June 6, 2007
Mail-Stop 4561
Mr. John W. Combs
Chairman, President and Chief Executive Officer
ShoreTel, Inc.
960 Stewart Drive
Sunnyvale, CA 94085
Re: ShoreTel, Inc.
Amendment No. 2 to Form S-1
Filed May 25, 2007
File No. 333-140630
Dear Mr. Combs:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
The purpose of our review process is to assist you in your
compliance with the applicable disclosure requirements and to
enhance
the overall disclosure in your filing. We look forward to working
with you in these respects. We welcome any questions you may have
about our comments or any other aspect of our review. Feel free
to
call us at the telephone numbers listed at the end of this letter.
Form S-1
Post-Contractual Support, page 48
1. We note your response to prior comment 4. Based on your
disclosure, please confirm to us that you deferred the revenue
related to the few instances in which you created a specified
upgrade
or enhancement rights. If not, tell us and disclose how you
determined that these instances had and will not have a material
impact to your results of operations or financial statements.
Valuation of Common Stock, page 51
2. We note you response to prior comment 6. You disclose that the
"change in value between the valuation dates was essentially on a
straight-line basis." The deemed fair value of the common stock
should be based on the fair value and the straight-line
interpolations of the enterprise value between the valuation dates
is
not appropriate. Please revise or advise.
Note 1. Product Revenue, page F-9
Note 1. Post-Contractual Support, page F-9
3. We note your response to prior comment 12 and 14. Please tell
us
in more detail the factors you considered in concluding that you
do
"not have situations in which you have established fair value for
all
delivered elements in a bundled arrangement." In this regard,
please
tell us the following:
* We understand that you have established VSOE of fair value for
PCS,
training and installation services. We also understand that VSOE
of
fair value for the PCS is based on a percentage of the established
product list price. Please confirm to us that the percentage is
fixed based on each product and for each term of PCS. If not,
tell
us how the percentage is determined and why it is different for
each
product and each term of PCS. Confirm to us that the established
product list price is standard for all resellers and not adjusted
based on the reseller. Also, tell us how you determined the VSOE
of
fair value for the training and installation services.
* How you derive the VSOE of fair value for PCS in the initial
bundled arrangement from PCS renewal amounts which are offered in
one, three and five year terms. Citing typical terms in an
arrangement, please provide us with hypothetical calculations of
how
you allocate a portion of the consideration received to
undelivered
PCS based on your approach.
* Why the established product list price is not considered the
VSOE
of fair value for the delivered elements.
* How you considered the limited sales of products in concluding
that
you have no established VSOE of fair value for the delivered
elements.
* We note that the actual prices given to resellers depend on
their
volume and customer satisfaction metrics, including your strategic
considerations. Tell us your consideration of the appropriateness
of
stratifying these resellers based on similar prices and customers
in
determining the VSOE of fair value for the delivered elements,
products.
4. We note your response to prior comment 13 and have the
following
comments.
* We understand that your channel partners receive reimbursements
for
cooperative marketing costs meeting specified criteria. Please
tell
us in detail the specified criteria that must be met. Also, tell
us
whether the reimbursements are limited to specific advertising,
trade
shows and other related sales and marketing activities. If so,
tell
us the terms of the reimbursements for these activities.
* Please tell us how you are able to determine and identify the
benefit that you received as a result of your channel partners`
advertising, trade shows and other related sales and marketing
activities.
* Please tell us how you concluded that the fair value of the
benefit
is equal to 50% of the sales and marketing costs incurred by your
channel partners.
1997 Stock Option Plan, page 87
5. This section states that there are 31,244,685 options
outstanding
at 3/31/07. We note that on page 95, in the second bullet, that
there are 32,494,685 options outstanding. Please reconcile or
advise.
Exhibits
6. Please file your legal opinion in the next pre-effective
amendment.
* * * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities Act
of
1933 and that they have provided all information investors require
for an informed investment decision. Since the company and its
management are in possession of all facts relating to a company`s
disclosure, they are responsible for the accuracy and adequacy of
the
disclosures they have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
??should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
??the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
??the company may not assert staff comments and the declaration of
effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement has access to all information you provide to the staff
of
the Division of Corporation Finance in connection with our review
of
your filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
You may contact Kathryn Jacobson at (202) 551-3365 or Dean
Suehiro at (202) 551-3384 if you have questions regarding comments
on
the financial statements and related matters. Please contact
Michael
Clampitt at (202) 551-3434 or me at (202) 551-3418 with any other
questions.
Sincerely,
William Friar
Senior Financial Analyst
Financial Services Group
CC: Jeffrey Vetter, Esq.
Fenwick & West LLP
Silicon Valley Center
801 California Street
Mountain View, CA 94041
Phone (650) 988-8500
Facsimile (650) 938-5200
Mr. John W. Combs
ShoreTel, Inc.
Mr. John W. Combs
ShoreTel, Inc.
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