An Open Letter to the Shareholders, Customers and Strategic Partners of BakBone Software
17 Octubre 2005 - 8:34AM
PR Newswire (US)
SAN DIEGO, Oct. 17 /PRNewswire-FirstCall/ -- BAKBONE SOFTWARE (TSX:
BKB; PK: BKBO) publishes an open letter to shareholders, customers
and strategic partners from president and CEO, Jim Johnson. Dear
Fellow Stakeholders: While the past several months have been a
period of uncertainty for our shareholders, customers and strategic
partners, it has also been a time of growth and development with
BakBone continuing to outpace industry growth trends.
Notwithstanding the challenges we have endured over the past year
including the change in our independent auditors, as well as our
review of and change in a number of our financial and accounting
processes, I continue to have the utmost confidence in the Board of
Directors, executive management and employees of BakBone Software
as we work through this process. In reviewing the past two quarters
for fiscal year 2006, many of the metrics we have been carefully
tracking show positive trends. As stated in previous open
communications, the fundamentals of the business remain strong and
we are taking advantage of many growth opportunities to move this
organization to the next level. Following are some of the
highlights we are seeing as we move into the second half of our
fiscal year. Adding to our existing worldwide customer base of
12,000, our global client list continues to expand. During the
first two quarters of fiscal year 2006, 2300 new customers became
BakBone end users including NTT (Japan), Bank of Taiwan, Oil and
Gas Corporation of India, the Korean Navy and Serena Rosso
(Australia) in the Pacific Rim; DDB Worldwide Communications
Group-Chicago, Macy's, Wireless Services Corporation, Georgetown
National Biomedical Research Center and North Carolina Central
University in North America; and BBC (British Broadcasting Corp.)
and Muller Dairy in our EMEA (Europe, Middle East and Africa)
region. While this is not an inclusive list of new customers, it is
an excellent representation of the quality of customer we are
adding to our global customer roster. -- During Q1 and Q2 FY06,
approximately 60 percent of new bookings in North America were
derived from new customers with approximately 40 percent coming
from repeat customers. This compares with the metric reported in
January 2005 of 75 percent of total new bookings derived from new
customers and 25 percent from repeat customers signaling a strong
trend that current end users continue to buy and believe in BakBone
products. -- The competitive landscape is crowded, but the majority
of all transactions in North America continue to be Veritas
replacements -- a solid indicator of BakBone's competitive
strengths in the marketplace. -- Our maintenance attach rate
remains high in North America at 100 percent with our retention
rate at approximately 90 percent. While our maintenance retention
rate on a global basis is good, this is a revenue opportunity that
has not been fully leveraged. We have set in place additional
processes to capture the data required to improve maintenance
renewals and expect a significant increase over the next few
quarters on a worldwide basis. -- Our backup server operating
system breakdown in North America and the EMEA region reflect
Microsoft at approximately 50 percent, Linux at 35 percent, and
Unix at 10 percent with the balance representing other operating
systems. While this metric is remaining fairly consistent, we are
witnessing a slight increase in NetVault purchases for Linux
operating systems. -- The upcoming release of NetVault 7.4 offers
several enhancements of scalability, security and performance,
including: -- Media allocation improvements to increase scalability
-- Fault tolerance resulting in improved product performance -- New
command line interface tools to enable script-based job definitions
and improve operational efficiency -- Enhanced filter capabilities
resulting in a reduction of GUI clutter -- As a result of recent
quality assurance testing, NetVault 7.4 has proven to perform in
some of the world's most challenging IT environments. The newest
version of NetVault offers unprecedented performance in
environments of more than 80 filers connecting to 60 drives while
remaining easy to use. NetVault 7.4 is able to manage more clients
and tape drives than ever before making it a true enterprise-class
product. -- To meet increasing product demand from the marketplace,
the Company increased the size of its research and development team
during the first two quarters. By establishing offshore development
and quality assurance labs to compliment our existing engineering
resources, BakBone has nearly doubled the size of its R&D team
while capturing the associated cost savings. The Company is reaping
the benefits of an increased quality focus through improved
