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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, 1998
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
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
585 Broadway, Redwood City, California 94063
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(Address of principal executive offices) (Zip Code)
(650) 261-5100
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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
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(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 12, 1999 the aggregate market value of
the voting stock held by nonaffiliates of the registrant was $1,148,094,481.
As of March 26, 1999, registrant had outstanding 25,065,304 shares of Common
Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the Proxy Statement for Registrant's 1998 Annual Meeting of
Stockholders to be held May 5, 1999 are incorporated by reference in Part III of
this Form 10-K Report.
BROADVISION, INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 1998
TABLE OF CONTENTS
Page No.
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Part I
Item 1. Business ........................................................................................................ 3
Item 2. Properties ...................................................................................................... 22
Item 3. Legal Proceedings ............................................................................................... 23
Item 4. Submission of Matters to a Vote of Security Holders ............................................................. 23
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters ........................................... 23
Item 6. Selected Consolidated Financial Data ............................................................................ 24
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ........................... 25
Item 7a. Quantitative and Qualitative Disclosure About Market Risk ...................................................... 45
Item 8. Financial Statements and Supplementary Data ..................................................................... 45
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ............................ 61
Part III
Item 10. Directors and Executive Officers of the Registrant ............................................................. 61
Item 11. Executive Compensation ......................................................................................... 61
Item 12. Security Ownership of Certain Beneficial Owners and Management ................................................. 61
Item 13. Certain Relationships and Related Transactions ................................................................. 61
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ............................................... 61
SIGNATURES .............................................................................................................. 62
2
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 Background.................................................3
The BroadVision Solution................................................6
BroadVision Business Strategies.........................................6
Focus on extending relationship management............................6
Enhance targeted application solutions................................7
Expand and leverage key business alliances............................7
Maintain technological leadership.....................................8
Grow international presence...........................................8
BroadVision Products....................................................8
BroadVision One-To-One Enterprise.....................................9
BroadVision One-To-One Commerce......................................10
BroadVision One-To-One Financial.....................................10
BroadVision One-To-One Knowledge.....................................10
Key capabilities of the BroadVision total end-to-end solution........11
BroadVision One-To-One Tools.........................................11
Other products.......................................................12
BroadVision Professional Services......................................13
Strategic services...................................................13
Interactive services.................................................13
Content and creative services........................................13
Education services...................................................13
Technical support....................................................13
Customers and Markets..................................................13
Sales and marketing..................................................15
Strategic alliances..................................................15
Competition............................................................16
BroadVision Technology.................................................16
Product Development ...................................................18
Intellectual Property and Other Proprietary Rights ....................19
Employees..............................................................20
Executive officers and key personnel.................................21
Overview and Background
BroadVision(TM) develops, markets and supports application software solutions
for one-to-one relationship management for the extended enterprise. These
solutions enable businesses to use the Internet as a platform to conduct
commerce, offer online financial services, provide self-service, and deliver
targeted information to their customers, suppliers, distributors, employees, and
other constituents of their extended enterprises. The BroadVision One-To-One(TM)
product family allows businesses to tailor World Wide Web (the "Web") site
content to the needs and interests of individual users by personalizing each
visit on a real-time basis. BroadVision One-To-One applications achieve this
result by interactively capturing Web site visitor profile information,
organizing the enterprise's content, targeting that content to each visitor
based on easily constructed business rules, and executing transactions. The
Company believes the benefits of these applications include enhanced customer
satisfaction and loyalty, increased business volume, reduced costs to service
customers and execute transactions, and enhanced employee productivity.
3
Trends in One-to-One Relationship Management
To prevail in the intensely competitive global marketplace, business managers
must continually devise new strategies to market, sell, distribute, and support
their products and services. From the 1950s to the 1980s, leading businesses in
North America, Europe, and Asia advanced the sciences of mass production, mass
communication, and mass distribution to establish world markets for their
products and services. During the 1980s, these mass marketers began using new
technologies and analytical techniques to better segment and define targeted
markets in order to reach customer groups most likely to buy their products.
These new approaches helped marketers respond to increasing competition and
customer demands for improved quality, service, and product choice. The trend
toward greater specialization has continued to increase as many marketers have
used targeted marketing tools and new delivery media, such as direct mail and
telemarketing, to reach more precisely targeted market segments.
In the latter half of the 1990s, many marketing executives in both
business-to-consumer and business-to-business industries have turned their
attention to the ultimate target market segment: the market of one. One-to-one
relationship management involves a systematic, interactive approach to
developing and managing a detailed knowledge base that integrates individual
customers' product and business requirements, personal preferences, and purchase
histories with traditional demographic statistics. This information provides the
foundation for businesses to serve customers in the form of individually
tailored products, services, information, incentives, and transactions. By
focusing on individual customers and one-to-one relationship management,
business managers can develop more productive relationships with their customers
that maximize customer satisfaction, develop customer loyalty, and contain the
high costs associated with new customer acquisition.
One-to-One Relationship Management on the Internet
With the emergence of the Internet as a globally accessible, interactive, and
individually addressable communications and computing platform, businesses have
the opportunity to implement one-to-one relationship management on a mass basis.
The proliferation of inexpensive, easy-to-use Web browsers and affordable
Internet access services has made the Internet easy to navigate, accessible to
millions of homes and businesses, and readily adaptable to a broad range of
business, education, commerce, entertainment, and marketing applications.
Technologies such as Java from Sun Microsystems, Inc. ("Sun") are facilitating
the delivery of content over the Internet and accelerating adoption of the
Internet as a mainstream business and personal computing platform. In addition,
businesses are utilizing the Internet to create internal enterprise networking
environments called "intranets" or "extranets." These networks are enabling
businesses to create Internet applications that provide new ways of interacting
with employees, partners, and customers.
As Internet use has grown, industry experts have described the Internet as
the ideal platform for deploying applications that enable companies to develop
individual one-to-one relationships across their entire enterprise. Whether an
Internet application is designed primarily for delivering knowledge, conducting
commerce, or customer self-service, it offers businesses an opportunity to
extend front office services in a personalized and cost effective way to all
constituents in their extended enterprise. By recognizing the
relationship-building potential of the Internet--in particular, the ability to
interactively capture visitor profile information, observations, and feedback
and to dynamically target useful information to visitors based on this
data--business managers can utilize advanced Internet technologies to engage in
personalized dialogs with millions of customers on a one-to-one basis.
The Business Challenge on the Internet
While the Internet is increasingly becoming a global platform for providing
and accessing information, there remain significant challenges to doing business
on the Internet. The Internet is characterized by fluid and dynamic content,
where information is continually being updated and enhanced. Visitors perceive
the value of Web sites to be directly correlated to the frequency of content
updates and the dynamic behavior of the site. Creating the best Web sites
generally requires sophisticated creative and technical expertise. Although the
market has been flooded with numerous inexpensive tools for building and
updating Web sites, many of the companies producing and using these tools have
failed to take full advantage of the Internet's dynamic one-to-one relationship
potential.
4
Many Web sites today simply present text and graphics electronically in a
static format, much like a product brochure. There has recently been a dramatic
shift away from companies simply building these "brochure-ware" sites to
companies making a significant investment in building mission-critical Internet
applications. These Internet applications have the interactive capability to
capture visitor profiles, conduct personalized interactions, enable secure
transactions, remember information from one visit to the next, enable business
managers to manage the site on a real-time basis, and integrate into existing
business systems. Providing these additional capabilities is a valuable next
step for companies that plan to maximize the potential of the Internet for
relationship management across their extended enterprise.
However, most of the Web sites that have moved beyond brochure-ware to
provide electronic commerce, online financial services or knowledge management
applications still have failed to capitalize fully on the Internet's potential
for building one-to-one relationships. Sites that do support commerce often fail
to satisfy customer expectations, providing commercial experiences that are less
enjoyable and cost-effective than traditional alternatives. Most lack any form
of real-time personalization and cannot dynamically target information based on
a visitors' preferences and past histories. Others lack integration with
mainstream business systems for supporting visitors interactively or exchanging
information with corporate databases. While some of these sites use advanced
applications to support online order and payment transactions, many still
require buyers to place orders by telephone, defeating a basic objective of
online businesses.
The Technology Gap on the Internet
Web sites are generally cumbersome for business managers to operate. Business
rules and content, such as product and pricing data, financial policies,
promotions, and advertising campaigns, are often "hard-coded" into programs and
virtually impossible for non-technical managers to change dynamically. Most
applications are not scaleable and require ongoing tuning and re-engineering to
keep up with visitor growth and changes in Internet technology. Development is
often slow and defects are common due to the limitations of most productivity
tools. Generally, with currently available application servers, business
managers do not have the capability to react to market conditions with real-time
control and management of Web sites, but instead are often constrained by slow
"change request" processes that take technical specialists days or even weeks to
implement.
