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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Year Ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-28252
BROADVISION, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3184303
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
585 Broadway, Redwood City, California 94063
(Address of principal executive offices) (Zip Code)
(650) 261-5100
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.0001 par value
------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Based on the closing sales price of March 24, 2000 the aggregate market value of
the voting stock held by nonaffiliates of the registrant was $16,841,974,970.
As of March 24, 2000, registrant had outstanding 248,359,090 shares of Common
Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the Proxy Statement for Registrant's 1999 Annual Meeting of
Stockholders to be held May 31, 2000 are incorporated by reference in Part III
of this Form 10-K Report.
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BROADVISION, INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 1999
TABLE OF CONTENTS
Page No.
--------
Part I
Item 1. Business-----------------------------------------------------------------------------------------------3
Item 2. Properties--------------------------------------------------------------------------------------------19
Item 3. Legal Proceedings-------------------------------------------------------------------------------------20
Item 4. Submission of Matters to a Vote of Security Holders---------------------------------------------------20
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters---------------------------------20
Item 6. Selected Consolidated Financial Data------------------------------------------------------------------21
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-----------------22
Item 7A. Quantitative and Qualitative Disclosure About Market Risk--------------------------------------------37
Item 8. Financial Statements and Supplementary Data-----------------------------------------------------------38
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure------------------55
Part III
Item 10. Directors and Executive Officers of the Registrant---------------------------------------------------56
Item 11. Executive Compensation-------------------------------------------------------------------------------56
Item 12. Security Ownership of Certain Beneficial Owners and Management---------------------------------------56
Item 13. Certain Relationships and Related Transactions-------------------------------------------------------56
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K-------------------------------------56
SIGNATURES----------------------------------------------------------------------------------------------------57
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PART I.
ITEM 1. BUSINESS
The following discussion of the Company's business contains forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including, but not limited to, those
set forth under "Risk Factors" and elsewhere in this Form 10-K.
Overview and Industry Background.......................................................3
The BroadVision Solution...............................................................6
BroadVision Business Strategies........................................................6
Extend and Expand our Leadership in Business-to-Consumer E-Commerce..................6
Become a Recognized Leader in Business-to-Business E-Commerce........................7
Develop New and Enhance Existing Targeted Application Solutions......................7
Enhance our Service and Support Infrastructure.......................................7
Expand and Leverage Alliances with Key Business Partners.............................7
Support Diverse Customer Business Models.............................................8
Grow Our International Presence......................................................8
BroadVision Products...................................................................8
BroadVision One-To-One Packaged Applications.........................................9
BroadVision One-To-One Business Tools...............................................10
Other Products......................................................................11
Product Development.................................................................11
BroadVision Worldwide Professional Services...........................................12
Strategic Services..................................................................12
Interactive Services................................................................12
Content and Creative Services.......................................................12
Technical Support Services..........................................................12
Education Services..................................................................12
BroadVision University..............................................................12
Strategic Alliances...................................................................13
Customers and Markets.................................................................13
Competition...........................................................................15
Technology............................................................................16
Adherence to Industry Standards.......................................................16
Intellectual Property and Other Proprietary Rights....................................18
Employees.............................................................................18
Executive officers..................................................................18
Overview and Industry Background
We develop, market and support application software solutions that
personalize e-business. These solutions enable e-businesses to use the web and
an expanding array of wireless devices as platforms to conduct electronic
commerce, offer online customer self-service and support, deliver targeted
information and provide financial services such as online billing, consumer
banking and brokerage. These capabilities can be provided to all constituents of
the extended enterprise, including customers, suppliers, partners, distributors
and employees.
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The BroadVision One-To-One(TM) applications suite allows businesses to tailor
Web and wireless content to the needs and interests of individual users by
personalizing content and transactions on a real-time basis.
Our applications interactively capture Web and wireless visitor profile
information, organize the enterprise's content, dynamically target that content
to each visitor based on easily constructed business rules, deliver stylized
content to the specified device, and execute transactions. We believe the
benefits of these personalized applications include enhanced customer
satisfaction and loyalty, increased business volume, greater brand awareness,
reduced costs to service customers and execute transactions, and enhanced
employee productivity.
BroadVision One-To-One applications are used throughout the world. For
example, over 50 financial institutions in 25 countries use our applications to
personalize financial transactions with their customers.
---------------------------------------------------------------------------------------
Countries Where BroadVision One-To-One Financial is Deployed
---------------------------------------------------------------------------------------
Andorra Czech Israel Luxembourg Sweden
Republic
----------------- ---------------- ------------- ------------------- ------------------
Austria England Italy Malaysia Switzerland
----------------- ---------------- ------------- ------------------- ------------------
Belgium Estonia Japan The Netherlands Taiwan
----------------- ---------------- ------------- ------------------- ------------------
Canada France Korea Singapore Turkey
----------------- ---------------- ------------- ------------------- ------------------
China Germany Kuwait Spain United States
----------------- ---------------- ------------- ------------------- ------------------
Six of the largest Fortune 500 retailers in the United States use our
applications for e-business.
-------------------------------- ------------------------- ------------------
Retailer Fortune 500 Ranking 1999 Revenues
-------------------------------- ------------------------- ------------------
Wal-Mart Stores 3 $139 billion
-------------------------------- ------------------------- ------------------
Sears Roebuck & Co. 15 $41 billion
-------------------------------- ------------------------- ------------------
The Home Depot 32 $30 billion
-------------------------------- ------------------------- ------------------
Federated Stores (Fingerhut) 95 $15 billion
-------------------------------- ------------------------- ------------------
Circuit City 182 $10 billion
-------------------------------- ------------------------- ------------------
Office Max 358 $5 billion
-------------------------------- ------------------------- ------------------
In addition to traditional brick-and-mortar retailers using BroadVision as
their business-to-consumer e-commerce solution, over 140 companies worldwide use
BroadVision applications to customize interactions and transactions between
themselves and their suppliers in a business-to-business environment or to
create online marketplaces where multiple buyers and vendors purchase and sell
goods and services. Among our retail and business-to-business commerce customers
are over 70 recently formed "dot com" companies who have chosen to deploy their
e-businesses using BroadVision. We believe that our customers, particularly
those in Europe, are at the leading edge of deploying applications that display
content and conduct transactions on wireless devices. Additionally,
information-intensive businesses have found our applications to be well-suited
for employee intranet sites, where enterprise information is centralized,
personalized and delivered.
Personalizing Web and Wireless Interactions and Transactions
The Web has changed the nature of business operations and competition by
creating more efficient marketplaces. Since information is now much more readily
available, companies and their customers, suppliers, partners, distributors,
employees and other constituents, have the means to instantaneously share
information, automate business processes and conduct business on a global scale.
However, the sheer volume of information, combined with the constituents'
ability to change vendors at the click of a button on a mouse, has led directly
to the need for differentiation. Personalization through one-to-one relationship
management has become the solution. In the past, personalization of products or
services was often inefficient and expensive for companies which had to rely on
inefficient mass marketing or a costly, direct sales
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model. Moving from these channels to efficient and economical one-to-one
relationship management became possible with the advent of the Web.
With the appropriate applications in place, companies could react to the
informational and self-service needs of individual customers, partners and
employees in real time. More specifically, when the Web was coupled with
personalized e-business applications, business managers were given the ability
to capture visitor profile information, observations and feedback interactively,
and to use rule-driven tools to target, in real time, useful information to
visitors based on this data. One-to-one relationship management allows a company
to use its knowledge of its customers, suppliers, partners, distributors and
employees to personalize interactions and thus strengthen relationships, foster
loyalty, and create and sustain competitive advantage. One-to-one relationship
management provides the foundation for delivering individually tailored
products, services, information, incentives and transactions. Whether a Web or
wireless application is designed primarily for conducting commerce or providing
customer self-service, it offers businesses an opportunity to extend
front-office services or deliver knowledge in a personalized and cost-effective
way to all constituents of the extended enterprise. In particular, business
managers can use advanced technologies to engage in personalized dialogues with
millions of customers, or with just one.
The Next Wave of Web and Wireless Technologies
BroadVision was one of the first companies to pioneer the technologies for
managing personalized customer relationships and high volume online transactions
on the Web. Our scalable, patented technology enabled business managers to
easily define business rules for managing highly complex business processes and
displaying dynamic content in areas such as product and pricing data, financial
policies, promotions and advertising campaigns. We debuted tools that eased Web
site development, introduced real-time control and management of Web sites, and
generated page logic. Not surprisingly, new technology requirements have
surfaced since we first introduced our BroadVision One-To-One(TM) applications
to market in 1995. With our proposed acquisition of Interleaf, we demonstrated
our commitment to XML for creating, publishing, managing, styling and
re-purposing electronic content. The acquisition of Interleaf will also provide
to us WAP and XSL technologies for styling and delivering content to wireless
devices. Our commitment to Java, Enterprise JavaBeans and J2EE is measured by
the signing of a significant co-development and co-marketing agreement with Sun
Microsystems in March 2000, which will result in a new family of Java-based
BroadVision applications. And we are committed to helping customers leverage
their existing back- and front-office applications infrastructure through the
availability of packaged interfaces to a growing number of third-party
applications, including those from Siebel Systems and SAP, as demonstrated by
agreements with both Siebel Systems and STC Technologies to develop interfaces.