customer satisfaction and a reduction in support costs. -- We added
Ken Horner as senior vice president for corporate development and
strategy in September. In his new role, Ken will be responsible for
strategic business development, as well as the worldwide rollout of
BakBone's corporate strategy and vision. With 20 years of storage,
networking, and enterprise software management experience, most
recently Horner has been involved in defining BakBone's ongoing
market positioning and strategic vision, serving as a corporate
development consultant to the Company since February 2005. Horner's
previous experience includes executive management positions at
DataCore Software, Seagate Technology, Sterling Software, Tech Data
Corporation, and Rexon/Wang Tek. As DataCore's vice president of
worldwide marketing and channel operations, Horner spent four years
successfully leading corporate partnering, worldwide market and
multi-tiered channel definition, technology acquisition and
strategic alliance efforts on a global basis. As part of Seagate
Software's executive management team, Horner was instrumental in
building and managing the Storage Management Group, including the
development of the Backup Exec product line, from its inception (as
Arcada Software) through its sale to VERITAS. -- For the six months
ended September 30, 2005, total worldwide bookings(*) were $20.7
million from the sale of software license and maintenance contracts
representing a 27 percent increase over $16.2 million for the same
period of fiscal year 2005. Comparing the first two quarters FY06
with the same period in FY04, the Company's total worldwide
bookings increased 55 percent from $13.3 million. -- We continue to
be debt free and the cash balance as of the end of September, 2005
was $14.7 million. This represents a reduction in cash of $3.3
million from the $18.0 million reported at the end of May 2005.
During the first half of FY06 we continued to re-invest in the
infrastructure of the Company including marketing, capital
equipment, research and development, and business development.
Significant expenses specific to SOX and audit-related fees
continued to hit the bottom line during fiscal Q1 and Q2, however,
these costs are more in line with expectations as we move through
fiscal Q3 FY06. *Bookings represent the total dollar value of
contracts signed during the period. The revenue associated with
bookings will be recognized in accordance with our revenue
recognition policies. Strategic Growth Opportunities Many questions
from our shareholders revolve around the growth opportunity model
for the Company. As evidenced by the positive feedback received by
numerous BakBone employees, our stakeholders continue to believe in
the future of this organization and the expanding business
prospects for BakBone Software as demonstrated below. Apple Early
trend analysis indicates that NetVault for Apple's Mac OS X Server
to be a strong growth opportunity for the Company. With Mac OS X,
as we have done with Linux, we continue to create areas of
expertise that put us ahead of the competition. NetVault 7.3.1 for
Mac OS X Server version 10.4 "Tiger" with a native Mac user
interface was released for general availability (GA) on September
20 and is the first enterprise-class backup and recovery solution
modeled after Apple's Server Manager user interface and combines
enhanced data protection with unique networked storage
functionality. This was, by far, one of the most successful
announcements in BakBone's history. While released close to the end
of our second quarter FY06, we are already seeing impressive sales
traction. Product reviews are strong and product quality excellent.
In addition, the following touch points are important to note: --
BakBone's NetVault for Apple's Mac OS X Server is slated to be on
the shelves of Apple stores shortly. -- Leveraging Apple's
leadership in the education market, this is BakBone's strongest
market vertical to date for NetVault on Apple. Some early wins
include the University of Utah, Hollins University and Rush
Henrietta Schools. -- BakBone's knowledge base of the global
storage market is proving well suited to Apple's expansion plans
for its storage business. This works well for BakBone's future
strategic partnership opportunities with Apple. NCR/Teradata
BakBone's OEM relationship with Teradata continues to expand.
Working closely with Teradata's backup and recovery (BAR)
engineering team as well as storage hardware partners
SUN/StorageTek, EMC, and Engenio, Teradata is scheduled to release
a disk-to-disk/disk-to-disk-to-tape option in late fiscal Q3 based
on NetVault's virtual tape library (VDL) and shared virtual tape
library (SVDL) features. This provides Teradata customers higher
reliability for backups and faster restores. In parallel, Teradata
will offer a Linux version of NetVault in late fiscal Q3 in support
of end users incorporating a Linux enterprise computing strategy.
