Filed by Extended Systems, Incorporated
Pursuant to Rule 425 under the Securities Act of 1933
And deemed filed pursuant to Rule 14a-12
Under the Securities Exchange Act of 1934
Subject Company: ViaFone, Inc.
Commission File No. 000-23597
THE FOLLOWING IS A TRANSCRIPT FROM THE CONFERENCE CALL ON MAY 28, 2002 REGARDING
THE PROPOSED TRANSACTION:
Extended Systems, Inc. (XTND) - Special Investor Call
Tuesday, May 28, 2002 - 5:30 PM ET
THE OPERATOR: Good afternoon, ladies and gentlemen, and welcome to the Extended
Systems Incorporated Special Investor Call. At this time, all participants are
in a listen-only mode. A brief question-and-answer session will follow the
formal presentation. If anyone should require operator assistance during the
conference, please press star zero on your telephone keypad. As a reminder, this
conference is being recorded.
I would now like to turn the conference over to your host, Ms. Karla Rosa. Thank
you, Ms. Rosa; you may begin.
KARLA ROSA: Thank you. Good afternoon, and thank you for joining us this
afternoon for Extended Systems' Special Investor Conference Call to discuss our
signing of a definitive agreement to acquire ViaFone, a Brisbane,
California-based company that provides a real-time, mobile platform and
out-of-the-box mobile applications to the enterprise.
A press release regarding the acquisition ran at approximately 4:50 Eastern Time
this afternoon on BUSINESS WIRE and is also available on the Internet at
extendedsystems.com.
Steve Simpson, Extended Systems' President and Chief Executive Officer, will
start today's call by sharing his thoughts and observations on the acquisition
of ViaFone and how it helps us achieve our strategic objectives. Russ McMeekin,
ViaFone President and CEO, will follow Steve. He'll provide additional remarks
about ViaFone's business, customers and partners and how this transaction
benefits ViaFone stakeholders. I will then take you through the financial
details of the deal. We will complete the call by taking your questions.
Before we begin, I would like to remind you that today's conference call will
include forward-looking statements, including statements regarding potential
benefits of the acquisition of ViaFone. These statements are subject to risks
and uncertainties that may cause actual events and results to differ materially.
These risks and uncertainties are discussed in detail in Extended Systems' SEC
filings, including our fiscal 2001 Form 10-K and our Form 10-Qs for fiscal 2002,
and our press release, which we released this afternoon in connection with the
signing of the definitive agreement. Additionally, we intend to file an S-4
registration statement in connection with the transaction that will include
further detailed discussion of these risks and uncertainties. Statements
regarding our business outlook are based
Extended Systems, Inc. - Special Investor Call - 5/28/02 1
on current expectations. To adhere to the SEC's guidance on fair and open
disclosure, we have made this conference call publicly available by a
teleconference and Web rebroadcast.
Now, I'll turn the call over to Steve Simpson, Extended Systems' President and
Chief Executive Officer. Steve.
STEVE SIMPSON: Thank you, Karla, and thank you all for joining us this
afternoon. We're really excited about joining forces with ViaFone. Let me tell
you why. Today's announcement that Extended Systems has reached a definitive
agreement to acquire ViaFone is an important step in our execution of our mobile
and wireless strategy.
The acquisition will strengthen our mobile and wireless solution capabilities,
and the acquisition will add valuable assets to our portfolio. It is expected to
expand our position in the market and will accelerate our strategy to provide a
comprehensive mobile platform for our enterprise customers. We will be able to
provide a single solution to meet global mobility needs with complementary
technology, products and services, which will consist of Extended Systems'
synchronization and device management solutions, ViaFone's real-time and mobile
applications and tools, Extended Systems' worldwide operations, and ViaFone's
professional services organization. Together, we have a strong customer base of
global 2000 companies and partnerships with world leaders in business solutions.
The acquisition will expand and complement Extended Systems' product line,
allowing us to provide a broad and complete set of mobile products and services
to our global 2000 customers.