The Ascendancy of Packaged Applications
Packaged applications are a proven alternative to in-house or third-party
custom applications development. The trend toward packaged solutions is typical
of business automation software, with the markets for accounting, manufacturing,
human resources and sales force automation systems dominated by packaged
applications. Packaged solutions end a company's dependence on home-grown,
custom-built systems, enabling them to increase the resources available for core
business initiatives. To realize the potential of one-to-one relationship
management, packaged applications must support the following goals:
o Attract, retain and service visitors that range from the casual to the
sophisticated by providing dynamic content, interactive dialogues and
communities of interest in a friendly, easy-to-use Web and wireless
environment;
o Provide non-technical business managers with the ability to define and
modify the application's business rules and content in real time;
o Develop and maintain visitor profiles, observe and remember interactions
and engage in ongoing personalized dialogues while empowering individuals
to control the privacy of their personal data;
o Dynamically target personalized content, products and incentives to
correspond to profile data in order to motivate visitors to interact and
conduct transactions;
o Integrate and interact with back and front office systems to fully
utilize a company's data and information resources;
o Fulfill financial and information transactions with secure electronic
commerce processes; and
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o Offer a consistent end-user experience across multiple constituent touch
points such as wireless devices, including cellular telephones, pagers
and personal digital assistants, or PDAs, interactive voice response
systems and the traditional call center.
The BroadVision Solution
We offer a suite of packaged applications and related services that
personalize e-businesses. The BroadVision One-To-One applications suite enables
companies to capitalize on the Web (internet, intranet and extranet sites) and
wireless devices for selling, marketing and servicing the constituents of their
extended enterprise: customers, suppliers, partners, distributors, employees and
others. Our products enable businesses to organize dynamic profiles of Web site
and wireless users from volunteered data and observed behavior, deliver highly
specialized content in response to these profiles and securely execute
transactions. Business managers are able to modify business rules and content in
real time, offering a personalized experience to each visitor. Because of the
open architecture of our applications, they are easily integrated with our
customers' existing systems and easily expanded as our customers' needs and
businesses grow.
Surrounding this applications suite is an e-business "ecosystem" created by
over 200 partner firms around the world who ensure our customers' success
through complementary technology, applications, tools and services offerings
that can be used to extend and enhance a BroadVision environment.
We believe our products enhance our customers' revenue opportunities by
enabling them to build long-term relationships. Web and wireless visitors are
engaged by highly personalized real-time interactions, are able to transact
business securely, and are encouraged to remain online and to make return
visits. Our applications also improve the cost-effectiveness of one-to-one
relationship management by enabling non-technical managers to modify business
rules and content in real time and by helping to reduce costs of customer
acquisition and retention, business development and technical support. In
addition, the packaged solution nature of our products decreases our customers'
time to market and allows them to easily manage and expand their Web and
wireless application deployments in a cost-effective manner. Our targeted
applications, BroadVision One-To-One Retail Commerce, BroadVision One-To-One
Business Commerce, BroadVision One-To-One Financial, BroadVision One-To-One
Billing and BroadVision One-To-One Knowledge, have the specific benefits of
addressing personalization needs in the areas of Web commerce, Web financial
services, online billing, and corporate information distribution and
development.
BroadVision Business Strategies
Our objective is to become the leading provider of personalized e-business
applications worldwide. In order to achieve that objective, we have adopted the
following key elements of our strategy:
Extend and Expand our Leadership in Business-to-Consumer E-Commerce. The
BroadVision One-To-One Retail Commerce and Financial applications are widely
used for conducting retail and financial commerce on the Web. The BroadVision
One-To-One Retail Commerce application enjoys 24% market share (ABN AMRO, 1998)
and is used by six of the largest Fortune 500 U.S. retailers. BroadVision
One-To-One Financial is used by over 50 banks in 25 countries around the world
to automate and personalize consumer banking and brokerage transactions.
These applications enable our customers to manage relationships and
transactions with consumers over the Web and wireless devices. We have witnessed
the growth of one-to-one relationship management that allows businesses to
capitalize more fully on the Web and wireless devices as business venues for
interacting and transacting with consumers. We believe that we offer the most
complete solution available today for one-to-one relationship management in a
business-to-consumer environment.
We intend to maintain our strong position and become the standard by which
other business-to-consumer e-commerce applications are measured by:
o continuing to enhance our technology through heavy investment in research
and development activities;
o incorporating industry-leading components into our products;
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o partnering with leading technology and platform providers;
o influencing technology directions via membership on key standard-setting
committees; and
o employing our technology and human resources as a source of ongoing
technological advantage.
Become a Recognized Leader in Business-to-Business E-Commerce. We have nearly
150 customers who have deployed the BroadVision One-To-One applications to
manage relationships between their companies and their suppliers. Some of these
companies in the business-to-business arena are using our applications to build
"exchanges," where many sellers and many buyers come together at a Web site to
buy and sell goods and services. We intend to expand our number of customers,
partnerships and targeted applications for the growing business-to-business
e-commerce market.
Develop New and Enhance Existing Targeted Application Solutions. We were
among the first companies to introduce packaged Web applications for electronic
commerce, financial services and knowledge management. We are now extending our
"best of breed" applications with new offerings we have developed ourselves,
co-developed with partners or licensed third parties to develop. These offerings
include BroadVision One-To-One Billing, developed by BroadVision; a one-to-one
business portal application co-funded and co-developed with Hewlett-Packard that
is shipping in year 2000; and a new family of vertical applications for
industries ranging from automotive to travel that will ship in year 2000. These
vertical applications are developed in conjunction with large system integration
firms partnered with technology vendors; together, we possess the industry
domain knowledge necessary for the creation of these specialized applications.
We will continue to enhance the core BroadVision One-To-One Enterprise
relationship management system that underlies each of our application solutions.
We intend to apply the experience gained from each customer engagement to
enhance our applications and services. Our plan is to host ongoing Technical
Advisory Councils with leading customers and partners to incorporate their
feedback into product planning. We will continue to utilize our expanding
libraries of reusable application objects and templates.
Enhance our Service and Support Infrastructure. Our Worldwide Professional
Services Organization provides a broad range of consulting services in support
of all of our products. This organization provides business application
expertise, technical know-how and product knowledge to complement our products
and to provide solutions that meet customer business requirements. By using our
services, customers are able to build a customized application solution to
maximize the benefits of one-to-one relationship management.
We are committed to extending the service offerings and the resources
available to our customers and have implemented programs such as an online
BroadVision University, train-the-trainer and third-party educational centers to
extend the breadth and depth of our services offerings. We have also tiered our
technical support offerings to offer standard, enterprise and personalized
support programs for our customers.
Expand and Leverage Alliances with Key Business Partners. To accelerate the
acceptance of our products, we have developed the BroadVision Partner Program.
The Partner Program is a comprehensively structured partnership relationship
designed to drive effective partner alliances and ensure the success of these
relationships by jointly identifying and pursuing specific business objectives.
The Partner Program operates within a framework of proactive business planning,
revenue targeting initiatives, structured sales enablement and enhanced
BroadVision training and sales engineering support. The Partner Program is
intended to help our partners successfully develop, promote, and sell their
services and solutions in close coordination with our newly expanded network of
sales engineering, marketing and professional consulting services. The Partner
Program assists our partners in growing their business by incorporating our core
competency, personalizing interactions and transactions with a wide range of
constituencies, into a focused execution matrix.
We partner with leading systems integrators, Web technology vendors, creative
agencies, application solution providers/ASPs, value-added resellers,
distributors and consultants. These alliances provide additional sales and
marketing channels for our products, enable us to more rapidly incorporate
additional functions and platforms into our products and facilitate the
successful deployment of customer applications.
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We will continue to place an emphasis on establishing additional alliances
as new technologies and standards emerge, although we may be unable to establish
or maintain certain alliances.
Support Diverse Customer Business Models. We intend to continue our
commitment to flexibility by offering our customers choices for the deployment
of our applications. Customers can choose to deploy our applications using their
own in-house technical resources or can engage with our Worldwide Professional
Services Organization to assist with implementation. Customers can also choose
to work with a BroadVision-trained systems integrator or distribution partner,
or with a combination of our resources and a partner's. Another option is for a
customer to utilize an ASP who hosts the customer's BroadVision application
deployment at a remote facility and is responsible for its ongoing service and
support.
Grow Our International Presence. To capitalize on the emergence of the Web as
a global network, we have established, and continue to add, worldwide
distribution capabilities with direct or distributor sales personnel in 35
cities and 23 countries worldwide. Our reseller relationship with
Hewlett-Packard has made our suite of products available in over 120 countries.
We intend to continue to certify providers of professional services for our
products in countries where there is customer demand.
Our partners include multinational systems integrators, as well as partners
with a single-country scope of operations. Our product architecture is designed
to support multiple languages, multiple currencies and remote, distributed
publishing. We currently have available for shipping versions of our BroadVision
One-To-One Enterprise product that support the display of content and interface
in Arabic, Chinese, Hebrew, Japanese, Korean, Slovakian and Turkish as well as
most Western European languages.