In part, the limited capabilities of these static Web sites are a result of
the inadequacies of the technologies used to develop Internet applications. Many
Web developers still rely on general purpose publishing tools, such as HTML
(Hypertext Mark-up Language) editors, to develop Web pages and the links between
them. Many of today's Web development tool kits that assist in Web site
development do not offer capabilities for generating personalized, dynamic Web
pages or for easily maintaining site content and page generation logic. These
tools were not designed to be used in the development of sophisticated
applications offering enterprise-scale implementations of business processes,
such as product marketing, sales, or customer support. Using low-level tool kits
and commerce and merchant servers to develop and maintain sophisticated Internet
applications, such as those for managing customer relationships, managing a high
volume of online transactions and defining dynamic business rules, is a highly
complex process requiring a breadth of expertise that is often beyond the
capabilities of in-house information technology organizations. In addition, the
cost, time, and effort of building and maintaining Internet applications in this
manner is often beyond the funding capacity of internal application development
budgets.
Application Systems for One-to-One Relationship Management
The recent trends toward one-to-one relationship management and the rapid
adoption of the Internet as a technology platform for conducting business have
fueled the need for sophisticated packaged application software that enables
companies to quickly create applications that build personalized, long-term
relationships with customers, partners, and employees. Early adopter companies
have built successful online relationship management applications, and these
online businesses are creating pressures for their competitors to come to market
quickly with online business sites. To build these sites, the Company believes
that more of these businesses are turning toward the purchase of packaged
enterprise Internet applications. These packaged applications provide an
attractive alternative to in-house or third-party custom application
development, enabling companies to get to market more quickly with a solution
that is more readily extensible and maintainable as the business evolves.
5
To realize the potential of one-to-one relationship management, Internet
applications must support the following activities:
* Attract, retain and service visitors from the casual to the sophisticated by
providing dynamic content, interactive dialogs, and communities of interest
in a friendly, easy to use Web site environment;
* Offer a consistent end-user experience across multiple customer touch
points such as interactive voice response systems and call centers;
* Develop and maintain visitor profiles, observe and remember interactions,
and engage in ongoing personalized dialogs while empowering individuals to
control the privacy of their personal data;
* Provide non-technical business managers with the ability to define and
modify the Internet application's business rules and content in real time;
* Dynamically target personalized content, products, and incentives to
correspond to profile data in order to motivate visitors to interact and
conduct transactions;
* Fulfill financial and information transactions with secure electronic
commerce processes; and
* Integrate and interact with back office systems to fully utilize a
company's data and information resources.
The BroadVision Solution
BroadVision offers a family of packaged applications for automating
relationship management throughout the extended enterprise. The BroadVision
One-To-One product family enables companies to capitalize on the Internet,
intranets and extranets for selling, marketing, and supporting all of their
business constituents: employees, customers, suppliers, distributors, and
others. The Company develops, markets, and supports the BroadVision One-To-One
family of Internet applications specifically designed for relationship
management as well as a variety of associated software tools to customize and
maintain these applications. The Company's applications are specifically
designed to allow non-technical business managers to build lasting one-to-one
customer relationships by tailoring content to the needs and interests of
individual visitors by personalizing each experience on a real-time basis.
The Company's customers use BroadVision solutions to deploy Internet
applications that engage visitors and encourage return visits through
personalized real-time interactions. These applications also allow the Company's
customer to capture marketing information from volunteered data and observed
behavior, and generate revenues from electronic commerce. The Company believes
that these capabilities are especially critical for business managers and
Internet application developers in order for them to take full advantage of the
Internet as an emerging marketplace for building long-term customer
relationships and conducting cost effective business transactions.
BroadVision Business Strategies
The Company's objective is to establish one-to-one real-time relationship
management as a standard for Web sites worldwide. Consistent with that
objective, the Company has adopted the following strategies.
Focus on Extending Relationship Management by Providing Packaged Application
Solutions
The Company is focusing exclusively on developing packaged application
solutions for electronic businesses ("e-businesses") that are developing
mission-critical Web sites as profitable business channels for managing
relationships and transactions with their customers, partners, employees, and
other constituents. The Company believes that the next major phase of Internet
growth will be driven by complete packaged application solutions that allow
businesses to capitalize more fully on the Internet as a business venue for
interacting with the constituents of their extended enterprise. Businesses will
implement these packaged applications in order to speed time to market, rely on
a vendor rather than an internal development organization to maintain and update
the technology underlying the business application, and reduce total cost and
risk of application deployment.
6
Enhance Targeted Application Solutions
The Company will continue to leverage its BroadVision One-To-One Enterprise
relationship management system to enhance its Web application products and
services focused on specific horizontal and/or vertical markets. Utilizing its
expanding libraries of reusable application objects and templates and working
closely with customers and strategic partners, the Company believes it can
deliver a targeted application solution for one-to-one relationship management
faster, of a higher quality, and at a lower cost than its competitors. The
Company has delivered targeted application solutions for business-to-consumer
and business-to-business commerce, for retail financial services and for
knowledge management. The Company intends to remain nimble and flexible in
developing other applications products in the general area of relationship
management, in response to market opportunities that may arise.
Expand and Leverage Alliances with Key Business Partners
To accelerate the acceptance of the BroadVision One-To-One products and to
promote the adoption of the Web as a commercial marketplace, the Company has
developed cooperative alliances with leading Internet technology vendors,
systems integrators, and Web site developers. The Company believes that these
alliances will provide additional marketing and sales channels for the Company's
products, enable the Company to more rapidly incorporate additional functions
and platforms into the BroadVision One-To-One products, and facilitate the
successful deployment of customer applications.
The approach of leveraging the Company's business alliances is intended to
increase the number of personnel available to perform application design and
development services for the Company's customers; enhance the Company's market
credibility, increase the potential for lead generation and access to large
customer accounts; and provide additional marketing expertise in certain
vertical industry segments while providing technical expertise in the
development of reusable objects and templates.
To date, the Company has signed business alliances with over 90 systems
integration, design, consulting, and other services organizations worldwide,
which has expanded the Company's sales and support infrastructure and post-sales
implementation capabilities while broadening market awareness for the Company.
Alliances to date include American Management Systems, Andersen Consulting LLP,
Cambridge Technology Partners, Computer Sciences Corporation, Context
Integration, Concept 5, Daimler-Benz Information Systems AG (Debis), Dimension
AB, Ernst & Young LLP, Gran Via Internet, NTT Data Corporation, Metamor
Worldwide, Sema Group plc, Siemens Business Services Gmbh and Co., and others.
The Company also places a strategic emphasis on developing technology
alliances in order to ensure that the Company's products are based on industry
standards and the Company is positioned to take advantage of current and
emerging technologies. The benefits of this approach include enabling the
Company to focus on its core competencies while reducing time to market and
simplifying the task of designing and developing applications by both the
Company and its customers.
Some of the Company's strategic technology alliances to date have included
alliances with Hewlett-Packard and Sun Microsystems, providers of enterprise
server hardware and systems software; IONA Technologies, Inc. ("IONA"), a
provider of a CORBA-compliant development platform; Oracle, Sybase, and
Informix, providers of standard RDBMSs; RSA, a provider of encryption
technology; Security First Technologies ("S1"), a provider of integrated, secure
Internet financial applications; and VeriFone, Inc. and CyberCash, Inc.,
providers of payment systems.
Specific strategic alliances of the Company include ventures with Macromedia
to jointly develop the next version of its BroadVision One-To-One Design Center
product; Hewlett-Packard to embed Web Quality of Service technologies into
BroadVision products; Cisco Systems to create a unique Cisco-BroadVision
One-To-One reference architecture, configuration guide, and performance and
scaleability benchmarks; S1 to develop and market joint products based on
Virtual Financial Manager ("VFM"), S1's suite of Internet-based financial
services applications; and Sema Group to jointly develop and market BroadVision
One-To-One applications for the telecommunications sector.
7
The Company's will continue to place an emphasis on establishing additional
such alliances as new technologies and standards emerge, although no assurance
can be given that the Company will be successful in establishing or maintaining
such alliances.
Maintain Technological Leadership
The Company believes that it offers the most complete solution available
today for extended relationship management for e-businesses. The Company intends
to maintain this leadership position by continuing to enhance its technology
through heavy investment in research and development activities, incorporating
industry-leading components into its products, and employing its own technology
and human resources as a source of ongoing technological advantage.
Having employed the Common Object Request Broker Architecture ("CORBA")
standard as a cornerstone of its product architecture, the Company has
integrated other CORBA-compatible technologies, such as the JavaScript and Java
development languages, into its products.