Together, we will provide mobile server functionality and out-of-the-box mobile
applications for field sales, field service, mobile professional, coupled with
ViaFone's complementary mobile technology for building a complete mobile
solution. ViaFone brings strategic alliances with leading system integrators and
blue-chip customers, including EDS, HP, WebMethods, FedEx, (indiscernible),
CIBC, CSFB, Bell, etcetera.
The ViaFone professional services team are experts at building mobile enterprise
applications. For ViaFone, Extended Systems will expand ViaFone's ability to
sell, support and market products to worldwide companies. Additionally, Extended
Systems provides leading synchronization and mobile data management technology
and products in an enterprise customer base, including over 2,000 global
customers, such as Airbus, Deutsche Bank, Echo Labs, Daimler Chrysler, Reuters,
British Airways, EDS, and 3M.
Extended Systems has strategic alliance relationships with leading mobile
infrastructure companies, such as IBM, Ericsson, Compaq, Nokia, HP, Microsoft,
Handspring, Palm, Motorola, NEC, Sharp and Toshiba; international infrastructure
and network of offices, and European presence.
Completion of this acquisition will position us very strongly as the enterprise
- - as the enterprises are connecting mobile employees to enterprise systems to
improve overall competitiveness and business performance. The driving needs and
benefits include responding more accurately and efficiently to the customers,
enable anytime/anywhere productivity, improving integrity and visibility for
mobile data collection, increasing utilization of current e-business systems, by
extending access into the field for sales automation, ERP, CRM and e-mail
solutions.
Extended Systems has strong representation in the enterprise today. Enterprise
customers want a solution that is platform and device neutral. They want a
server-based synchronization platform to connect mobile devices to all of their
business applications, such as traditional legacy applications, ERP
applications, CRM applications, and some of the newer client server
applications.
Extended Systems, Inc. - Special Investor Call - 5/28/02 2
ViaFone together with Extended Systems will be able to provide this
comprehensive, mobile solutions benefit for corporate managers. Extended Systems
will offer a single server base, mobile architecture that will give CIOs a
platform with which to integrate their current application infrastructure,
supporting multiple platforms, groupware and devices, and by offering consistent
service delivery across platforms and lowering total cost of ownership through
centralized system management, software distribution, fewer APIs, and greater
choice of services and solution, our customers can reduce or contain costs while
improving the effectiveness and efficiencies of their workforce.
Today's announcement significantly strengthens our ability to reach our goals
and increase our leadership in the emerging mobile and wireless enterprise
arena. I would now like to turn the call over to Russ McMeekin for his thoughts
on today's announcement.
RUSS MCMEEKIN: Thanks, Steve. We also are very excited here at ViaFone. We
believe it represents a major next step for the partners, customers and
employees, as well as the investors of ViaFone. A bit about ViaFone - we're
first - we were founded in 1999. Our first product shipped was in Q1 2000,
recently acquired MobileQ, a Canadian-based company that brought us a number of
very strategic customers and additional revenue to the company. We raised $35
million from top brand-name investors, such as Redpoint Ventures, DFJ, RRE,
Partech, International and Pequat Capital, and we have two very key strategic
locations here in Brisbane, California, which will be a strong player for you
going forward, as well as up in Toronto as a result of the MobileQ acquisition.
So I'll turn it over to Karla, and perhaps you can give some thoughts.
KARLA ROSA: Okay, thank you, Russ. Let me summarize the major financial points
from today's announcement.
Under the terms of the agreement, all outstanding shares of ViaFone will be
exchanged for three million newly issued shares of Extended Systems' common
stock. The ViaFone options will not be assumed and will expire on the effective
date of the merger. We plan to issue new Extended Systems options to ViaFone
employees as part of our annual option-grant process, which normally occurs in
the fall.