Our strategies involve substantial risks. We may be unable to implement our
strategies and our strategies, even if implemented, may not lead to successful
achievement of our objectives. If we are unable to implement our strategies
effectively, our business may be harmed.
BroadVision Products
We offer a suite of personalized e-business applications focused on
empowering business-to-business and business-to-consumer companies to build
relationships and sell online.
Product Category and Name Description
------------------------- -----------
Application Foundation:
BroadVision One-To-One Enterprise The core product. BroadVision One-To-One Enterprise provides the foundation
for rapid development and real-time operation of large-scale, personalized
e-business applications. Each of the following targeted applications
includes and leverages the functionality of BroadVision One-To-One
Enterprise.
Targeted Applications:
BroadVision One-To-One Retail Commerce Packaged application for consumer e-commerce and merchandising.
BroadVision One-To-One Business Commerce Packaged application for business-to-business relationship management and
channel automation.
BroadVision One-To-One Financial Packaged application for rapid creation of personalized consumer financial
services sites.
BroadVision One-To-One Knowledge Packaged application for intranet and extranet information sharing and
collaboration.
BroadVision One-To-One Billing Packaged application for online bill presentment and payment.
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Product Name Product Description
------------ -------------------
BroadVision One-To-One Business Tools:
BroadVision One-To-One Design Center An authoring tool that allows Web designers to quickly and easily build
dynamic Web page templates.
BroadVision One-To-One Command Center A point-and-click tool that allows users to quickly write rules that match
users with content whether they are anonymous or registered.
BroadVision One-To-One Publishing Center A powerful tool for setting content publishing rights, creating approval
workflow and empowering distributed publishing.
BroadVision One-To-One Instant Publisher An intuitive tool that allows casual content developers to publish content
using a Web browser.
BroadVision One-To-One Packaged Applications
We offer a suite of five integrated applications, BroadVision One-To-One
Retail Commerce, BroadVision One-To-One Business Commerce, BroadVision
One-To-One Financial, BroadVision One-To-One Billing and BroadVision One-To-One
Knowledge, which are built on top of BroadVision One-To-One Enterprise, the
application system that serves as the functional core of each targeted
application. These applications are designed to integrate the e-business channel
with a company's existing business infrastructure, providing a consistent view
of the customer and delivering an experience optimized for that customer.
BroadVision One-To-One Enterprise. As the application system on top of which
BroadVision One-To-One applications are built, One-To-One Enterprise provides a
secure and flexible, standards-based architecture that supports large volume
transactions, large scale catalogs, distributed content management, enterprise
system integration and dynamic personalization. It is based on open standards
such as CORBA, Java, XML and Javascript.
BroadVision One-To-One Retail Commerce. One-To-One Retail Commerce is a
highly scalable, retail-focused application used by Fortune 500 retailers such
as Sears Roebuck and The Home Depot and by "dot coms" such as Mercata and
Pets.com. It has strong and comprehensive packaged functionality such as
shopping cart, shopping list, search, custom pricing, incentives, advertising,
communities, targeted marketing through Web, email and wireless content
distribution, tax calculation, payment integration and more. It allows dot com
and traditional retailers to target anonymous users on their first visit to
increase the ratio of those who visit a site to those who purchase from a site,
and it enables targeted promotions designed to increase "share" of customer.
BroadVision One-To-One Business Commerce. One-To-One Business Commerce
facilitates online trade between business partners whether they are merchants,
resellers, distributors or manufacturers. Features such as quotes, search,
persistent requisition, contract pricing, purchasing list and contract pricing
allow businesses to automate their channel relationships, reducing order time
and errors. Large-scale business-to-business sellers such as W.W. Grainger,
General Electric and Toshiba use BroadVision One-To-One Business Commerce to
create e-businesses that integrate with structured back-end business system.
BroadVision One-To-One Financial. This financial services application enables
banks, brokerages, mutual fund companies and other financial institutions to
enable their online customers to perform a complete set of secure transactions
within and between accounts. BroadVision One-To-One Financial provides financial
institutions with the ability to deploy quickly customer-centric Web sites that
offer customized interactions, thereby enabling a financial institution to
differentiate itself by enhancing the customer relationship.
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BroadVision One-To-One Knowledge. One-To-One Knowledge is an intranet- and
extranet-focused application that allows employees and partners to easily access
and share information no matter where they are. A strong, secure infrastructure
allows users to see only the content that they are entitled to see. It allows
administrators to finely tune publishing rights on a group or individual basis
so that specific users can be restricted to publishing in specific areas of the
site. Comprehensive workflow allows administrators to see changes before they
are actually published.
BroadVision One-To-One Billing. One-To-One Billing brings electronic bill
payment and delivery capabilities to e-commerce and marketing Web sites. It
enables companies that want to personalize interactions with customers during
their ongoing billing cycles to streamline routine billing practices while
gaining knowledge of their customers' needs, preferences, and buying activities
using the Web. The application is designed for use by direct and aggregate
billers.
Key Capabilities of Our Applications
We designed all of the BroadVision One-To-One applications for use in
mission-critical, high-performance environments by companies with demanding
architecture, deployment and maintenance requirements. Some of the key
capabilities of the applications include:
Ease of use -- tools designed with graphical user interfaces allowing
non-technical business managers to modify business rules and content in real
time.
Scalability -- robust embedded application server functionality allows
BroadVision One-To-One applications to support large numbers of concurrent
customers and transactions.
Flexible integration -- a comprehensive set of APIs allows integration
with a variety of legacy business systems such as SAP and Peoplesoft, and
custom mainframe systems
Open standards-based architecture -- object-oriented application code
written in C++, Java and JavaScript allows developers and system integrators
to use, integrate, modify, adapt or extend the applications with minimal
impact on other areas to create a rapidly customized product that meet
specific business requirements. Support for the CORBA standard for
object-oriented computing permits distribution of the application across
multiple processors. This design enables high-volume performance, flexible
application deployment and easy integration with other third-party or legacy
applications.
Secure transaction processing -- secure handling of a wide range of
commerce and financial services transactions includes order pricing and
discount/incentive handling, tax computation, shipping and handling charges,
payment authorization, credit card processing, order tracking, news and
stock feeds through a combination of built-in functionality and integration
with other products.
Multi- platform availability -- BroadVision One-To-One Enterprise and its
associated applications are available on a variety of platforms including
Sun Solaris, Microsoft Windows NT and Hewlett-Packard's HP-UX. Supported
databases include Oracle, Sybase, Informix and Microsoft SQL Server.
Multi-Lingual/Multi-Currency -- availability of content display and
interface in Arabic, Chinese, Hebrew, Japanese, Korean, Slovakian, Turkish
and most Western European languages and support for a wide range of
currencies, including the Euro, enable worldwide use of our applications.
BroadVision One-To-One Business Tools
Our applications are customized and managed using tools that are licensed
separately from the applications. Inherent to the functionality of our
applications is a set of building blocks comprised of customizable components,
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application templates and business rules implemented and managed by these tools
that are instrumental to rapidly build and easily maintain BroadVision
One-To-One applications. A description of our tools products is as follows:
BroadVision One-To-One Design Center. Based on the Macromedia(R)'s
Dreamweaver 2 Web authoring tool, the One-To-One Design Center allows Web
authors and Web application developers faster time to market by shortening the
development cycle. This tool gives Web authors direct access to powerful
personalization and functional components through a series of Dreamweaver
wizards. These wizards generate server-side JavaScript, which is the primary
programming language for our applications. By making simple point-and-click
choices, the Web author can visually construct a complete, dynamic application
without having to write HTML or JavaScript.
BroadVision One-To-One Command Center. One-To-One Command Center allows
business users to change the way users are matched with content through an
intuitive point-and-click interface. With this tool, business managers can
create rules based on profile information, transaction history, session behavior
and other data. They can also develop business rules that evaluate user
information gathered during previous interactions and use it to target products
and services during subsequent interactions. Rules allow business managers to
target users whether they are anonymous or registered, allowing businesses to
increase their browse-to-buy ratio.
BroadVision One-To-One Publishing Center. One-To-One Publishing Center allows
a distributed and remote team of non-technical content experts to manage most
aspects of site content collaboratively, including creating, editing, staging,
producing and archiving. This tool provides personal and shared in-boxes that
enable teams of content creators to collaborate in developing content. A
programming calendar facilitates staging, scheduling and coordination of content
publishing. This tool provides the ability to preview content prior to
publishing, to control access to publishing and to capture content
classification information. It supports content created with HTML editors,
Microsoft Office products and Lotus Domino.
BroadVision One-To-One Instant Publisher. One-To-One Instant Publisher
provides simple, personalized publishing forms, so that employees can publish
content through a Web-based point-and-click interface. Because publishing rights
are tied to their login name and password, publisher profiles remain the same
regardless of where users are physically located.
Other Products
In addition to our products, we have entered into agreements that enable us
to resell third-party software products from Bluegill, Interwoven, IONA
Technologies, Interleaf, Macromedia, and Verity. These are sublicensed to end
users and either incorporated in or sold as options to our products. License
revenue from these third-party products was insignificant and constituted less
than 1% of total software product license revenues for each of the years ended
December 31, 1997 and 1998, and approximately 7% for the year ended December 31,
1999.