Utilizing in-house expertise and experiences with customers, the Company
intends to maintain its leadership position in providing a scaleable,
innovative, and open architecture.
Grow International Presence
To capitalize on the emergence of the Internet as a global network, the
Company has established worldwide distribution capabilities with direct or
distributor sales personnel in 43 cities in 34 countries.
Direct sales operations are found in Amsterdam, Basel, Hong Kong, London,
Munich, Paris, Singapore and Tokyo. The Company distributes its products through
licensed distributors, value-added resellers, and systems integrators in those
countries and in Argentina, Belgium, Brazil, China, France, Finland, Germany,
Japan, Korea, Kuwait, Mexico, South Africa, Spain, Sweden, Switzerland, Taiwan,
Turkey and the United Kingdom.
The Company intends to continue to certify providers of professional services
for BroadVision products in these and other countries. The Company's partners
include multinational systems integrators, as well as partners with a
single-country scope of operations.
The Company's product architecture is designed to support international
languages, and the Company is currently shipping versions of its BroadVision
One-To-One Enterprise relationship management system that support the display of
content in Arabic, traditional Chinese, Hebrew, Japanese, Korean, Slovakian, and
Turkish as well as all Western European languages.
The Company's strategies involves substantial risk. There can be no assurance
that the Company will be successful in implementing its strategies or that its
strategies, even if implemented, will lead to successful achievement of the
Company's objectives. If the Company is unable to implement its strategies
effectively, the Company's business, financial condition, and operating results
may be materially adversely affected.
BroadVision Products
The Company develops, markets and supports a family of extended relationship
management applications products and associated software tools for use in
customizing and maintaining solutions built with these applications.
BroadVision offers four applications products - BroadVision One-To-One
Enterprise, One-To-One Commerce, One-To-One Financial, and One-To-One Knowledge
that provide a spectrum of complementary capabilities offering numerous business
functions and supporting the needs of companies in different industries.
8
BroadVision One-To-One Enterprise is the Company's base product, providing the
technology platform on top of which the vertical-market One-To-One applications
are built. This flexible relationship management system contains cross-industry
functionality such as profile and content management; adapters to third-party
systems; and matching technologies and algorithms. It utilizes an open,
scaleable application architecture for Web session management, secure user
authentication and authorization, dynamic and personalized page generation, and
transaction handling.
BroadVision One-To-One Enterprise provides the following capabilities
designed to meet the needs of companies delivering personalized relationship
management on their Web sites:
Profiling - BroadVision One-To-One Enterprise stores and maintains
dynamic profiles of Web site visitors. Profile data can be collected
from information in existing customer information files, from
information provided explicitly by site visitors, and by observation of
visitors' behavior on the site. Visitors' session information is saved
in a transaction log and can be used to update and enrich the visitors'
profiles. Profile information is stored in any of several widely used
third-party relational databases.
Content Management - BroadVision One-To-One Enterprise delivers dynamic
content to the user in response to their interests and needs. Content
items available for display to visitors comprise one of six types:
templates (Web page designs and layouts), products, editorials,
advertisements, incentives, and discussion groups. Each of these
content types has a rich set of attributes that describe its properties
and key features. This content is managed within BroadVision One-To-One
Enterprise with tools to create, classify, organize, and publish the
content.
Highly Personalized Interactions - BroadVision One-To-One Enterprise
provides tools for business managers to create and manage "if-then"
rules and taxonomy-based matching schemes that determine which content
to deliver to Web site visitors and the conditions under which the
content should be delivered. The criteria for content selection can
include the visitor's demographic or psychographic variables,
historical behavior, current session behavior, context information such
as date and time, and marketing logic for delivering incentives,
promotions, and recommendations. This allows Web sites to personalize
product information, editorials, pricing, advertising, coupons,
incentives, and promotions for Web site visitors who fit specified
profiles or the predetermined criteria as established by the company's
business managers.
Simplicity - In an extended enterprise, Web site visitors are casual
and varied. They require applications whose use is intuitively obvious
and which are personalized for their individual information needs. For
example, a brokerage application needs to be sophisticated enough for a
professional investor yet also immediately usable by a casual investor.
BroadVision One-To-One Enterprise provides the personalized
interactions capable of servicing such a broad constituency.
Internationalization - The Company is currently shipping versions of
BroadVision One-To-One Enterprise which are capable of supporting the
display of content in Arabic, traditional Chinese, Hebrew, Japanese,
Korean, Slovakian, Turkish and all Western European languages. In
addition, BroadVision One-To-One Enterprise supports the new European
currency, the Euro, including conversions between European Monetary
Union currencies and the Euro, with on-screen prices displayed in both
the Euro and local currencies.
Open Architecture - BroadVision One-To-One Enterprise uses "open
adapters" to enable easy integration with a company's existing
infrastructure, with over 60 different third-party system integrators
completed to date.
9
Core Features of BroadVision One-To-One Enterprise
- ------------------------------ ------------------------ ------------------------ --------------------------------
PROFILING CONTENT MATCHING OPEN ADAPTERS
- --------- ------- -------- -------------
Demographics Product Alerts Data warehouses
Preferences Information Attribute search ERP systems
Interests Editorials Collaborative filtering Line-of-business applications
Usage history Advertising Community rating Call centers
Observation Incentives Email targeting Payment processors
Permissions Discussion groups Entitlements Shipping & handling systems
Support for external Page templates Event-based matching Configurations
content and profiles Full Text search Tax systems
Matching agents Fulfillment systems
Observation LDAP
Rule-based matching Middleware
User profile Search engines
Customer service
Data feeds
Security
Other third-party systems
- ------------------------------ ------------------------ ------------------------ --------------------------------
BroadVision One-To-One Commerce is an enterprise-class application solution for
the rapid deployment and dynamic personalization of high transaction Internet
commerce sites. This extensible and flexible electronic commerce application
helps businesses sell more efficiently to their online customers, whether these
customers are consumers, businesses or channel partners.
With its advanced, instant personalization capabilities, BroadVision
One-To-One Commerce enables fast-moving, high transaction companies to
immediately change the products, prices, promotions and other content to better
meet user needs - even on a user's first visit to a Web site. Full commerce
transaction capabilities include persistent shopping carts, shopping lists,
real-time pricing, automatic tax calculation, shipping and handling cost
computation, payment processing, order fulfillment and management and more.
BroadVision One-To-One Financial is an enterprise-class financial services
solution that enables banks, brokerages, mutual fund companies, and other
financial institutions to rapidly deploy personalized financial services
applications that enable customers to access their account information and
perform a rich set of secure transactions within and between accounts using the
Internet.
BroadVision One-To-One Financial provides customers with a Web site that
offers customized interactions that enable financial institutions to
differentiate themselves while forging closer relationships with customers. When
customers spend more time on a bank's site, the bank has the opportunity to
build a more profitable relationship with the customer.
BroadVision One-To-One Knowledge is an enterprise-class application designed to
dramatically increase the productivity of corporate knowledge workers, including
sales and marketing professionals, channel business partners and executive
management.
Optimized for rapid deployment over corporate intranets and extranets, this
agent-based application enables individuals and work groups to organize
information into flexible, interactive knowledge channels accessible through Web
browsers. These interactive channels automate the intelligent distribution of
information for employees and partners on a one-to-one, just-in-time basis
throughout an enterprise. BroadVision One-To-One Knowledge provides an immediate
solution to the problems faced by enterprises around the world: information
accessibility, overload, awareness and high cost.
10
Key Capabilities of the BroadVision Total End-to-End Soultion
The Company designed all of these applications products for use in
mission-critical, high-performance environments by customers with demanding
architecture, deployment, and maintenance requirements. Some of the key
capabilities of the applications include:
* Broad applicability - robust functionality to support business-to-business,
business-to-consumer, and business-to-employee relationship management,
including personalized marketing and communications, selling and commerce
transaction handling, and customer self-service.
* Scaleability - architected for high performance and fast response while
supporting large numbers of simultaneous users accessing the system over
the public Internet or private intranets or extranets.
* Open and standard - object-oriented application code written in C++, Java
and JavaScript allows developers and system integrators to use, modify,
adapt, or extend the applications to create a rapidly customized product
that meets the specific business requirements of a particular corporate
customer. 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.
* Transaction processing - handles a wide-range of commerce and financial
services transactions including order pricing and discount/incentive
handling, tax computation, shipping and handling charges, payment
authorization, credit card charge processing, order tracking, news and
stock feeds -- through a combination of built-in functionality and
integration with other products.
* Platform independence - versions available for multiple operating systems,
including Sun Solaris, Microsoft Windows NT, and HP-UX. Databases supported
include Oracle, Sybase, Informix, and Microsoft SQL Server.