Based on the average closing price of Extended Systems' stock for the five days
ending on May 24, 2002, the transaction values ViaFone at approximately 11.4
million on a fully diluted basis. Extended Systems will account for this
transaction using the purchase method of accounting. Of the three million newly
issued shares of Extended Systems' common stock that will be issued to the
holders of outstanding shares of ViaFone, 15 percent will be placed in an escrow
fund for a period of 12 months in order to satisfy any indemnity claims that may
arise under the terms of the definitive agreement. Additionally, approximately
84 percent of the total shares issued will be subject to lock-up agreements and
released from lock-up over a period of six to twelve months.
Completion of the transaction is subject to the approval of the stockholders of
Extended Systems and ViaFone, certain regulatory approvals, and other customary
closing conditions. The acquisition is expected to close in July or August, the
first quarter of our fiscal year 2003.
Our acquisition of ViaFone is not expected to impact our results for our fourth
quarter ending June 30, 2002. We continue to expect software revenue of $6.2 to
$6.7 million, sequential growth of 5 to 15 percent, and expect hardware revenue
of $250,000 to $300,000 in the fourth quarter. We also continue to expect to
incur an operating loss, including amortization and severance charges, but
excluding other unusual items of $700,000 to $1.1 million in the fourth quarter.
Extended Systems, Inc. - Special Investor Call - 5/28/02 3
Looking to what the deal brings to Extended Systems, based on a projecting
closing date of late July/early August, we expect ViaFone to contribute $8.5
million to $10 million of license and services revenues in fiscal year 2003.
Excluding the impact of any charge for in-process research and development, we
expect the transaction to be accretive to Extended Systems' operating income in
our fiscal year 2003 in the neighborhood of $300,000 to $400,000. This estimate
includes our estimate of severance charges expected to be incurred in combining
the two companies but excludes the impact of other unusual items, such as
in-process R&D.
As we discussed with you on our last conference call, we are expecting to see a
sequential decline in our net revenue in the first quarter of fiscal 2003 as a
result of normal summer seasonality resulted from expected lower levels of
business in Europe. The acquisition of ViaFone will partially offset this
decline; however, we continue to believe it's prudent to project a revenue
decline in the first quarter. We also expect to report an operating loss in the
first quarter of fiscal 2003, partially as a result of lower revenues and
partially from the impact of the ViaFone acquisition. We are projecting that our
integration efforts will be complete by the end of the first quarter and that we
will see operating efficiencies in the second quarter of fiscal 2003.
As a combined company, we continue to target profitability in the second quarter
of fiscal 2003 through a combination of software revenue growth and continued
control of our operating expenses. We will be providing additional guidance on
fiscal 2003, particularly our first quarter, in July when we report our results
for fiscal year 2002.
Moving on to cash, you may recall that we had approximately $4.6 million in cash
and cash equivalents as of March 31, 2002. Including the tax refund of $1.6
million, which we received in April, we continue to expect to generate between
$900,000 to $1.1 million in cash in the current quarter and expect to exit the
fourth quarter with $5.5 to $5.7 million in cash and cash equivalents. We expect
to add approximately $3 million in cash to the balance sheet when the ViaFone
transaction closes in the first quarter of fiscal 2003.
That concludes the formal part of today's call. I would now like to open the
call up to questions.
OPERATOR: Ladies and gentlemen, at this time, we will be conducting our
question-and-answer session. If you would like to ask a question, please press
star one on your telephone keypad. To remove your question from the queue,
please press star two. And for participants using speaker equipment, it may be
necessary to pick up your handset before pressing the star keys. Again, that's
star one to ask a question, and if you are using speakerphone, please pick up
your handset before pressing the star keys. And I'll pause for a brief moment.
Our first question comes from Mr. Matt Hoffman of SoundView. Please state your
question.
MATT HOFFMAN: Hi, Karla, Steve.
STEVE SIMPSON: Hi, Matt.
KARLA ROSA: Hi, Matt.
MATT HOFFMAN: And I guess Russ, too, right?
RUSS MCMEEKIN: Hey, Matt, yup.