Product Development
We believe that our future success will depend in large part on our ability
to enhance the BroadVision One-To-One applications suite, develop new products,
maintain technological leadership and satisfy an evolving range of customer
requirements for large-scale interactive online relationship management
applications.
Our product development organization is responsible for product architecture,
core technology, product testing and quality assurance, writing product user
documentation and expanding the ability of BroadVision One-To-One products to
operate with the leading hardware platforms, operating systems, database
management systems and key electronic commerce transaction processing standards.
Since inception, we have made substantial investments in product development
and related activities. Certain technologies have been acquired and integrated
into BroadVision One-To-One products through licensing arrangements.
11
As of December 31, 1999, there were 119 employees in our product development
organization. Our research and development expenses were $7.4 million in the
year ended December 31, 1997, $9.2 million in the year ended December 31, 1998
and $14.6 million in the year ended December 31, 1999.
To date, we have not capitalized any software development costs as products
are made available for general release relatively concurrently with the
establishment of technological feasibility. We expect to continue to devote
substantial resources to our product development activities.
BroadVision Worldwide Professional Services
Our Worldwide Professional Services Organization provides a broad range of
consulting services in support of all of our products. This organization
provides business application expertise, technical know-how and product
knowledge to complement our products and to provide solutions that meet customer
business requirements. By using our services, customers are able to build a
customized application solution to maximize the benefits of one-to-one
relationship management. A summary of the professional services that we provide
is as follows:
Strategic Services. We provide business strategy and process consulting to
assist customers in defining and planning profitable online businesses, while
optimally utilizing the functionality of our products. Services include in-depth
needs analysis, customer segmentation, one-to-one marketing expertise,
storyboarding and business organizational planning to achieve timely and
successful implementation of our software products. Strategic Services
consulting is generally offered on a time and materials basis.
Interactive Services. We provide technical services for development of
customized BroadVision One-To-One applications, custom interfaces, data
conversions and system integration. These consultants participate in a wide
range of activities, including requirements definition and application design,
development and implementation. These consultants also provide advanced
technology services focused on application development for custom objects and
templates and database administration and tuning. Interactive Services
consulting is generally offered on a time and materials basis.
Content and Creative Services. This group specializes in content management,
sourcing, workflow processes and user-interface design. The group is made up of
BroadVision One-To- One product design experts and a variety of leading design
houses. This team combines extensive interactive design and marketing experience
to build effective user interfaces. Content and Creative Services consulting is
generally offered on a time and materials basis.
Technical Support Services. We have tiered our support programs to better
serve the needs of our worldwide customer base. Standard Support provides
technical assistance during regular business hours; Enterprise Support is
designed for customers with mission-critical environments, providing customers
with access to support experts 24 hours a day, 7 days a week; Personalized
Support assigns a specific individual to an account. We have technical support
centers in North America, Europe and Asia. Under our standard maintenance
agreement, we provide telephone support and upgrade rights to new releases,
including patch releases as necessary, and product enhancements. The annual
maintenance fee for these services is based upon a percentage of the
then-current list price for the licensed software fee, payable annually in
advance.
Education Services. These services are offered to customers either at our
education facilities or at the customers' locations, as either standard or
customized classes. These classes are priced at either fixed daily rates or on a
per-class basis. We expect our course offerings to grow from six to 20 classes
in 2000.
BroadVision University. To provide comprehensive, high-quality training
solutions for our customers, partners and employees worldwide, we have
established BroadVision University. Courses are delivered through various means
and methods, including traditional instructor-led courses as well as various
Web-based training mechanisms to facilitate distance learning.
12
Our goal is to transfer knowledge in "Web time" to a large worldwide
audience. Technical facilities will be located worldwide, including Redwood City
and Chicago in the United States, the United Kingdom in Europe and Hong Kong in
Asia.
We also enroll our employees in BroadVision University, to ensure high
quality and consistent training of our own personnel. This extensive training
program provides a series of foundation courses that are general in content for
all audiences, which is followed by a specific series of courses based on the
employee's role in our Worldwide Professional Services Organization.
Strategic Alliances
A significant element of our sales strategy is to engage in strategic
business alliances to assist us in marketing, selling and developing customer
applications.
As of December 31, 1999, we had developed key strategic business alliances
with over 200 systems integration, design, consulting and other services
organizations throughout the world, including Andersen Consulting, Deloitte
Consulting, Hewlett-Packard, Itochu Techno-Sciences Corp., NTT Data,
PricewaterhouseCoopers, Security First Technologies and Sema Group.
In April 1999, we announced a strategic alliance with Hewlett-Packard.
Hewlett-Packard has agreed to resell and support the current BroadVision
One-To-One product suite and to co-develop, sell and support integrated
business-portal solutions that will act as the interface to next generation
e-services for enterprise customers.
Hewlett-Packard is leveraging its approximately 5,000 person global sales
force to resell and support the current BroadVision One-To-One product suite.
The new co-developed products are being developed to run on multiple platforms
and to enable enterprise customers to deploy quickly and easily a series of
advanced, personalized business-portal solutions that provide integrated
commerce, marketing and customer-relationship management across Web sites,
e-mail, call centers, PCs, kiosks, mobile phones and personal digital
assistants.
Additionally, we have developed key technology partnerships with leading Web-
and wireless-focused companies in areas complementary to our solutions, such as
data analysis and reporting, enterprise application integration, enterprise Web
management, call center management, voice recognition, payment processing,
auctioning and XML.
These technology partnerships enhance our ability to base our products on
industry standards and to take advantage of current and emerging technologies.
These alliances include companies such as Broadbase, E.Piphany, Interwoven, IONA
Technologies, Macromedia, Moai Technologies, Security First and STC.
Our technology partnerships support our strategy of integrating throughout
the extended enterprise, from multiple touchpoints such as Nuance's voice
recognition/voice response technology, to integration with enterprise
applications using technology such as STC.
Customers and Markets
As of December 31, 1999, we had licensed our products to over 400 end-user
customers and 100 partners. As of December 31, 1999, our products were
commercially deployed in over 200 live Web sites.
We have targeted a number of markets that we believe to be especially
conducive to one-to-one relationship management applications such as financial
services, travel and leisure, retail and distribution, telecommunications,
chemicals, computer hardware and software, energy and utilities, industrial
equipment and automotive.
13
Our primary target customers are Global 2000 organizations that are at the
forefront of building innovative Web applications to increase revenues and
reduce operational costs. We also target pure-play Web companies that have built
or are building their core businesses on the Web.
During the year ended December 31, 1997, approximately 11% of our revenues
were attributable to one customer. During the years ended December 31, 1998, and
December 31, 1999, no customer accounted for more than 10% of our total
revenues.
The following table sets forth a representative list of our customers
organized by industry segment.
Target Industry Sample Applications Sample Customers
--------------- ------------------- ----------------
Financial services Home banking CCF France
Online brokerage Citigroup
Obtaining information on and Credit Suisse
selecting:
-Loans Liberty Financial
-Mutual funds USAA
-Insurance
Knowledge management (intranets)
Retail Online shopping Circuit City
Interactive catalogues
The Home Depot
Office Max
Rand McNally
Sears Roebuck
Telecommunications Commerce: Business to-business and British Telecom
business-to-consumer
Online services
Customer self-service Nortel Networks
Telia
TELUS
Vodafone
Travel and leisure Reservations Air Miles
Travel planning
Brand projection, loyalty programs and American Airlines
affinity marketing Budget Rental Cars
Carlson Companies
TAM Airlines
Industrial manufacturing Knowledge management General Electric
Business-to-business Hewlett-Packard
purchasing Hilti
Business-to-consumer purchasing Philips PC Peripherals
Xerox
14
Target Industry Sample Applications Sample Customers
--------------- ------------------- ----------------
Dot com's Electronic storefronts Chipshot.com
Exchanges/market makers e-Greenbiz.com
Mercata
Pets.com
Zones.com
Sales and Marketing
We market our products primarily through a direct sales organization with
operations in North America, Europe, Australia and Asia/Pacific. On December 31,
1999, our direct sales organization included 164 sales representatives, managers
and sales support.
We have a sales office at our headquarters in Redwood City, California and
have North American sales offices in Atlanta, Georgia; Bellevue, Washington;
Burlington, Massachusetts; Dallas, Texas; Denver, Colorado; Irvine, California;
Minneapolis, Minnesota; New York, New York; Portland, Oregon; Schaumberg,
Illinois; and Vancouver, British Columbia. We have a sales and service office in
McLean, Virginia for the U.S. Federal Government.
We have international sales offices in Melbourne, Australia; Wanchai, Hong
Kong; Hare Hatch, England; Coorbevoie, France; Munich, Germany; Milan, Italy;
Tokyo, Japan; Seoul, Korea; Amersfoot, The Netherlands; Wheelock Place,
Singapore; Madrid, Spain; Stockholm, Sweden; Basel, Switzerland; and Taipei,
Taiwan.
A component of our strategy is continued expansion of our international
activities. We intend to broaden our presence in international markets by
expanding our international sales force and by entering into additional
distribution agreements. We also contract with third-party resellers,
distributors and systems integrators in North America, South America, Europe,
Australia and Asia. We intend to increase our use of this distribution channel.