* Multi-lingual - content display available in Arabic, traditional Chinese,
Hebrew, Japanese, Korean, Slovakian, Turkish and all Western European
languages.
BroadVision One-To-One Tools
BroadVision applications are customized and maintained using tools that are
licensed to customers separately from the applications products. Inherent to the
functionality of the Company's applications is a set of building blocks
comprised of customizable "components," "application templates," and "rule sets"
that are instrumental in rapidly building and easily maintaining
One-To-One-based applications. A description of the Company's tools products are
as follows.
BroadVision One-To-One Design Center. BroadVision One-To-One Design Center,
integrated with Macromedia(R)'s Dreamweaver(TM) 2, is a PC-based tool that
offers Web authors and Internet application developers faster time to market by
shortening the development cycle. It also requires fewer specialized skills and
reduces overall development and maintenance costs. The BroadVision One-To-One
Design Center with Dreamweaver 2 gives the Web author direct access to
BroadVision's powerful personalization and functional components through a
series of wizards in the Dreamweaver visual development environment. These
wizards generate server-side JavaScript, which is the primary programming
language for BroadVision 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. In addition, because the wizards directly
access information on the BroadVision development server, the code is generated
correctly the first time, without human error. The net result is increased
productivity and accuracy.
BroadVision One-To-One Command Center. BroadVision One-To-One Command Center is
a PC-based tool that allows non-technical business managers to make rapid
changes to the Web site without programmer intervention. With the BroadVision
One-To-One Command Center, business managers can define rules incorporating
"if-then" relationships to match content to users 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. Also, business managers can make real-time changes to content and
generate management reports that monitor the activity on their Web site,
enabling the evaluation of the effectiveness of content and services being
offered on the site.
11
BroadVision One-To-One Publishing Center. BroadVision One-To-One Publishing
Center is a Java- and Web-based tool that allows a distributed and remote team
of non-technical content experts to collaboratively manage every aspect of site
content, including creation, editing, staging, production, and archiving. The
BroadVision One-To-One Publishing Center 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 taxonomy
information. It supports content created with HTML editors, Microsoft Office
products, and Lotus Domino. An associated tool, the BroadVision One-To-One
Instant Publisher, is designed for casual content contributors. It provides
simple, personalized publishing forms, so that casual contributors can leverage
the functionality of the BroadVision One-To-One Publishing Center without
becoming expert users.
Other Products
In addition to its proprietary products, the Company has entered into
agreements which enable it to resell third-party software products from
CyberSource Corporation, Verity, Inc., Oracle Corporation ("Oracle"), Macromedia
("Macromedia"), IONA, NetPerceptions ("NetPerceptions") and Sybase, Inc.
("Sybase"). These are sublicensed to end users and either incorporated in or
sold as options to the Company's own products. License revenue from these
third-party products was insignificant and constituted less than 1% of total
software product license revenues in each of the years for 1998, 1997 and 1996.
The table below summarizes certain features of the Company's products:
- ------------------------------------ ------------------------------------------ -----------------------------------
Product Product Operating Platforms/RDBMS
Name Description
- ------------------------------------ ------------------------------------------ -----------------------------------
Relationship Management System: Full object-oriented environment for Sun Solaris, HP-UX, Microsoft
One-To-One Enterprise developing, testing, and tuning Windows NT operating systems
horizontal applications. One-To-One
Enterprise is sold with one
development-only One-To-One Command Oracle, Sybase, Informix,
Center and One-To-One Design Center Microsoft SQL Server RDBMS
- ------------------------------------ ------------------------------------------ -----------------------------------
Applications Products: Packaged applications offering vertical Sun Solaris, HP-UX, Microsoft
One-To-One Commerce functionality for electronic commerce, Windows NT operating systems
One-To-One Financial online financial services and knowledge
One-To-One Knowledge management
Oracle, Sybase, Informix,
Microsoft SQL Server RDBMS
- ------------------------------------ ------------------------------------------ -----------------------------------
Deployment System: Full environment for deployment of Sun Solaris, HP-UX, Microsoft
One-To-One Enterprise production application Windows NT operating systems
Oracle, Sybase, Informix,
Microsoft SQL Server RDBMS
- ------------------------------------ ------------------------------------------ -----------------------------------
Deployment System: Full environment for deployment of Sun Solaris, HP-UX, Microsoft
One-To-One Applications production applications Windows NT operating systems
Oracle, Sybase, Informix,
Microsoft SQL Server RDBMS
- ------------------------------------ ------------------------------------------ -----------------------------------
One-To-One Design Center PC-based application enabling Windows 95 operating system
application developers and Web authors
to quickly and easily build dynamic Web
page templates
- ------------------------------------ ------------------------------------------ -----------------------------------
One-To-One Command Center PC-based application enabling business Windows 95 operating system
managers to monitor state of Web
applications, interactively change
business rules in real time, and
generate reports
- ------------------------------------ ------------------------------------------ -----------------------------------
One-To-One Publishing Center Browser-based Any browser on the client; Sun
application enabling content developers Solaris, HP-UX, Microsoft Windows
and editors to manage the publishing NT on the server
One-To-One Instant Publisher of new content to the Web site; optional
tool for causal publishers
- ------------------------------------ ------------------------------------------ -----------------------------------
12
BroadVision Professional Services
The Company's Worldwide Professional Services Organization ("WPSO") provides
a broad range of consulting services in support of BroadVision's total product
line. The Company's WPSO provides comprehensive business application expertise,
technical know-how, and product knowledge to complement its products and to
provide total solutions to customer business requirements. A summary of the
consulting services provided by the Company is as follows.
Strategic Services provides business strategy and process consulting, assisting
customers in defining and planning profitable online businesses. Services
include in-depth needs analysis, customer segmentation, site story boarding, and
preparing detailed plans and procedures necessary to achieve timely and
successful implementations of the Company's software products. Strategic
Services consulting is generally offered on a time and materials basis.
Interactive Services provides technical services for development of customized
BroadVision-based 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 is a group specializing in content management,
sourcing, workflow processes, and user-interface design. The group is made up of
One-To-One design experts and a variety of leading design houses. This unique
team combines years of interactive design and marketing experience to build
purposeful user-interfaces that meet customers pre-defined goals. Content and
Creative Services consulting is generally offered on a time and materials basis.
Education Services are offered to customers either at the Company's 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.
Technical Support includes telephone support and upgrade rights to new releases
(inclusive of patch releases as necessary) and product enhancements, as provided
under the Company's standard maintenance agreement. 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.
Customers and Markets
The Company has licensed its product to over 250 customers, including
approximately 70 partners worldwide. The types of applications being developed
by licensees using BroadVision software include product merchandising, retail
financial services, and corporate knowledge management for employees, partners,
and customers. As of December 31, 1998, BroadVision products were commercially
deployed in over 110 live web sites. The Company's target customers include
Global 2000 organizations that are at the forefront of building innovative
Internet applications to increase revenues and reduce operational costs. During
1998, no customer accounted for more than 10% of the Company's total revenues.
In 1997, software license and service revenues from one customer accounted for
approximately 11% of the Company's total revenues and during 1996 one customer
accounted for 10% of the Company's total revenues.
The market for the Company's products and services continues to evolve
rapidly. As is typical for new and rapidly evolving industries, demand and
market acceptance for recently introduced products and services are subject to a
high level of uncertainty, especially where, as is true of the Company's
product, acquisition of the product requires a large capital commitment or other
significant commitment of resources. With respect to the Company, this
uncertainty is compounded by the risks that consumers and enterprises will not
adopt electronic commerce and knowledge management and that an appropriate
infrastructure necessary to support increased commerce and communication on the
Internet will fail to develop, in each case, to a sufficient extent and within
an adequate time frame to permit the Company to succeed.
13
Adoption of electronic commerce and knowledge management, particularly by
those individuals and enterprises that have historically relied upon traditional
means of commerce and communication, will require a broad acceptance of new and
substantially different methods of conducting business and exchanging
information. Moreover, the Company's products and services involve a new
approach to the conduct of online business and, as a result, intensive marketing
and sales efforts may be necessary to educate prospective customers regarding
the uses and benefits of the Company's products and services in order to
generate demand for the Company's systems. For example, enterprises that have
already invested substantial resources in other methods of conducting business
may be reluctant or slow to adopt a new approach that may replace, limit, or
compete with their existing systems. Similarly, individuals with established
patterns of purchasing goods and services may be reluctant to alter those
patterns or may otherwise be resistant to providing the personal data which is
necessary to support the Company's consumer profiling capability.
The Company has targeted a number of markets that it believes to be
especially conducive to one-to-one relationship management applications. These
markets, identified in the table below, have historically been characterized by
early adoption of online technology or could otherwise benefit from providing
significant interactive service to their end-user customers.