Extended Systems, Inc. - Special Investor Call - 5/28/02 4
MATT HOFFMAN: Well, here's a couple of questions for you. Let's focus on the
product for a second. We talked about an out-of-the-box solution, especially on
the e-mail side, well, certainly for most business apps. But tell me more about
how this is going to get you the real-time out-of-the-box e-mail support for the
Extended Systems - you know, the Extended Systems platform, if you will.
STEVE SIMPSON: We might address the fact that today with the addition of
ViaFone's capability, they provide real-time e-mail capability today for a broad
range of platforms. In fact, Russ, maybe you can --
RUSS MCMEEKIN: The large Fortune 100 corporations here in the United States, we
have a large appointment in Japan, Canada and in Europe, as well as the device
agnostic solution, so we are able to offer this on PocketPC, Palm and RIM
devices. So we are a significant player in real-time e-mail, combined with
Extended Systems synchronized e-mail, makes us one of the leaders here.
MATT HOFFMAN: So what you were lacking was the off-line e-mail solution?
RUSS MCMEEKIN: You're saying "we" at ViaFone?
MATT HOFFMAN: "We" at ViaFone, yes.
RUSS MCMEEKIN: Yes, that's correct. In fact, as I said, as I may have mentioned
or certainly Steve mentioned, we've had a partnership for some time, so how
we've been fulfilling real-time and offline as a simultaneous solution to the
enterprise customers has been through our partnership. So, technically -- from a
technology point of view, nothing's different other than it's under one
ownership structure versus two companies that have been in the past.
MATT HOFFMAN: Okay.
STEVEN SIMPSON: What this really gives us, Matt, is, together, gives us a very
broad range of device support because the one-bridge architecture gives the
capability for very rapidly supporting new devices, it gives us WAP support,
which we didn't have before, as well as other devices, such as RIM, real-time
e-mail.
The other key thing is that we've talked about in the past, from a strategic
point of view, we believe that longer term, where the greatest ability or
opportunity for us to make a contribution to add value is in strategic
application deployment. Initially, what's been important to customers and
companies has been simply deploying PIM and e-mail kind of capabilities, but
where the real - and that'll always be important - but where they'll get
tremendous leverage and competitive advantage and increased productivity is in
strategic application deployment, and that's something that, you know, we did
the app for each acquisition a while back. But this is, we think, a much, much
bigger opportunity working with the ViaFone team, with ViaFone becoming part of
Extended Systems, because they are very focused on application deployment.
They've done some very exciting things in the pharmaceutical arena, and in
service arena, and in other arenas and have a platform that really lends itself
to that. And that's where we think the greatest opportunity is going forward in
the enterprise.
MATT HOFFMAN: Okay. Let's talk a little bit more about ViaFone. In terms of the
number of customers, the actual number of licenses that ViaFone has sold, if you
want to give them to me cumulatively or in the last calendar or fiscal year,
just give us an idea for the scale of their business and share with us the type
- - how much revenue they did in the past calendar or, again, fiscal year?
Extended Systems, Inc. - Special Investor Call - 5/28/02 5
KARLA ROSA: Sure, Matt. You know, if we look at ViaFone's results, including the
impact of their acquisition in MobileQ, their focus has been primarily on
working with large customers, such as Bell Mobility, Bell Canada, customers that
are doing large deployment of the software that MobileQ and ViaFone sell, so
they have a relatively small number of customers, currently under 20 actual
customers, with, you know, different levels of deployment among those customers.
In the last calendar year, the combined revenue for the MobileQ and ViaFone
business was just about $3.6 million in revenue. And, again, we are projecting
that for the fiscal year 2003 that ViaFone will contribute $8.5 to $10 million
of revenue to the combined company.
MATT HOFFMAN: Okay, now how many - you said there are 20 customers. Any idea of
the number of actual end-users, you know, using either ViaFone or MobileQ? I
don't know exactly how you would want to give me that information, just the
scale of the deployment of their technology.