Initial sales activities typically include a demonstration of BroadVision
One-To-One product suite capabilities at the prospect's site, followed by one or
more detailed technical reviews, often presented at our headquarters. The sales
process usually involves collaboration with the prospective customer in order to
specify the scope of the application. Our professional services organization
typically plays a key role in helping customers to design, and then develop,
their applications.
As of December 31, 1999, 68 employees were engaged in a variety of marketing
activities, including preparing marketing research, product planning and
collateral marketing materials, managing press coverage and other public
relations, identifying potential customers, attending trade shows, seminars and
conferences, establishing and maintaining close relationships with recognized
industry analysts and maintaining our Web site.
Our marketing efforts are targeted at:
o product strategy development and product management;
o building market awareness through press and analysts;
o creating brand awareness and visibility;
o producing and maintaining marketing information and sales tools;
o generating and developing customer leads; and
o sourcing and managing relationships with systems integrators, value-added
resellers, creative design and advertising agencies and technology
partners.
15
Competition
The market for personalized e-business one-to-one relationship management
applications is rapidly evolving and intensely competitive. We expect
competition to persist and intensify in the future.
Our primary competition currently includes the following:
o in-house development efforts by prospective customers or partners using
application development tools;
o other vendors of application software or application development
platforms and tools directed at content management, interactive commerce
and financial services, like InterWorld, Open Market and Vignette;
o Web content developers that develop custom software or integrate other
application software into custom solutions;
o International Business Machines; and
o Microsoft.
The principal competitive factors affecting the market for our products are:
o depth and breadth of functionality offered;
o ease of application development;
o availability of knowledgeable developers;
o time required for application development;
o reliance on industry standards;
o product reliability;
o proven track record;
o scalability;
o maintainability;
o personalization and other features;
o product quality;
o price; and
o customer support.
We believe that we presently compete favorably with respect to each of these
factors. However, our market is still evolving, and we may be unable to compete
successfully with current or future competitors.
Technology
The technical demands of interactive, personalized one-to-one e-business
applications, deployable on the Web, extranets and intranets, require an
architectural design that is standards-based, open, interoperable and flexible.
Our applications are based on a modular, component-based architecture that
provides for robust, scalable and extensible e-business applications. By
emphasizing reusable code, separation of application logic, business rules and
data, and adherence to open standards such as Java, XML and CORBA, our
applications provide an efficient architecture for customers and partners to
deploy, modify, and control applications, as well as to integrate them with
external business systems. This architecture also provides a robust foundation
upon which we can rapidly develop new products.
Our advanced technology enables the delivery of robust, scalable and
innovative e-business solutions into the market faster and at a lower cost than
alternatives. Our technology consists of the following key elements:
Adherence to Industry Standards
Industry standards protect a customer's investment by providing compatibility
with existing applications, enabling ease of modification, and reducing the need
for software to be rewritten. Our architecture complies with CORBA, a
16
standard for applications software design and development widely adopted in the
commercial software industry. Applications that are CORBA-compliant can:
o run on either single computers with one or more processors or across
large networks;
o allow replication and relocation of object servers to improve system
performance;
o are platform independent; and
o have strongly defined application programming interfaces through the use
of the Interface Definition Language specified by CORBA.
Java. We are strongly committed to Java and Java-based technologies such as
Enterprise Java Beans (EJB). Our application templates, which define the
front-end look-and-feel of pages on the web site, are written in JavaScript.
Most of our backend programs are written in C++ and Java, which are
widely-accepted standard programming languages for developing Web applications.
Our commitment to industry standards such as Java and C++, along with open,
published programming interfaces into the applications, delivers an e-business
solution that is open and extensible. Customers benefit by needing fewer
resources to modify the application, and by having simplified integrations with
other applications, such as ERP systems.
XML. Our applications fully support XML, which is an emerging standard for
managing and exchanging data between systems. In addition, XML facilitates
re-purposing information so that it can be sent to non-browser interfaces such
as those used by wireless devices including mobile telephones, pagers and PDA's.
Our adoption and support of XML for content management allows customers to
publish information in a structured manner, which can then be directed toward
either a browser or communication devices such as email or mobile telephones.
In addition to Java, XML, C++ and CORBA, we use other widely accepted
standards in developing our products, including Structured Query Language for
accessing relational database management systems; Common Gateway Interface and
Hypertext Transfer Protocol for Web access; Netscape Application Programming
Interface for access to Netscape's Web servers; Secure Socket Layer for secure
transmissions over networks; and the RC2 and MD5 encryption algorithms supplied
by RSA. Our applications can be operated in conjunction with relational database
management systems provided by Informix, Microsoft, Oracle and Sybase.
N-Tier Architecture. Our applications use a modular, N-tier architecture that
logically separates application presentation, business rules and data. Between
each of these tiers are session managers and adapters that facilitate
integration with external business systems interface technologies, described
below, that establish seamless interoperability between application components.
This architecture partitions applications across:
o a front-end tier that manages the application presentation and interface
to Web site visitors;
o application engine tiers that manage application activities such as
community, profiling, targeting and transactions, and the business rules
that define the interactive characteristics and behavior of one-to-one,
personalized applications. This layer utilizes a lightweight component
model, which can be distributed across multiple logical and physical
processors, thus enabling the N-tier design of the application; and
o a back-end tier that integrates underlying database management systems
with external business systems, such as ERP and CRM solutions, that
perform specialized relationship management functions.
Interaction Manager. Our "session manager" technology is designed to manage
the high volume of dynamic interactions that occur in online sessions between
many concurrent Web site visitors and an e-business application. The session
manager, called the BroadVision Interaction Manager, enables three key
activities:
o maintaining user profile information between visitors and sites so that
each current and future interaction can trigger a response appropriate to
the objectives of both visitor and site provider;
o interpreting application objects and templates in real time and
retrieving profile data and business rules to dynamically generate HTML
code that tailors content, Web pages and interactions to the needs and
interests of individual Web site visitors; and
o enabling application scalability by allowing Web site providers to add
additional software processes or hardware processors to their Web systems
to support more concurrent Web site visitors without incurring
performance degradation or additional overhead in application
maintenance.
17
Components and Applications. We believe the costs and time associated with
Web application development and maintenance can be substantially reduced with
our technology. Our applications are comprised of reusable application
components and presentation templates. Application components, such as customer
account information for a business-to-business transaction, are designed to be
open and customizable. Used in combination with our structured development
methodology, these technologies are designed to help customers and partners
create reusable program components that increase application quality and reduce
cost and time-to-market of new and maintained applications. Application
templates, written in JavaScript, enable business managers to define and
implement business rules through the BroadVision One-To-One Command Center on a
real-time basis. Our customers, partners and consultants use these templates and
JavaScript to develop e-business application solutions. Our Education Services
Group offers training classes to customers and partners on the use of components
and application templates.
Content Management. Key to successful e-business applications is the ability
to deliver relevant, current and accurate information to the application's users
such as customers, employees and business partners. Our personalization
capabilities enable business managers to define rules to deliver the right
information to the right user at the right time. Content management discipline
ensures that this information is kept current and accurate. Our content
management system, which is based on XML standards, provides a rich environment
for users to create and publish information to the web and to other formats,
such as wireless. In addition, XML enables automatic data feeds and syndication
of information to other systems and business partners. For example, a vendor's
catalog information can be automatically and easily included in a e-business Web
site.
Intellectual Property and Other Proprietary Rights
Our success and ability to compete are dependent to a significant degree on
our proprietary technology. We rely on a combination of patent, copyright,
trademark, service mark, trade secret laws and contractual restrictions to
protect our proprietary rights in products and services. We hold a patent issued
to us on January 20, 1998, covering certain elements of our BroadVision
One-To-One Enterprise product. Our success and competitive position depends on
our ability to protect our proprietary technology. We have registered
"BroadVision" and "BroadVision One-To-One" as trademarks in the United States.
However, the steps taken by us may not prevent misappropriation of our
technology and agreements entered into for that purpose may not be enforceable.
In addition, litigation like the lawsuit against ATG, which was recently
settled, may be necessary in the future to enforce our intellectual property
rights, to protect our trade secrets, to determine the validity and scope of the
proprietary rights of others, or to defend against claims of infringement or
invalidity. We cannot guarantee that infringement or other claims will not be
asserted or prosecuted against us in the future whether resulting from our
intellectual property or licenses from third parties. Claims or litigation,
whether successful or unsuccessful, could result in substantial costs and
diversions of resources, either of which could harm our business. We rely upon
certain software that we license from third parties, including relational
database management systems from Oracle and Sybase, object request broker
software from IONA Technologies, database access technology from Rogue Wave
Software and other software that is integrated with internally developed
software and used in our software to perform key functions. In this regard, all
of our services incorporate data encryption and authentication technology
licensed from RSA. Our third-party technology licenses may not continue to be
available to us on commercially reasonable terms, if at all. The loss of or
inability to maintain any of these technology licenses could result in delays in
introduction of our products and services until equivalent technology, if
available, is identified, licensed and integrated, which could harm our
business.
