares held
subject to the plan will be tendered in a tender or exchange
offer; or
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on or subsequent to the date of the transaction, the business
combination is approved by the board and authorized at an annual
or special meeting of stockholders, and not by written consent,
by the affirmative vote of at least
662/3%
of the outstanding voting stock which is not owned by the
interested stockholder.
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Section 203 defines a business combination to include:
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any merger or consolidation involving the corporation and the
interested stockholder;
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any sale, transfer, pledge or other disposition involving the
interested stockholder of 10% or more of the assets of the
corporation;
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subject to exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder; and
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the receipt by the interested stockholder of the benefit of any
loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation.
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In general, Section 203 defines an interested stockholder
as any entity or person beneficially owning 15% or more of the
outstanding voting stock of the corporation and any entity or
person affiliated with or controlling or controlled by the
entity or person.
Amended and Restated Certificate of Incorporation and Amended
and Restated Bylaws. Provisions of our amended
and restated certificate of incorporation and amended and
restated bylaws may delay or discourage transactions involving
an actual or potential change in our control or change in our
management, including transactions in which stockholders might
otherwise receive a premium for their shares, or transactions
that our stockholders might otherwise deem to be in their best
interests. Therefore, these provisions could adversely affect
the price of our common stock. Among other things, our amended
and restated certificate of incorporation and amended and
restated bylaws:
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permit our board of directors to issue up to
10,000,000 shares of preferred stock, with any rights,
preferences and privileges as they may designate, including the
right to approve an acquisition or other change in our control;
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provide that the authorized number of directors may be changed
only by resolution of the board of directors;
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provide that all vacancies, including newly created
directorships, may, except as otherwise required by law, be
filled by the affirmative vote of a majority of directors then
in office, even if less than a quorum;
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divide our board of directors into three classes;
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require that any action to be taken by our stockholders must be
effected at a duly called annual or special meeting of
stockholders and not be taken by written consent;
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provide that stockholders seeking to present proposals before a
meeting of stockholders or to nominate candidates for election
as directors at a meeting of stockholders must provide notice in
writing in a timely manner, and also specify requirements as to
the form and content of a stockholders notice;
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do not provide for cumulative voting rights (therefore allowing
the holders of a majority of the shares of common stock entitled
to vote in any election of directors to elect all of the
directors standing for election, if they should so choose);
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provide that special meetings of our stockholders may be called
only by the chairman of the board, our chief executive officer
or by the board of directors pursuant to a resolution adopted by
a majority of the total number of authorized directors; and
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provide that stockholders will be permitted to amend our amended
and restated bylaws only upon receiving at least
662/3%
of the votes entitled to be cast by holders of all outstanding
shares then entitled to vote generally in the election of
directors, voting together as a single class.
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The amendment of any of these provisions would require approval
by the holders of at least
662/3%
of our then outstanding common stock, voting as a single class.
34
New York
Stock Exchange
Our common stock is listed on the New York Stock Exchange under
the symbol CML.
Transfer
Agent and Registrar
The transfer agent and registrar for our common stock is Wells
Fargo Bank Minnesota, N.A. The transfer agent and
registrars address is Shareowner Services, 161 North
Concord Exchange, South St. Paul, Minnesota 55075.
VALIDITY
OF CAPITAL STOCK
The validity of the common stock being offered hereby will be
passed upon for us by Cooley Godward Kronish LLP, Palo Alto,
California. The underwriters are being represented by Gunderson
Dettmer Stough Villeneuve Franklin & Hachigian, LLP,
New York, New York. As of the date of this prospectus, a partner
at Cooley Godward Kronish LLP directly holds an aggregate of
3,000 shares of our common stock.
EXPERTS
The financial statements and managements assessment of the
effectiveness of internal control over financial reporting
incorporated by reference in this prospectus and in the
registration statement have been so incorporated by reference in
reliance upon the reports of Grant Thornton LLP, independent
registered public accountants, upon the authority of said firm
as experts in accounting and auditing in giving said reports.
WHERE YOU
CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements
and other information with the SEC. You may read and copy any
document we file at the SECs Public Reference Room at
100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at
1-800-SEC-0330
for more information about the operation of the public reference
room. The SEC also maintains an Internet site that contains
reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC,
including Compellent. The SECs Internet site can be found
at
http://www.sec.gov.
The SEC allows us to incorporate by reference the information we
file with it, which means that we can disclose important
information to you by referring you to another document that we
have filed separately with the SEC. You should read the
information incorporated by reference because it is an important
part of this prospectus. We incorporate by reference the
following information or documents that we have filed with the
SEC (Commission File
No. 0-33685):
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our Annual Report on
Form 10-K
for the year ended December 31, 2008 and filed with the SEC
on March 16, 2009;
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the information specifically incorporated by reference into our
Annual Report on Form
10-K for the
year ended December 31, 2008 from our definitive proxy
statement on Schedule 14A for our 2009 Annual Meeting of
Stockholders filed with the SEC on April 17, 2009;
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our Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2009 filed with the SEC on
May 8, 2009;
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our Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2009 filed with the SEC on
August 7, 2009;
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our Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2009 filed with the SEC
on October 28, 2009;
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our Current Reports on
Form 8-K
filed on February 17, 2009, August 3, 2009 and
November 4, 2009; and
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the description of our common stock contained in our
registration Statement on Form
8-A as filed
on March 20, 2009 pursuant to Section 12(b) of the
Exchange Act, including any amendment or report filed for the
purpose of updating such descriptions.
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Any information in any of the foregoing documents will
automatically be deemed to be modified or superseded to the
extent that information in this prospectus or in a later filed
document that is incorporated or deemed to be incorporated
herein by reference modifies or replaces such information.
We also incorporate by reference any future filings (other than
current reports furnished under Item 2.02 or Item 7.01
of
Form 8-K
and exhibits filed on such form that are related to such items)
made with the SEC pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act, after the date of this prospectus and
prior to the termination of the offering of the common stock
covered by this prospectus. Information in such future filings
updates and supplements the information provided in this
prospectus. Any statements in any such future filings will
automatically be deemed to modify and supersede any information
in any document we previously filed with the SEC that is
incorporated or deemed to be incorporated herein by reference to
the extent that statements in the later filed document modify or
replace such earlier statements.
We will furnish without charge to you, upon written or oral
request, a copy of any or all of the documents incorporated by
reference, including exhibits to these documents. You should
direct any requests for documents to:
Compellent Technologies, Inc.
Attention: Investor Relations
7625 Smetana Lane
Eden Prairie, Minnesota 55344.
(952) 294-3300.
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