- ---------------------- -------------------------- ---------------------- ---------------------------------------------
Target Industry Sample Applications Sample Customers Benefits of BroadVision Solutions
- ---------------------- -------------------------- ---------------------- ---------------------------------------------
Financial services Home banking Argentaria Investment and insurance content targeted
and insurance Online brokerage Credit Suisse based on profiles of visitors
Obtaining information on Hartford Nationwide service can be locally targeted
and selecting: USAA Low-cost distribution channel
- Loans Tremendous cross-selling and up selling
- Mutual funds opportunity.
- Insurance Secure and high performance online
transactions
- ---------------------- -------------------------- ---------------------- ---------------------------------------------
High technology & Knowledge management The Baan Company Ability to disseminate large amounts of
manufacturing Business-to-business Hewlett-Packard knowledge/information in a personalized way
purchasing Macromedia based on purchaser's profile
Oracle Maintain and make available up-to-date
Xerox information related to complex purchasing
decisions
Supports purchase orders, Visa purchasing
cards, volume discounts, price locks, custom
pricing schedules
- ---------------------- -------------------------- ---------------------- ---------------------------------------------
Retail and Online shopping Cyberian Outpost Creation of branded communities based on
Distribution Interactive catalogues Electronic Arts profiles of visitors
Fingerhut Online, real-time control of business
The Good Guys rules, such as pricing and promotions by
RS Components content providers
Reduced transaction costs of direct
purchases
- ---------------------- -------------------------- ---------------------- ---------------------------------------------
Travel and leisure Reservations Air Miles Provide travel planning advice and
Travel planning American Airlines transaction services without agents or
Brand projection, Thomas Cook other intermediaries
loyalty programs, and Opportunity to cross-sell or up sell
affinity marketing services in addition to basic travel
reservations based on user profiles
- ---------------------- -------------------------- ---------------------- ---------------------------------------------
Telecommunications Commerce: Belgacom Selective sharing of visitor profiles
Business-to-business and Hong Kong Telecom between aggregators and content providers
business-to-consumer JiangSu Telecom Online, real-time control of business
Online services Telus Advanced rules, such as pricing and promotions.
Self-service (call Communications
centers) Vodafone
- ---------------------- -------------------------- ---------------------- ---------------------------------------------
Media and publishing Purchasing digital media Grolier Ability to price digital products and
Knowledge management Meta Group services in real time
Milwaukee Journal Dynamically target relevant information to
Sentinel individuals
Singapore Post
Virgin.net
- ---------------------- -------------------------- ---------------------- ---------------------------------------------
Application Service Hosting services Debis Systemhaus Extend BroadVision solutions to mid-tier
Providers bundling packaged Metronet market
application software and Servi Banca BroadVision publishing tools enable remote
complex Web site Usinternetworking publication to hosted Web sites
management as turnkey US Web
service
- ---------------------- -------------------------- ---------------------- ---------------------------------------------
14
Sales and Marketing
The Company markets its products primarily through a direct sales
organization with operations in North America, Europe, and Asia/Pacific. On
December 31, 1998, the Company's direct sales organization included 95 sales
representatives, managers, applications consultants, and pre-sales support and
post-sales support personnel. The Company has a sales office at its headquarters
in Redwood City, California and has North American sales offices in Atlanta,
Boston, Chicago, Dallas, Los Angeles, Minneapolis, and New York City, and
established a sales and service office in Washington DC for the US Federal
Government. The Company has subsidiaries in France, Germany, the Netherlands,
Switzerland, the United Kingdom, Japan, and Hong Kong and a sales office in
Singapore.
A component of the Company's strategy is continued expansion of its
international activities. The Company intends to broaden its presence in
international markets by expanding its international sales force and by entering
into additional distribution agreements. The Company also contracts with
resellers and commissioned agents in North America, South America, Europe, and
Asia. Although the Company generates leads from many sources, the majority of
the Company's leads have come from press articles discussing the Company's
products and customers implementing one-to-one relationship management
applications. Initial sales activities typically include a demonstration of
BroadVision One-To-One capabilities at the prospect's site, followed by one or
more detailed technical reviews, often presented at the Company's headquarters.
The sales process usually involves a collaboration with the prospective customer
in order to specify the scope of the application. The Company's professional
services organization typically plays a key role in helping customers to design,
and then develop, their applications.
The Company's marketing efforts are targeted at product strategy development
and product management; building market awareness through press and analysts;
producing and maintaining marketing information and sales tools; generating and
developing customer leads; and sourcing and managing relationships with systems
integrators, value-added resellers, creative design and advertising agencies,
and technology partners. As of December 31, 1998, 26 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 the Company's Web site.
The license of the Company's software products is often an enterprise-wide
decision by prospective customers, requiring the Company to engage in a lengthy
sales cycle to provide a significant level of education to prospective customers
regarding the use and benefits of the Company's products. In addition, the
implementation of the Company's products involves a significant commitment of
resources by the customers or by the Company's WPSO consultants over an extended
period of time. As a result, the Company's sales and customer implementation
cycles are subject to a number of significant delays over which the Company has
little or no control. Delays in license transactions as a result of the lengthy
sales cycle or delays in customer production or deployment of a system could
have a material adverse effect on the Company's business, financial condition,
and operating results, and can be expected to cause the Company's operating
results to vary significantly from quarter to quarter.
Strategic Alliances
A significant element of the Company's sales strategy is to engage in
strategic business alliances to assist the Company in marketing, selling, and
developing customer applications. This approach is intended to increase the
number of personnel available to perform application design and development
services for the Company's customers; enhance the Company's market credibility,
increase the potential for lead generation and access to large customer
accounts; and provide additional marketing expertise in certain vertical
industry segments while providing technical expertise in the development of
reusable objects and templates. To date the Company has developed key strategic
business alliances with over 90 systems integration, design, consulting, and
other services organizations, including American Management Systems, Andersen
Consulting, Cambridge Technology Partners, Computer Sciences Corporation,
Context Integration, Concept 5, Daimler-Benz Information Systems AG (Debis),
Ernst & Young LLP, Gran Via Internet, NTT Data Corporation, Metamor Worldwide,
Sema Group plc, Siemens Business Services Gmbh and Co., and others.
15
Competition
The market for online interactive relationship management applications is
rapidly evolving, and intensely competitive. The Company expects competition to
persist and intensify in the future. The Company's primary competition comes
from in-house development efforts by potential customers or partners. The
Company's competitors also include other vendors of application software
directed at interactive commerce and financial services and Web content
developers engaged to develop custom software or to integrate other application
software into custom solutions. The Company currently encounters direct
competition from Edify Corporation ("Edify"), InterWorld Corporation
("InterWorld"), International Business Machines Inc. ("IBM"), Microsoft
Corporation ("Microsoft"), Open Market Inc. ("OMI"), and Vignette Corporation
("Vignette"), among others. Some of these competitors have longer operating
histories, and significantly greater financial, technical, marketing, and other
resources than the Company and thus may be able to respond more quickly to new
or changing opportunities, technologies, and customer requirements.
Also, current and potential competitors may have greater name recognition and
more extensive customer bases that could be leveraged, thereby gaining market
share to the Company's detriment. Such competitors may be able to undertake more
extensive promotional activities, adopt more aggressive pricing policies, and
offer more attractive terms to purchasers than the Company. Moreover, certain of
the Company's current and potential competitors, such as IBM and Microsoft, may
bundle their products in a manner that may discourage users from purchasing
products offered by the Company.
In addition, current and potential competitors have established or may
establish cooperative relationships among themselves or with third parties to
enhance their products. Accordingly, it is possible that new competitors or
alliances among competitors may emerge and rapidly acquire significant market
share.
The principal competitive factors affecting the market for the Company's
products are depth and breadth of functionality offered, ease of application
development, time required for application development, reliance on industry
standards, reliability, scaleability, maintainability, personalization and other
features, product quality, price, and customer support.
The Company believes it presently competes favorably with respect to each of
these factors. However, the Company's market is still evolving, and there can be
no assurance that the Company will be able to compete successfully with current
or future competitors, or that competitive pressures faced by the Company will
not have a material adverse effect on the Company's business, financial
condition, and operating results.
BroadVision Technology
The Company believes its advanced technology enables the delivery of robust,
scaleable, and innovative Internet relationship management solutions into the
market faster and at a lower cost than alternatives. The Company's technology
consists of the following key elements:
Architectural Design
The Company believes that the technical demands of interactive one-to-one
relationship management on the Internet require an architectural design that
stresses standards, openness, interoperability, and flexibility. The Company has
designed its current application system as an architectural solution for
building dynamic, scaleable, and extensible Internet applications. By
emphasizing reusable methods, separation of application logic, business rules,
and data, and adherence to open standards, the BroadVision One-To-One
applications family provides an efficient architecture for customers and
partners to build, modify, and control applications, as well as to integrate
them with external business systems. The Company believes this architecture also
provides a robust foundation on which the Company can rapidly develop new
products.