Employees
As of December 31, 1999, we employed a total of 652 full-time employees, of
whom 507 are based in the United States, 96 in Europe and 49 in Asia. Of these
full-time employees, 232 are in sales and marketing, 119 are in product
development, 246 are in professional services and client support, and 55 are in
finance, administration and operations. As of December 31, 1998 and 1997, we
employed 271 and 188 full-time employees, respectively.
18
We believe that our future success depends on attracting and retaining highly
skilled personnel. Competition for personnel is intense, and we may be unable to
attract and retain high-caliber employees. Our employees are not represented by
any collective bargaining unit. We have never experienced a work stoppage and
consider our employee relations to be good.
Executive Officers
The following table sets forth certain information regarding our current
executive officers.
Name Age Position
---- --- --------
Pehong Chen............................... 42 Chairman of the Board, Chief Executive Officer and
President
Randall C. Bolten......................... 47 Chief Financial Officer and Executive Vice President,
Operations
Clark W. Catelain......................... 52 Executive Vice President, Engineering
James W. Thanos........................... 51 Executive Vice President and General Manager, Worldwide
Field Organization
Nancy Mills-Turner........................ 47 Executive Vice President and General Manager, Worldwide
Professional Services
Rani Merritt.............................. 35 Executive Vice President and General Manager, Worldwide
Marketing Organization
Pehong Chen has served as our Chairman of the Board, Chief Executive Officer
and President since our incorporation in May 1993. From 1992 to 1993, Dr. Chen
served as the Vice President of Multimedia Technology at Sybase, a supplier of
client-server software products. Dr. Chen founded and, from 1989 to 1992, served
as President of Gain Technology, a provider of multimedia applications
development systems, which was acquired by Sybase. He received a B.S. in
Computer Science from National Taiwan University, an M.S. in Computer Science
from Indiana University and a Ph.D. in Computer Science from the University of
California at Berkeley.
Randall C. Bolten has served as our Chief Financial Officer since September
1995 and as Chief Financial Officer and Executive Vice President, Operations
from January 2000. From 1994 to 1995, Mr. Bolten served as a financial
consultant to various entrepreneurial enterprises. From 1992 to 1994, Mr. Bolten
served as Chief Financial Officer of BioCad Corporation, a supplier of drug
discovery software products. From 1990 to 1992, Mr. Bolten served as Chief
Financial Officer, Business Development Unit and then Vice President, Finance of
Teknekron, a company engaged in the management of various high technology
companies. He received an A.B. in Economics from Princeton University and an
M.B.A. from Stanford University.
Clark W. Catelain has served as our Vice President, Engineering, since June
1995 and as our Executive Vice President, Engineering since January 2000. From
1989 to May 1995, Mr. Catelain served as the Senior Vice President, Engineering
of Gupta, a supplier of client-server database products. Mr. Catelain received a
B.S. in Mathematics and Computer Science from Purdue University.
James W. Thanos has served as our Vice President and General Manager,
Americas since January 1998 and as our Executive Vice President and General
Manager, Worldwide Field Organization, since January 2000. From January 1995 to
January 1998, Mr. Thanos served as Vice President of North American Operations
of Aurum Software, a sales force automation company. From May 1994 to January
1995, Mr. Thanos served as Vice President of Sales of Digital Equipment
Corporation. From January 1993 to December 1994, Mr. Thanos served as Vice
President of Sales of Harvest Software, an optical character recognition
software company. From December 1988 to January 1993, Mr. Thanos served as Vice
President of Sales Operations of Metaphor, a decision support software company.
Mr. Thanos holds a B.A. in International Relations from Johns Hopkins
University.
Nancy Mills-Turner joined BroadVision in September 1999 as Vice President of
Worldwide Professional Services and in January 2000, was named Executive Vice
President and General Manager, Worldwide Professional Services. Prior to
BroadVision, she worked for Oracle managing the professional services groups
including Consulting and Education. Before joining Oracle in 1995, she served as
director of Federal, State and Local practice
19
consultants at PricewaterhouseCoopers LLP. Prior to PricewaterhouseCoopers LLP,
she was Vice President, Software at BIS Computer Solutions directing the
activities of product development divisions specializing in commercial and
criminal justice applications and implementations services. Ms. Mills-Turner
received a B.A./B.S. in Business Administration and Biochemistry from Arizona
State University and a Master's degree in Business Administration and
Information Management Sciences from University of Southern California.
Rani Merritt has served as Executive Vice President and General Manager,
Worldwide Marketing Organization since January 2000. In 1997, Ms. Merritt
co-founded Icarian, Inc., a provider of business-to-business workforce
eServices, and served as Icarian's Vice President of Marketing until December
1999. From September 1995 to August 1997, Ms. Merritt was Vice President of
Strategic Services at BroadVision. From June 1994 to August 1995, she served as
Director of Online Product Development/Director of Operations at U.S. West. Ms.
Merritt received a B.A. and an M.S. in Industrial Engineering from Stanford
University.
ITEM 2. PROPERTIES
Our principal administration, research and development, sales, consulting,
training and support facilities are located in Redwood City, California, where
we occupy approximately 115,000 square feet pursuant to leases expiring through
2007. We recently entered into a lease for a new building currently under
construction that will provide us with approximately 400,000 square feet in
Redwood City, California. The building is expected to be available for occupancy
during June 2001.
Our European headquarters were recently relocated to Green Park, Reading, in
the United Kingdom where we lease approximately 19,000 square feet. We also rent
space in various cities to support our sales and field support activities. We
have North American sales offices in Atlanta, Georgia; Bellevue, Washington;
Burlington, Massachusetts; Dallas, Texas; Denver, Colorado; Irvine, California;
Minneapolis, Minnesota; New York, New York; Portland, Oregon; Schaumberg,
Illinois; and Vancouver, British Columbia. We have a sales and service office in
McClean, Virginia for the U.S. Federal Government. We have international sales
offices in Melbourne, Australia; Wanchai, Hong Kong; Hare Hatch, England;
Coorbevoie, France; Munich, Germany; Milan, Italy; Tokyo, Japan; Seoul, Korea;
Amersfoot, The Netherlands; Wheelock Place, Singapore; Madrid, Spain; Stockholm,
Sweden; Basel, Switzerland; and Taipei, Taiwan.
ITEM 3. LEGAL PROCEEDINGS
On February 22, 2000, we reached a settlement agreement and entered into a
license agreement with Art Technology Group, or ATG, in connection with the
lawsuit we filed on December 11, 1998 against ATG alleging infringement of our
U.S. Patent No. 5,710,887. In accordance with the terms of the settlement
agreement, we granted ATG a nonexclusive, nontransferable, worldwide, perpetual
license and we were paid by ATG $8 million at the effective date of the
settlement and will receive an additional $7 million payable in quarterly
installments commencing February 24, 2000 in the form of four consecutive
quarterly payments of $750,000 during 2000 and eight consecutive quarterly
payments of $500,000 during 2001 and 2002.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
20
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Our common stock is quoted on the Nasdaq National Market under the symbol
"BVSN." The following table shows high and low sale prices per share of the
common stock as reported on the Nasdaq National Market:
High Low
---- ---
Fiscal Year 1997
First Quarter.......................... $ 1.15 $ 0.83
Second Quarter......................... 1.01 0.49
Third Quarter.......................... 0.82 0.56
Fourth Quarter......................... 0.97 0.65
Fiscal Year 1998
First Quarter.......................... $ 2.11 $ 0.67
Second Quarter......................... 2.79 1.64
Third Quarter.......................... 3.28 1.12
Fourth Quarter......................... 4.92 1.03
Fiscal Year 1999
First Quarter.......................... $ 8.04 $ 3.01
Second Quarter......................... 8.19 4.35
Third Quarter.......................... 15.54 6.82
Fourth Quarter......................... 59.67 14.10
We have never declared or paid cash dividends on our common stock, and
it is our present intention to retain earnings to finance the expansion of our
business. In addition, our credit facility with our commercial lender contains
certain covenants that may limit our ability to pay cash dividends.
21
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the Consolidated Financial Statements of the Company
and Notes thereto, and other financial information included elsewhere herein of
this Form 10-K. Historical results are not necessarily indicative of results
that may be expected for future periods.