KARLA ROSA: You know, I think that in those cases, if you look at the number of
licenses that those customers are deploying, it's a pretty large number, but I
can't give you the details on that right now, Matt.
STEVEN SIMPSON: They have - they have applications, also. Like, for example,
what they've done for Federal Express is a capability for individual users to
track packages using handheld devices. So in that case, it's a server-based
license for quite a number of users who'll come in and use that capability when
they have a package or packages to track.
MATT HOFFMAN: So that's more of the old transcoding business model that ViaFone
was working on for a while?
RUSS MCMEEKIN: No, the license relationship is between us and FedEx, or, in the
case of CIBC, us and CIBC. But there's no consumer license fees or things of
that nature. They are very large enterprise fees that they pay to us with
ongoing support maintenance contracts.
MATT HOFFMAN: Okay.
STEVEN SIMPSON: And, Matt, one of the things we're excited about with -- that
Russ and his team have been able to do is they've been able to, in those cases,
while it's a relatively small number of customers, they've been able to really
provide the value proposition for the line-of-business managers, and we believe
that's one of the key ways to really take the business forward. We've been very
successful, in Extended Systems' case, in working very effectively with IT
managers, but we believe to take it to the next step, you really have to be
providing the value proposition in the line-of-business team, and I think while,
again, it's a relatively small number that the ViaFone team has done, they've
been very successful with the line-of-business managers, and we want to build on
that.
MATT HOFFMAN: Okay. A couple other real quick questions. ViaFone's leading
investors?
STEVEN SIMPSON: Yeah, as I said, Redpoint Ventures, RRE, DFJ, Partech
International, and Pequat Capital.
MATT HOFFMAN: Okay. And then the final question for me -- cash burn for your
last calendar year?
KARLA ROSA: There was a significant amount of cash burned by ViaFone in the last
calendar year. That's really not relevant from a go-forward standpoint. There's
been a pretty dramatic change in the cost structure at ViaFone over the past six
to twelve months.
Extended Systems, Inc. - Special Investor Call - 5/28/02 6
You know, we do expect that we're going to see some additional cost cuts, you
know, primarily in the areas that you would expect to see operating
efficiencies, such as the G&A areas, some R&D, some sales and marketing areas.
We're really looking at this on a go-forward basis.
On the ViaFone side of the business, we expect in the first quarter that they
will use, you know, for the full quarter probably around $1.5 to $2 million in
cash, and with the cost synergies that we expect to implement in the first
quarter, we expect to see the cash burn be at a breakeven rate in the second
quarter of our fiscal year 2003.
MATT HOFFMAN: Okay, great. Thanks.
KARLA ROSA: Thanks, Matt.
STEVEN SIMPSON: Thanks, Matt.
OPERATOR: Again, ladies and gentlemen, if any further questions, please press
star zero - I'm sorry, star one on your touchtone keypad. And if you're using
speakerphone, please pick up the handset before pressing the star keys.
Our next question comes from Eddie Woo with CIBC. Please state your question.
EDDIE WOO: Hey, Steve, Karla, Russ, how're you doing?
KARLA ROSA: Good, Eddie, how are you?
STEVEN SIMPSON: Good. How are you, Eddie?
EDDIE WOO: Good, good. This question is for Russ and Karla. Last time we met
with Russ, ViaFone still had a significant amount of cash. Would any of that
come over to Extended Systems? I mean what would the disposition of that cash
be?
KARLA ROSA: As I mentioned on the call earlier, Eddie, we're expecting that at
the time that we close the transaction in the first quarter, we're expecting
that the ViaFone will add about $3 million in cash to the balance sheet.
EDDIE WOO: Okay, sorry. I missed that. I was getting off the bus.
KARLA ROSA: No problem.
EDDIE WOO: All right. Well, good. Thanks, guys.
RUSS MCMEEKIN: Thanks, Eddie.
KARLA ROSA: Thank you.
STEVEN SIMPSON: Thank you.