16
Adherence to Industry Standards
The Company has invested substantially in developing its architecture to
comply with CORBA, a standard for applications software design and development
widely adopted in the commercial software industry. Applications that are
CORBA-compliant can run on either single computers with one or more processors
or across large networks, allow replication and relocation of object servers to
improve system performance, are platform independent, and have strongly defined
Application Programming Interfaces through the use of the Interface Definition
Language specified by CORBA.
Through CORBA compliance, the Company's products are fully compatible with
other CORBA-based technologies, such as Java and JavaScript. In addition to
CORBA, the Company uses other widely accepted standards in developing its
products, including SQL (Structured Query Language) for accessing relational
database management systems ("RDBMSs"), CGI (Common Gateway Interface), and HTTP
(Hypertext Transfer Protocol) for Internet access, NSAPI (Netscape Application
Programming Interface) for access to Netscape's Internet servers, SSL (Secure
Socket Layer) for secure transmissions over networks, and the RC2 and MD5
encryption algorithms supplied by RSA Data Security, Inc. ("RSA"). BroadVision
One-To-One Enterprise can be operated in conjunction with RDBMSs provided by
Oracle, Informix Corporation ("Informix"), Microsoft, and Sybase.
Most of the Company's programs are written in C++ and Java, widely accepted
standard programming languages for developing object-oriented applications.
Application templates are written in JavaScript. Adherence to industry standards
provides compatibility with existing applications, enables ease of modification,
and reduces the need for software to be rewritten, thus protecting the
customer's investment.
N-Tier Architecture
BroadVision One-To-One Enterprise utilizes an N-tier architecture that
logically separates application presentation, business rules, and data. Between
each of these tiers are session manager and project adapter interface
technologies, described below, that establish seamless interoperability between
application components. This architecture partitions applications across:
* A front-end tier that manages the application presentation and interface to
Web site visitors;
* Application engine tier(s) that manage the one-to-one life cycle
activities--community, profiling, targeting, and transactions--and the
business rules that define the interactive characteristics and behavior of
one-to-one relationship management applications. Due to the
object-oriented design of this code and the reliance on CORBA, this code
can be distributed across multiple logical and physical processors, thus
enabling the N-tier design of the application; and
* A back-end tier that integrates underlying database management systems for
storing BroadVision One-To-One data with external business systems that
perform specialized relationship management functions, such as online
credit card authorization and payment handling, sales tax and shipping
computation, online and off-line order fulfillment, inventory management,
visitor demographic analysis, and data mining.
The Company believes this N-tier architecture offers significant advantages over
alternative approaches, including:
* Bandwidth, database, and platform independence;
* Modularity, to enable changes to be made to one area of an application with
minimal impact on other areas;
* The ability for business managers to define and control business rules in
real time without requiring programming changes to application logic; and
* The ability to support specialized "object adapters" that reduce time and
cost to integrate BroadVision One-To-One applications with existing
business systems, the ability to perform such integration with a minimum of
programming, and the ability to localize applications to different language
and currency requirements.
17
Session Manager
The Company has developed proprietary "session manager" technology designed
to manage the high volume of dynamic interactions that occur in online sessions
between many concurrent Web site visitors and a relationship management
application. The session manager enables three key activities:
* Maintaining context, or "state," 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;
* Interpreting application objects and templates at runtime, and retrieving
profile data and business rules to dynamically generate HTML that creates
content, Web pages, and interactions tailored to the needs and interests of
individual Web site visitors; and
* Enabling application scaleability 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.
Components and Application Templates
The Company believes that the costs and time associated with Internet
application development and maintenance can be substantially reduced with its
technology for object-oriented application development. This technology consists
primarily of customizable components and application templates. Utilized in
combination with the Company's structured development methodology, these
technologies are designed to help customers and partners create libraries of
reusable program components that increase application quality and reduce cost
and time-to-market of new and maintained applications. In addition, 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. The Company's consultants currently use these technologies to
develop application solutions for customers, and the Company's Education
Services Group offers training classes to customers and partners on the use of
components and application templates.
Product Development
The Company believes that its future success will depend in large part on its
ability to enhance the BroadVision One-To-One product family, develop new
products, maintain technological leadership, and satisfy an evolving range of
customer requirements for large-scale interactive online relationship management
applications. The Company's 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, the Company has 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.
As of December 31, 1998, there were 73 employees in the Company's product
development organization. The Company's research and development expenses were
$9,227,000, $7,392,000 and $4,985,000, for the years ended December 31, 1998,
1997 and 1996, respectively. To date, the Company has not capitalized any
software development costs as products are made available for general release
relatively concurrent with the establishment of technological feasibility. The
Company expects to continue to devote substantial resources to its product
development activities.
The information services, software, and communications industries are
characterized by rapid technological change, changes in customer requirements,
frequent new product and service introductions and enhancements, and emerging
industry standards. The introduction of products and services embodying new
technologies and the emergence of new industry standards and practices can
render existing products and services obsolete and unmarketable.
18
The Company's future success will depend, in part, on its ability to develop
leading technologies, enhance its existing products and services, develop new
products and services that address the increasingly sophisticated and varied
needs of its prospective customers, and respond to technological advances and
emerging industry standards and practices on a timely and cost-effective basis.
There can be no assurance that the Company will be successful in effectively
using new technologies, adapting its products to emerging industry standards,
developing, introducing, and marketing product and service enhancements, or new
products and services, or that it will not experience difficulties that could
delay or prevent the successful development, introduction, or marketing of these
products and services, or that its new product and service enhancements will
adequately meet the requirements of the marketplace and achieve market
acceptance.
If the Company is unable, for technical or other reasons, to develop and
introduce new products and services or enhancements of existing products and
services in a timely manner in response to changing market conditions or
customer requirements, or if new products and services do not achieve market
acceptance, the Company's business, financial condition, and operating results
will be materially adversely affected.
Intellectual Property and Other Proprietary Rights
The Company's success and ability to compete are dependent to a significant
degree on its proprietary technology. The Company provides its products to end
users generally under nonexclusive, nontransferable licenses during the term of
the agreement, which is usually in perpetuity. Under the general terms and
conditions of the Company's standard license agreement, the licensed software
may be used solely for internal operations pursuant to BroadVision's published
licensing practices.
The Company holds a patent on its core technology for personalized business
on the Internet. The United States Patent Office issued Patent 5,710,887 on
January 20, 1998 to the Company, covering certain elements of the BroadVision
One-To-One Application System. There can be no assurance that this patent would
survive a legal challenge to its validity or provide significant protection. On
December 11, 1998, in the Northern District of California, BroadVision filed a
lawsuit against Art Technology Group, Inc. ("ATG") . The complaint alleges that
ATG is infringing BroadVision's U.S. Patent No. 5,710,887 and seeks injunctive
relief and unspecified damages. On February 3, 1999, ATG filed an answer and
counterclaim against BroadVision in which ATG seeks declaratory judgment for
non-interference and declaratory judgment for invalidity of the patent.
The Company has registered "BroadVision" and applied for registration of
"BroadVision One-To-One" as trademarks in the United States. Although the
Company takes steps to protect its trade secrets, there can be no assurance that
misappropriation will not occur or that copyright and trade secret protection
will be available in certain countries.
The source code for the Company's proprietary software is protected both as a
trade secret and as a copyrighted work. The Company makes source code available
for certain portions of its products. In addition, some of the Company's
agreements with its customers contain provisions requiring release of source
code for limited, non-exclusive use by the customer in the event that the
Company ceases to do business or the Company fails to support its products.
The provision of source code may increase the likelihood of misappropriation by
third parties.
The Company's policy is to enter into confidentiality and assignment
agreements with its employees, consultants, and vendors and generally to control
access to and distribution of its software, documentation, and other proprietary
information. Notwithstanding these precautions, it may be possible for a third
party to copy or otherwise obtain and use the Company's software or other
proprietary information without authorization or to develop similar software
independently. Policing unauthorized use of the Company's products is difficult,
particularly because the global nature of the Internet makes it difficult to
control the ultimate destination or security of software or other data
transmitted. The laws of other countries may afford the Company little or no
effective protection of its intellectual property.
19
There can be no assurance that the steps taken by the Company will prevent
misappropriation of its technology or that agreements entered into for that
purpose will be enforceable. In addition, litigation such as the lawsuit against
ATG, may be necessary in the future to enforce the Company's intellectual
property rights, to protect the Company's trade secrets, to determine the
validity and scope of the proprietary rights of others, or to defend against
claims of infringement or invalidity. Such litigation, whether successful or
unsuccessful, could result in substantial costs and diversions of resources,
either of which could have a material adverse effect on the Company's business,
financial condition, and operating results.