Years Ended December 31,
-------------------------------------------------------------
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- -------
(in thousands, except per share data)
Consolidated Statement of Operations Data:
Revenues:
Software licenses...................... $ -- $ 7,464 $ 18,973 $ 36,067 $ 75,383
Services............................... 540 3,418 8,132 14,844 40,131
-------- -------- -------- -------- --------
Total revenues................... 540 10,882 27,105 50,911 115,514
Cost of revenues:
Cost of software licenses.............. -- 330 1,664 1,001 3,703
Cost of services....................... 249 2,164 4,284 8,704 25,108
-------- -------- -------- -------- --------
Total cost of revenues........... 249 2,494 5,948 9,705 28,811
-------- -------- -------- -------- --------
Gross profit............................. 291 8,388 21,157 41,206 86,703
Operating expenses:
Research and development............... 2,575 4,985 7,392 9,227 14,568
Sales and marketing.................... 1,348 12,066 18,413 26,269 48,903
General and administrative............. 846 2,034 2,990 3,786 7,970
-------- -------- -------- -------- --------
Total operating expenses......... 4,769 19,085 28,795 39,282 71,441
-------- -------- -------- -------- --------
Operating income (loss)................ (4,478) (10,697) (7,638) 1,924 15,262
Other.................................. 160 552 265 2,115 3,547
-------- -------- -------- -------- --------
Net income (loss)...................... $ (4,318) $(10,145) $ (7,373) $ 4,039 $ 18,809
======== ======== ======== ======== ========
Net income (loss) per share:
Basic earnings (loss) per share.......... $ (0.04) $ (0.06) $ (0.04) $ 0.02 $ 0.08
======== ========= ======== ======== ========
Shares used in computation-- basic earnings
(loss) per share......................... 107,784 169,335 181,872 210,114 229,128
======== ======== ======== ======== ========
Diluted earnings (loss) per share........ $ (0.04) $ (0.06) $ (0.04) $ 0.02 $ 0.07
======== ========= ======== ======== ========
Shares used in computation-- diluted
earnings (loss) per share................ 107,784 169,335 181,872 230,877 260,712
======== ======== ======== ======== ========
As of December 31,
--------------------------------------------------------------
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ----------
(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents.................. $ 4,311 $ 17,608 $ 8,277 $ 61,878 $279,823
Working capital............................ 3,916 18,258 11,485 63,620 342,024
Total assets............................... 5,857 26,714 26,539 101,562 406,128
Debt and capital leases, less current
portion.................................. 516 495 3,005 3,194 4,875
Accumulated deficit........................ (6,124) (16,269) (23,642) (19,603) (794)
Total stockholders' equity................. 4,254 21,016 15,121 81,809 346,238
22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Except for historical information contained or incorporated by reference herein,
the following discussion contains forward-looking statements that involve risks
and uncertainties. The Company's actual results could differ significantly from
those discussed herein. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below under the
caption "Risk Factors" and elsewhere herein of this Form 10-K. Any such
forward-looking statements speak only as of the date such statements are made.
Overview
We develop, market and support fully integrated scalable application software
solutions specifically designed for one-to-one relationship management across
the extended enterprise. These total end-to-end solutions enable businesses to
use the Internet as a unique platform to conduct electronic commerce, provide
online financial services, offer online interactive customer self-service, and
deliver targeted information to all constituents of the extended enterprise.
These constituents include but are not limited to customers, suppliers,
distributors, partners, and employees. The BroadVision One-To-One product suite
allows businesses to tailor their Web site content to the special needs and
interests of individual users by personalizing each constituent's visit on a
real-time interactive basis. Our applications accomplish this by capturing Web
site visitor profile information and targeting an enterprise's organized content
to each visitor based on easily constructed business rules. We believe the
benefits of these applications include greater customer satisfaction and
loyalty, increased business volume, enhanced brand awareness, reduced costs to
service customers and execute transactions, as well as higher employee
productivity.
We sell our products and services worldwide through direct sales forces,
independent distributors, resellers and system integrators. We also have a
global network of strategic business relationships with key industry platform
and Web developer partners. We also engage in strategic business alliances to
assist us in marketing, selling and developing customer applications. In
addition, we place a strategic emphasis on technology alliances to ensure that
our products are based on industry standards and that we are positioned to take
advantage of current and emerging technologies. The benefits of this approach
include enabling us to focus on our core competencies while reducing time to
market and simplifying the task of designing and developing applications for us
and our customers.
Proposed Business Acquisition - Interleaf
On January 26, 2000, we announced a definitive agreement to acquire all of
the outstanding stock of Interleaf, subject to stockholder and regulatory
approval and other conditions. Under the terms of the agreement, Interleaf
shareholders will receive 1.0395 shares of BroadVision common stock in exchange
for each share of Interleaf common stock; or estimated purchase consideration of
approximately $802 million, inclusive of approximately $18 million of
acquisition and severance costs. We expect to account for the acquisition as a
purchase.
STATEMENT OF OPERATIONS AS A PERCENT OF TOTAL REVENUES
The following table sets forth certain items reflected in our consolidated
statements of operations expressed as a percent of total revenues for the
periods indicated.
Years Ended December 31,
---------------------------------
1997 1998 1999
--------- --------- -------
Revenues:
Software licenses........................ 70% 71% 65%
Services................................. 30 29 35
--- --- ---
Total revenues................... 100 100 100
--- --- ---
Cost of revenues:
Cost of license revenues................. 6 2 3
Cost of services revenues................ 16 17 22
--- --- ---
Total cost of revenues................ 22 19 25
--- --- ---
Gross profit..................... 78 81 75
--- --- ---
Operating expenses:
Research and development................. 27 18 13
Sales and marketing...................... 68 52 42
General and administrative............... 11 7 7
--- --- ---
Total operating expenses.............. 106 77 62
--- --- ---
Operating income (loss).......... (28) 4 13
Other................................. 1 4 4
--- --- ---
Income (loss) before income taxes (27) 8 17
Income tax provision.................. -- -- 1
--- --- ---
Net income (loss)................ (27)% 8% 16%
=== === ===
23
RESULTS OF OPERATIONS
Revenues
Our revenues are derived from software licensing arrangements and fees
charged for services. Our software licensing arrangements include fees for
software application products and fees for profiled users associated with the
deployment of purchased applications. In general, revenues related to software
licensing arrangements are recognized upon the consummation of a sale. A sale is
considered consummated when a non-cancelable license agreement has been executed
and the customer acknowledges an unconditional obligation to pay, the software
product has been delivered, there are no uncertainties surrounding product
acceptance, the fees are fixed and determinable and collection is considered
probable. Our professional services are delivered by our Strategic Services
Group, Interactive Services Group, Content and Creative Services Group,
Education Services Group and Technical Support Group. Revenues for consulting
related services are typically recognized when the services are performed.
Maintenance fees for technical support and software product upgrades are
recognized ratably over the contracted period. A summary of our software and
services revenues by geographic region for the periods indicated is as follows:
Software % Services % Total %
-------- - -------- - ----- -
(dollars in thousands)
Year Ended December 31, 1997:
Americas..................... $ 8,584 45% $ 4,288 53% $12,872 48%
Europe....................... 8,835 47 2,015 25 10,850 40
Asia/Pacific................. 1,554 8 1,829 22 3,383 12
------- --- -------- --- ------- ---
Total.......................... $18,973 100% $ 8,132 100% $27,105 100%
======= === ======== === ======= ===
Year Ended December 31, 1998:
Americas..................... $19,301 54% $ 10,029 67% $29,330 58%
Europe....................... 13,879 38 3,065 21 16,944 33
Asia/Pacific................. 2,887 8 1,750 12 4,637 9
------- --- -------- --- ------- ---
Total.......................... $36,067 100% $ 14,844 100% $50,911 100%
======= === ======== === ======= ===
Year Ended December 31, 1999:
Americas..................... $48,822 65% $ 30,501 76% $79,323 69%
Europe....................... 18,918 25 7,293 18 26,211 22
Asia/Pacific................. 7,643 10 2,337 6 9,980 9
------- --- -------- --- ------- ---
Total.......................... $75,383 100% $ 40,131 100% $115,514 100%
======= === ======== === ======== ===
1999 versus 1998
Total revenues for the year ended December 31, 1999 increased $64.6 million
or 127% on a year-over-year basis, and consisted of an increase in software
license revenue of $39.3 million or 109% and an increase in professional
services revenue of $25.3 million or 170%.
The 109% increase in software license revenues is a result of continued
strong demand for our expanding product line and core competencies; our
strategic positioning within a high momentum market for business to business and
business to consumer personalization focused software application solutions; and
the ability to achieve greater penetration into our existing customer base while
continuing to add significant numbers of new quality customers. During the year,
we continued to expand the functionality and personalization attributes of our
application products that contributed to a broadened customer base and an
increased level of repeat business. In addition, our deployment related user
profile based licensing revenues continued to accelerate as a result of an
increasingly larger number of live sites. Software product license revenues for
our targeted web enabling applications increased to $25.9 million in 1999 as
compared to $10.2 million in 1998. Deployment related user profile license
revenues increased to $31.2 million in 1999 as compared to $14.8 million in
1998. During the year ended December 31, 1999, we licensed approximately 217 new
end-user customers and 47 new partners which compares with approximately 94 new
end-user customers and 27 new partners for the year ended December 31, 1998. As
of December 31, 1999, we had a
24
total installed license base of over 410 end-user customers and 120 partners,
which compares with over 195 end-user customers and 75 partners as of December
31, 1998.
The 170% increase in professional services revenue is a result of higher
levels of consulting related services associated with increased business volumes
and higher customer support revenues derived from a larger installed customer
base. Maintenance related fees for technical support and product upgrades were
$13.4 million in 1999 which compares to $5.1 million in 1998. During the year
ended December 31, 1999, we continued to expand and enhance our professional
services group and, during August 1999, we completed our greatly expanded
corporate training facility located in Redwood City, California. We have also
added additional training and professional consulting related facilities in
Europe and Asia as of December 31, 1999.