OPERATOR: Okay, Ms. Rosa, there are no further questions at this time.
Extended Systems, Inc. - Special Investor Call - 5/28/02 7
STEVEN SIMPSON: Okay, well, we very much thank you for joining us today. Sorry
for the short notice, but, of course, under the circumstances, we all understand
this is the way we have to do it.
As I said, we are extremely excited about bringing together the Extended Systems
team and the ViaFone team. We think it's a very complementary and synergistic
opportunity with two organizations that have very similar perspectives on really
working with the customers, understanding the customers' needs and meeting and
exceeding those needs. And so we are really, really excited about going forward
with the team because we think we are going to be able to bring a lot more value
to our enterprise customers. Thank you for calling in today.
(CONFERENCE CALL CONCLUDED)
END
FORWARD LOOKING STATEMENTS
This transcript contains forward-looking statements, including statements
regarding Extended Systems' market leadership, the execution of its strategy and
the impact and benefits of the proposed merger, including the ability of
Extended Systems to integrate ViaFone's capabilities and technology and expand
its product offerings, to accelerate Extended Systems' strategy and the delivery
of sales and service applications, to offer a single platform for mobile
information management, and to strengthen its competitive position. These
statements are subject to risks and uncertainties and assumptions.
All statements other than statements of historical fact are statements that
could be deemed forward-looking statements, including any statements of the
plans, strategies, and objectives of management for future operations, including
the execution of integration and restructuring plans and the anticipated timing
of filings, approvals, and closings related to the merger; any statements
concerning proposed new products, services, developments, or industry rankings;
any statements regarding future economic conditions or performance; any
statement of belief; and any statement of assumptions underlying any of the
foregoing.
The risks and uncertainties and assumptions referred to above include approval
of the transaction; approval of the merger by the ViaFone and Extended Systems
stockholders; any regulatory review and approval of the transaction; the need
for Extended Systems to successfully integrate Viafone's employees, products,
partners, customers, and operations; the need for the combined company to
successfully develop new products and services; overall economic conditions and
the level of information technology purchasing by existing and potential
customers; the success of key business relationships; continued growth in the
markets for the combined companies' products; the perceived and realized
benefits of mobile devices; the acceptance of specific industry-wide standards
and protocols; the risks associated with development of new products and product
enhancements; the impact of competitive products and pricing; and other risks as
detailed from time-to-time in Extended Systems' SEC filings, including its 2001
Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed in fiscal
2002.
Extended Systems, Inc. - Special Investor Call - 5/28/02 8
ADDITIONAL INFORMATION AND WHERE TO FIND IT
In connection with the proposed transaction, Extended Systems will file a
registration statement on Form S-4, including a proxy statement/prospectus, with
the Securities and Exchange Commission. Investors and security holders are
advised to read the registration statement, including the proxy
statement/prospectus, when they become available, because they will contain
important information about Extended Systems, ViaFone, and the proposed merger.
Investors should carefully read the proxy statement/prospectus before making any
voting or investment decisions. Investors and security holders may obtain a free
copy of the registration statement and the proxy statement/prospectus (when they
are available) and other documents filed by Extended Systems with the Securities
and Exchange commission at the Securities and Exchange Commission's website at
http://www.sec.gov/. Free copies of the registration statement (when they are
available) and other documents filed by Extended Systems with the Securities and
Exchange Commission may also be obtained from Extended Systems.
Extended Systems and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from Extended Systems' stockholders
in favor of the proposed transaction. Information regarding the interests of the
officers and directors of Extended Systems in the proposed merger will be set
forth in the proxy/statement prospectus, when it is available. In addition,
information regarding such officers and directors is included in Extended
Systems' Proxy Statement for its 2001 Annual Meeting of Stockholders filed with
the Securities and Exchange Commission on September 17, 2001. This document is
available free of charge at the Securities and Exchange Commission's website at
http://www.sec.gov/ and from Extended Systems.
Extended Systems, Inc. - Special Investor Call - 5/28/02 9