The Company may, in the future, receive notices of claims of infringement of
other parties' trademark, copyright, and other proprietary rights. There can be
no assurance that claims for infringement or invalidity (or claims for
indemnification resulting from infringement claims) will not be asserted or
prosecuted against the Company. In particular, claims could be asserted against
the Company for violation of trademark, copyright, or other laws as a result of
the use by the Company, its customers, or other third parties of the Company's
products to transmit, disseminate, or display information over or on the
Internet.
Any such claims, with or without merit, could be time consuming to defend,
result in costly litigation, divert management's attention and resources, cause
product shipment delays, or require the Company to enter into royalty or
licensing agreements.
There can be no assurance that such licenses would be available on reasonable
terms, if at all, and the assertion or prosecution of any such claims could have
a material adverse effect on the Company's business, financial condition, and
operating results.
The Company relies upon certain software that it licenses from third parties,
including RDBMSs from Oracle and Sybase, object request broker software from
IONA, database access technology from Rogue Wave Software, Inc. ("Rogue Wave"),
and other software which is integrated with internally developed software and
used in the Company's software to perform key functions. In this regard, all of
the Company's services incorporate data encryption and authentication technology
licensed from RSA.
There can also be no assurance that the Company's third-party technology
licenses will continue to be available to the Company on commercially reasonable
terms, if at all. The loss or inability to maintain any of these technology
licenses could result in delays in introduction of the Company's products and
services until equivalent technology, if available, is identified, licensed, and
integrated, which could have a material adverse effect on the Company's
business, financial condition, and operating results.
Employees
As of December 31, 1998, the Company employed a total of 271 full-time
employees, including 121 in sales and marketing, 73 in product development, 50
in professional services and client support, and 27 in finance, administration,
and operations.
The Company believes that its future success is dependent on attracting and
retaining highly skilled personnel. Competition for such personnel is intense,
and there can be no assurance that the Company will continue to be able to
attract and retain high-caliber employees.
The Company's employees are not represented by any collective bargaining
unit. The Company has never experienced a work stoppage and considers its
employee relations to be good.
20
Executive Officers and Key Personnel
The executive officers and key personnel of the Company and their ages at
February 28, 1999 are as follows:
Name Age Position
---- --- --------
Pehong Chen...................... 41 Chairman of the Board, Chief Executive Officer and President
Randall C. Bolten................ 46 Chief Financial Officer and Vice President, Operations
Clark W. Catelain................ 51 Vice President, Engineering
Eric J. Golin.................... 39 Vice President of Worldwide Professional Services
Michael A. Kennedy............... 36 Vice President of Global Strategic Alliances
Giuseppe Kobayashi............... 43 Vice President and General Manager of Japan/Asia-Pacific Operations
Francois Stieger................. 49 Vice President and General Manager of European Operations
James W. Thanos.................. 50 Vice President and General Manager, Americas
Perry W. Thorndyke............... 49 Vice President, Business Development
Sandra J. Vaughan ............... 33 Vice President of Marketing
Pehong Chen has served as Chairman of the Board, Chief Executive Officer and
President of the Company since its 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 ("Gain"), 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 Chief Financial Officer and Vice President,
Operations, of the Company since September 1995. 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 Corporation, 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 Vice President, Engineering, of the Company
since June 1995. From 1989 to May 1995, Mr. Catelain served as the Senior Vice
President, Engineering of Gupta Corporation, a supplier of client/server
database products. Mr. Catelain received a B.S. in Mathematics and Computer
Science from Purdue University.
Eric J. Golin has served as Vice President of Worldwide Professional Services
of the Company since September 1997. From September 1994 to September 1997, Dr.
Golin served as Senior Architecture Engineer and later as Senior Director,
Engineering of the Company. From September 1993 to September 1994, Dr. Golin was
a principal architect for OpenVision Technology. From September 1989 to
September 1993, Dr. Golin was Assistant Professor of Computer Science at the
University of Illinois at Champaign-Urbana. Dr. Golin received an B.S., M.S.,
and a Ph.D. in Computer Science from Brown University.
Michael A. Kennedy has served as Vice President, Global Strategic Alliances,
since September 1997. From September 1995 to August 1997, Mr. Kennedy served as
Senior Director, Marketing of the Company. From August 1993 to August 1995, Mr.
Kennedy served as Director, New Media Business Development for Oracle
Corporation, supplier of database software. From December 1989 to July 1993, Mr.
Kennedy served as Senior Product Marketing Manager for Oracle Corporation. Mr.
Kennedy received a B.Sc. in Computer Science from the Aberdeen University,
Scotland.
21
Giuseppe Kobayashi has served as Vice President and General Manager of
Japan/Asia-Pacific Operations of the Company since January 1995. From 1994 to
the present, Mr. Kobayashi has also served as consultant to Wind River Systems,
Inc., a supplier of software development systems. During 1993, Mr. Kobayashi was
General Manager, Japan Operations, Gain Group at Sybase. During 1992, Mr.
Kobayashi was General Manager of Operations at Gain. From 1990 to 1992, Mr.
Kobayashi served as Managing Director of Asia Pacific Operations at Teradata
Corporation, a supplier of database software. Mr. Kobayashi holds a B.S. in
Computer Science from the University of San Francisco.
Francois Stieger has served as Vice President and General Manager of European
Operations of the Company since January 1996. From July 1994 to December 1995,
Mr. Stieger was employed as Senior Vice President, Europe and Middle East, for
OpenVision Technologies, Inc., a supplier of distributed systems management
products and services. From 1993 to 1994, Mr. Stieger served as Vice President,
Europe of the Gain Division of Sybase. From 1987 to 1992, Mr. Stieger served as
Vice President, Europe, Central and Southern region of Oracle, a supplier of
relational database software. Mr. Stieger holds a Diplome Universitaire De
Technologie in Mathematics and Mechanics from the University of Strasbourg.
James W. Thanos has served as Vice President and General Manager, Americas of
the Company since January 1998. 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. From January 1993 to May 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, Inc., a decision
support software company. Mr. Thanos holds a B.A. in International Relations
from Johns Hopkins University.
Perry W. Thorndyke has served as Vice President, Business Development for the
Company since May, 1998. From July 1997 to May 1998, Dr. Thorndyke served as
Vice President, Marketing of the Company. From August 1996 to July 1997, Dr.
Thorndyke served as Vice President, Business and Channel Development of the
Company. From February 1995 to January 1996, Dr. Thorndyke served as a
management consultant to the Vice President, Marketing for Quintus Corporation,
a supplier of client/server solutions for customer information management. From
February 1994 to January 1995, Dr. Thorndyke served as a management consultant
on technology strategy for customer information management systems to
independent software vendors and user organizations. From May 1992 to January
1994, Dr. Thorndyke served as Vice President and Division Manager for retail
banking systems at Wells Fargo Bank. From 1990 to May 1992, Dr. Thorndyke served
as Director of Marketing and Business Development at Metaphor Computer Systems,
a supplier of client/server software applications for PC-based support decision
products. Dr. Thorndyke received a B.A. in Computer and Information Sciences
from Yale University and a Ph.D. in Cognitive Psychology from Stanford
University.
Sandra J. Vaughan has served as Vice President, Marketing for the Company
since May, 1998. From June 1996 to April 1998, Ms. Vaughn served as Senior
Director and later as Vice President, Corporate Marketing of the Company. From
1993 to 1996, Ms. Vaughan served as Group Director, North America Field
Marketing of Sybase. From 1989 to 1993, Ms. Vaughn served as Director, Customer
Programs of Oracle Corporation. Ms. Vaughan received a BS Degree from the
University of California, Davis.
ITEM 2. PROPERTIES
The Company's principal administration, research and development, sales,
consulting, and support facilities are located in Redwood City, California,
where the Company occupies approximately 60,000 square feet pursuant to a lease
that expires in 2007. During March 1999, the Company entered into an operating
lease agreement through December 2007 for an additional 55,000 square feet of
office space adjacent to its corporate headquarters building in Redwood City,
California.