To date we have achieved good market acceptance for our products and have
experienced continued revenue growth. We anticipate that international revenues
will continue to account for a significant amount of total revenues, and expect
to continue to commit significant time and financial resources to the
maintenance and ongoing development of direct and indirect international sales
and support channels. Our Asia/Pacific operations have experienced lower growth
rates over the previous years as a result of the generally weak economic
conditions of that region. As a result, we expect that any significant growth in
international revenues will most likely come from European operations. However,
we may be unable to maintain or continue to increase international or domestic
market acceptance for our family of products.
1998 versus 1997
Total revenues for the year ended December 31, 1998 increased $23.8 million
or 88% on a year-over-year basis, and consisted of software license revenue
increases of $17.1 million or 90% and professional services revenue increases of
$6.7 million or 83%.
The 90% increase in software license revenues was primarily attributable to
the expanding sales volumes of our three complementary packaged application
products, higher deployment license revenues and to a lesser extent, product
pricing increases that were effective October 1, 1998. Application
license-related revenues for our three complementary products increased to $10.2
million in 1998 as compared to $2.4 million in 1997. Deployment-related license
revenues increased to $14.8 million in 1998 as compared to $8.1 million in 1997.
During the year ended December 31, 1998, we licensed approximately 94 new
end-user customers and 27 new partners, which compares with approximately 70 new
end-user customers and 34 new partners for the year ended December 31, 1997. As
of December 31, 1998, we had a total installed license base of over 195 end-user
customers and 75 partners, which compares with over 105 end-user customers and
48 partners as of December 31, 1997.
The 83% increase in professional services revenue results from a higher
level of consulting related services associated with increased business volumes
and higher levels of customer support revenues derived from a larger installed
customer base. Maintenance revenues were $5.1 million in 1998 as compared to
$2.1 million in 1997.
Cost of Revenues
Cost of license revenues includes royalties payable to third parties for
software that is either embedded in, or bundled and sold with, our products;
commissioned agent fees paid to distributors; and the costs of product media,
duplication, packaging and other associated manufacturing costs. Cost of
services consists primarily of employee-related costs, third-party consultant
fees incurred on consulting projects, post-contract customer support and
instructional training services.
Years Ended December 31,
----------------------------------------------------
1997 % 1998 % 1999 %
------- ------- ------- ------- ------- -----
(dollars in thousands)
Cost of license revenues [1].......... $1,664 9% $1,001 3% $3,703 5%
Cost of services revenues [2]......... 4,284 53 8,704 59 25,108 63
------ ------ ------
Total cost of revenues [3]............ $5,948 22% $9,705 19% $28,811 25%
====== ====== =======
[1] -- Percentage is calculated based on total software license revenues for
the period indicated
[2] -- Percentage is calculated based on total services revenues for the period
indicated
[3] -- Percentage is calculated based on total revenues for the period
indicated
25
1999 versus 1998
For the year ended December 31, 1999, cost of license revenues increased $2.7
million or 270% on a year-over-year basis. Cost of software licenses as a
percent of license revenues was 5% in 1999 as compared to 3% in 1998. Cost of
services revenues during 1999 increased $16.4 million or 188% on a
year-over-year basis. Cost of services as a percent of services revenues was 63%
in 1999 as compared to 59% in 1998.
The increase in cost of license revenues, in both absolute dollar and
relative percentage terms, was principally a result of the higher mix of third
party software bundled and sold with our products and the related third party
royalty fees payable on those sales. Third party royalty costs relative to
license revenues have been offset to some extent as a result of our
renegotiating previously existing percentage-based royalty arrangements into
prepaid fixed fee royalties for periods extending through 2004.
The increase in cost of services revenues in absolute dollar terms during
1999 as compared to 1998 is a result of higher business volumes as evidenced by
increased services revenues. Overall costs increased as a result of additions to
our professional services staff and the employment of outside consultants to
meet short-term consulting demands. The increase in cost of services as a
percentage of services revenues is a result of the assimilation of new
professional consultants added to the group during the year and higher use of
outside consultants in relation to the extent previously used during the prior
year period.
1998 versus 1997
For the year ended December 31, 1998, cost of license revenues decreased
$663,000 or 40% on a year-over-year basis. Cost of software licenses as a
percent of license revenues was 3% in 1998 as compared to 9% in 1997. Cost of
services revenues during 1998 increased $4.4 million or 103% on a year-over-year
basis. Cost of services as a percent of services revenues was 59% in 1998 as
compared to 53% in 1997.
The decrease in cost of license revenues, in both absolute dollar and
relative percentage terms, was principally a result of lower commissioned agent
fees and third party royalty rates. We continued to expand our in-house sales
force capabilities and during 1998 direct sales were higher and commissioned
agent sales were lower relative to 1997. In addition, royalty costs relative to
total license revenues decreased as a result of our renegotiating a previously
existing percentage based royalty arrangement into a prepaid fixed fee royalty
for a period through 2001.
The increase in cost of services revenues in absolute dollar terms during
1998 as compared to 1997 is a result of expanded business volumes as evidenced
by increased services revenues. Overall costs increased as a result of additions
to our professional services staff and the employment of outside consultants to
meet short-term consulting demands. The increase in cost of services as a
percentage of services revenues is a result of higher use of outside consultants
in relation to the extent previously used during the prior year period.
Operating Expenses and Other Income, net
Research and development expenses consist primarily of salaries,
employee-related benefit costs and consulting fees incurred in association with
the development of our products.
Costs incurred for the research and development of new software products are
expensed as incurred until the time that technological feasibility, in the form
of a working model, is established, at which point these costs are capitalized
subject to recoverability. The costs we have incurred subsequent to the
establishment of a working model but prior to general release have not been
significant. To date, we have not capitalized any software development costs.
26
Sales and marketing expenses consist primarily of salaries, employee-related
benefit costs, commissions and other incentive compensation, travel and
entertainment and marketing-related expenditures such as collateral materials,
trade shows, public relations and creative services.
General and administrative expenses consist primarily of salaries,
employee-related benefit costs and professional service fees.
A summary of operating expenses is set forth in the following table. The
percentage of expenses is calculated based on total revenues.
Years Ended December 31,
------------------------------------------------------
1997 % 1998 % 1999 %
-------- -------- -------- -------- -------- -----
(dollars in thousands)
Research and development.................. $ 7,392 27% $ 9,227 18% $14,568 13%
Sales and marketing....................... 18,413 68 26,269 52 48,903 42
General and administrative................ 2,990 11 3,786 7 7,970 7
------- --- ------- ------
Total operating expenses.................. $28,795 106% $39,282 77% $71,441 62%
======= === ======= == ======= ==
Other income, net......................... $ 265 1% $ 2,036 4% $4,543 4%
======= === ======= == ====== ==
1999 versus 1998
Research and development expenses for the year were $14.6 million in 1999 as
compared to $9.2 million in 1998 which represents an increase of 58%
year-over-year. Sales and marketing expenses for the year were $48.9 million in
1999 as compared to $26.3 million in 1998 which represents an increase of 86%
year-over-year. General and administrative expenses for the year were $8.0
million in 1999 as compared to $3.8 million in 1998 which represents an increase
of 111% year-over-year. Net other income for the year was $4.5 million in 1999
as compared to $2.0 million in 1998 that represents an increase of 123%
year-over-year.
The increase in research and development expenses is primarily attributable
to personnel costs for added headcount within those operations involved in the
enhancement of existing applications and the development of our next generation
of products. The increases in sales and marketing expenses reflects the cost of
hiring additional sales and marketing personnel, the continued development of
sales distribution channels and the expansion of promotional activities and
marketing-related programs. In addition, commission rates were higher during
1999 as result of sales people exceeding their sales quotas. The increase in
general and administrative expenses is attributable to additional administrative
and management personnel, higher professional fees and additional infrastructure
to support the expansion of our operations. The increase in net other income is
attributable to a higher level of investment income during the year as a result
of earnings on proceeds received from a follow-on public stock offering in
November 1999.
1998 versus 1997
Research and development expenses for the year were $9.2 million in 1998 as
compared to $7.4 million in 1997 which represents an increase of 25%
year-over-year. Sales and marketing expenses for the year were $26.3 million in
1998 as compared to $18.4 million in 1997 which represents an increase of 43%
year-over-year. General and administrative expenses for the year were $3.8
million in 1998 as compared to $3.0 million in 1997 which represents an increase
of 27% year-over-year. Net other income for the year was $2.0 million in 1998 as
compared to $265,000 in 1997 that represents an increase of 668% year-over-year.
The increase in research and development expenses is primarily attributable
to personnel costs for added headcount within those operations involved in the
enhancement of existing applications and the development of our next generation
of products. The increases in sales and marketing expenses reflects the cost of
hiring additional sales and marketing personnel, the continued development of
sales distribution channels and the expansion of promotional activities and
marketing-related programs. In addition, commission rates were higher during
1998 as result of sales people exceeding their sales quotas. The increase in
general and administrative expenses in absolute dollar terms is attributable to
additional administrative and management personnel, higher professional fees and
27
additional infrastructure to support the expansion of our operations. The
increase in net other income is attributable to a higher level of investment
income during the year as a result of earnings on proceeds received from a
follow-on public stock offering in March 1998.
Income Taxes
For the year ended December 31, 1999, we recorded an income tax provision of
$996,000 consisting solely of current