22
The Company also rents space in various cities to support its sales and field
support activities, including Atlanta, GA; Newton, MA; Schaumburg, IL; Dallas,
TX; Ashburn, VA; Irvine, CA; Bethesda, MD; New York, NY; Amersfoort, The
Netherlands; Courbevoie, France; Munich, Germany; WanChai, Hong Kong; Tokyo,
Japan; Wheellock Place, Singapore; Bottmingen, Switzerland; Berkshire, England;
Madrid, Spain; and Koeln, Germany. The Company believes that its existing
facilities are adequate to meet its needs for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
On December 11, 1998, BroadVision filed a lawsuit against Art Technology
Group, Inc. ("ATG") in the Northern District of California. The complaint
alleges that ATG is infringing BroadVision's U.S. Patent No. 5,710,887 and seeks
injunctive relief and unspecified damages. On February 3, 1999, ATG filed an
answer and counterclaim against BroadVision in which ATG seeks declaratory
judgment for non-interference and declaratory judgment for invalidity of the
patent.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "BVSN." Public trading of the Common Stock commenced on June 26, 1996.
Prior to that, there was no public market for the Common Stock. As of March 12,
1999, there were approximately 9,845 holders of record of the Company's Common
Stock. For the periods indicated, the following table sets forth the Nasdaq
National Market high and low sale price per share of BVSN Common Stock.
High Low
--------------- ----------------
1998
Fourth Quarter $44.25 $9.25
Third Quarter $29.50 $10.06
Second Quarter $25.13 $14.75
First Quarter $19.00 $6.00
1997
Fourth Quarter $8.69 $5.88
Third Quarter $7.38 $5.00
Second Quarter $9.13 $4.38
First Quarter $10.38 $7.50
1996
Fourth Quarter $9.06 $6.56
Third Quarter $8.38 $5.38
Second Quarter (from June 26, 1996) $7.13 $6.88
The Company has never declared or paid cash dividends on its Common Stock,
and it is the Company's present intention to retain earnings to finance the
expansion of its business. In addition, the Company's credit facility with its
commercial lender contains certain covenants which may limit the Company's
ability to pay cash dividends.
23
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 in this
Form 10-K. Historical results are not necessarily indicative of the results to
be expected in the future.
Years Ended December 31,
-----------------------------------------------------------------------------------
1998 1997 1996 1995 1994
-----------------------------------------------------------------------------------
Statement of Operations Data: (in thousands, except per share data)
Revenues:
Software licenses $ 36,067 $ 18,973 $ 7,464 $ - $ -
Services 14,844 8,132 3,418 540 -
------------------ --------------- --------------- --------------- ---------------
Total revenues 50,911 27,105 10,882 540 -
Cost of revenues:
Cost of license revenues 1,001 1,664 330 - -
Cost of services revenues 8,704 4,284 2,164 249 -
------------------ --------------- --------------- --------------- ---------------
Total cost of revenues 9,705 5,948 2,494 249 -
------------------ --------------- --------------- --------------- ---------------
Gross profit 41,206 21,157 8,388 291 -
Operating expenses:
Research and development 9,227 7,392 4,985 2,575 748
Sales and marketing 26,269 18,413 12,066 1,348 512
General and administrative 3,786 2,990 2,034 846 511
Total operating ------------------ --------------- --------------- --------------- ---------------
expenses 39,282 28,795 19,085 4,769 1,771
------------------ --------------- --------------- --------------- ---------------
Operating income (loss) 1,924 (7,638) (10,697) (4,478) (1,771)
Other income and taxes, net 2,115 265 552 160 101
================== =============== =============== =============== ===============
Net income (loss) $ 4,039 $ (7,373) $ (10,145) $ (4,318) $ (1,670)
================== =============== =============== =============== ===============
Basic earnings (loss) per $ 0.17 $ (0.36) $ (0.54) $ (0.36)
share
=============================== ================================== =============== ===============
Diluted earnings (loss) per $ 0.16 $ (0.36) $ (0.54) $ (0.36)
share
=============================== ================================== =============== ===============
Shares used in per share computations:
================================== =============== ===============
Basic 23,346 20,208 18,815 11,976
================================== =============== ===============
Diluted 25,653 20,208 18,815 11,976
================================== =============== ===============
December 31,
-----------------------------------------------------------------------------------
1998 1997 1996 1995 1994
-----------------------------------------------------------------------------------
Balance Sheet Data: (in thousands)
Cash and cash equivalents $ 61,878 $ 8,277 $ 17,608 $ 4,311 $ 808
Working capital 64,320 11,485 18,258 3,916 2,208
Total assets 101,562 26,539 26,714 5,857 2,640
Long-term obligations 3,245 3,081 587 593 -
Accumulated deficit (19,603) (23,642) (16,269) (6,124) (1,806)
Total stockholders' equity 81,809 15,121 21,016 4,254 2,526
24
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 in this Form 10-K. Any such forward-looking
statements speak only as of the date such statements are made.
Overview..............................................................25
Statement of Operations as a Percent of Total Revenues................26
Results Of Operations.................................................26
Revenues............................................................26
Cost of revenues....................................................29
Operating expenses and other income, net............................30
Income taxes........................................................32
Liquidity and capital resources.....................................33
Quarterly Results of Operations.......................................34
Recent Accounting Pronouncements......................................35
Risk Factors..........................................................36
Overview
BroadVision, Inc. develops, markets and supports fully integrated large scale
application software solutions exclusively designed to manage one-to-one
relationships for the extended enterprise. The Company's total end-to-end
solutions provide businesses with a competitive advantage by enabling them to
capitalize on the Internet as a unique platform to enhance commerce, provide
critical self-service functions, and deliver highly specialized information to
customers, suppliers, distributors, employees, or any other constituent of the
extended enterprise through real-time interactive one-to-one relationships.
The BroadVision One-To-One product family allows businesses to tailor Web
site content to the needs and interests of individual users by personalizing
each visit on a real-time basis. BroadVision One-To-One applications achieve
this result by interactively capturing Web site visitor profile information and
targeting organized enterprise content to each visitor based on easily
constructed business rules.
The Company believes the benefits of these applications include enhanced
customer satisfaction and loyalty, increased business volumes, reduced costs to
service customers and execute transactions, as well as enhanced employee
productivity.
The Company sells its products and services worldwide through a direct sales
force, independent distributors, value-added resellers, and system integrators.
It also has a global network of strategic business relationships with key
industry platform and Web developer partners. To date, the Company has signed
business alliances with over 90 systems integration, design, consulting, and
other services organizations worldwide, which has expanded the Company's sales
and support infrastructure and post-sales implementation capabilities while
broadening market awareness for the Company.
The Company also places a strategic emphasis on developing technology
alliances in order to ensure that the Company's products are based on industry
standards and the Company is positioned to take advantage of current and
emerging technologies. The benefits of this approach include enabling the
Company to focus on its core competencies while reducing time to market and
simplifying the task of designing and developing applications by both the
Company and its customers.
25
STATEMENT OF OPERATIONS AS A PERCENT OF TOTAL REVENUES
The following table sets forth certain items reflected in the Company's
consolidated statements of operations expressed as a percent of total revenues
for the periods indicated.
Years Ended December 31,
-------------------------------------------
1998 1997 1996
-------------- -------------- --------------
Revenues:
Software licenses 70.8% 70.0% 68.6%
Services 29.2 30.0 31.4
-------------- -------------- --------------
Total revenues 100.0 100.0 100.0
Cost of revenues:
Cost of license revenues 2.0 6.1 3.0
Cost of services revenues 17.1 15.8 19.9
-------------- -------------- --------------
Total cost of revenues 19.1 21.9 22.9
-------------- -------------- --------------
Gross profit 80.9 78.1 77.1
Operating expenses:
Research and development 18.1 27.3 45.8
Sales and marketing 51.6 67.9 110.9
General and administrative 7.4 11.1 18.7
-------------- -------------- --------------
Total operating expenses 77.1 106.3 175.4
-------------- -------------- --------------
Operating income (loss) 3.8 (28.2) (98.3)
Other income, net 4.0 1.0 5.1
-------------- -------------- --------------
Income (loss) before income taxes 7.8 (27.2) (93.2)
Income tax benefit 0.1 - -
-------------- -------------- --------------
Net income (loss) 7.9% (27.2)% (93.2)%
============== ============== ==============
RESULTS OF OPERATIONS
Revenues
The Company's revenues are derived from software license fees and fees
charged for its services.
The Company recognizes software license revenues when a non-cancelable
license agreement has been signed 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.
Revenues allocated to software license fees, in general, are recognized upon
consummation of the sale and the portion allocated to maintenance and support is
recognized over the contracted period, which is typically one year.
The Company's professional services include its Strategic Services Group, its
Interactive Services Group, its Content and Creative Services Group, its
Education Services Group, and its Technical Support Group. Maintenance fees
relating to technical support and upgrades are recognized ratably over the
contracted period. Consulting related services are typically recognized as
services are performed.
26
A summary of the Company's software and services revenues by geographic
region for the periods indicated is as follows :
(in thousands)
-----------------------------------------------------------------------------------------------------
Years Ended
December 31, Software % Services % Total %
----------------------------------------------------------------------------------------------------