Working together with representatives from Teradata and
SUN/StorageTeK, BakBone met with numerous Teradata customers and
prospects to discuss BAR design and implementation options at the
most recent Teradata Partners annual users' group meeting and trade
show held earlier this month. Network Appliance Network Appliance
continues to be a strong supporter and strategic partner for
BakBone. Both BakBone and Network Appliance (NTAP) agree that
together we can mutually help customers maximize data protection
and make available industry-leading data protection solutions at
the lowest total cost of ownership. Some encouraging data points
for growth include: -- BakBone shares with NTAP the largest
worldwide distributor of NTAP products, Arrow Electronics, and
continues to see increased bookings grow through this mutually
strategic product distributor quarter-over-quarter. -- Through the
NTAP partnership, BakBone is able to leverage its worldwide
presence and scale in large enterprise accounts beyond a single
region, i.e. Yahoo!, Shell Oil. Integrated Data Protection (IDP) As
announced last week, BakBone's Integrated Data Protection (IDP)
strategy is officially off the ground. This new corporate vision
allows IT organizations to centrally manage and control access and
availability of data in order to more effectively meet business,
operating and financial objectives. BakBone will use its IDP
building-block approach to integrate and automate different data
storage and protection products and functionality. Unlike
competitive offerings that consist of separate point products that
lack coordination and require manual administration, IDP will
provide a holistic view and centralized management of a range of
data storage and protection technologies such as replication,
archiving and continuous data protection, as well as the Company's
award-winning NetVault backup and recovery software. As progress is
made on this strategic vision on multiple fronts, we will be in a
position to bring to market comprehensive, heterogeneous data
protection to meet the changing environments and requirements of
our customers, strategic partners and the overall market. Stay
tuned on this one! Financial Audit Update So, where do we stand
today with the publishing of the Company's financial reports? The
good news is that we are confident there is an end in sight. We are
working through the iterative audit process with our former
auditors. We have made available all supporting documentation for
revenue transactions from fiscal years 2003 and 2004 in order that
they can complete their audits for these periods. Let me again
state that revenues previously recognized in prior years will all
be recognized, but we must ensure the appropriate accounting
treatment of revenues to assure that they are recognized in the
proper period. We are making progress, but it is slower than
anticipated. We are working diligently to get the Company through
this stage of its financial audits. When a public company changes
its revenue recognition policy, it is an exhaustive process which
requires the detailed review of transactions which have transpired
over many years. At such time as our financial reports are
finalized, we will be in a position to file the delayed financials
with the U.S. Securities and Exchange Commission and the Canadian
Securities Commissioners. Simultaneously, we will file the
appropriate applications to resume trading on the Toronto Stock
Exchange, as well as the Over-the-Counter Bulletin Board. As much
as we would like to predict the date when this work will be
completed, there are important parts of the process we do not
control. When it becomes possible for us to determine a completion
date for the audit work and filing of our financial statements, we
will immediately make the appropriate disclosures. Coming up next
month, we will meet with institutional investors to talk about our
IDP vision during the American Electronics Association (AEA)
Classic to be held in San Diego November 7-9. While not a presenter
this year, we have set aside time during the conference to meet
with investors to discuss the growth of the Company, its current
operational progress and future business and development
opportunities. We trust the above information specific to our
operational progress provides a strong indicator that our primary
objective is to grow this organization and be a major player in the
data protection market. As I have said before in my communications,
we are committed to our shareholders, customers and strategic
partners. I can assure you the goal of maximizing shareholder value
continues to be the primary focus of all of our activities.
Sincerely, Jim Johnson President and CEO Safe Harbor This
communication contains forward-looking statements that involve
risks, uncertainties, assumptions and other factors, which, if they
do not materialize or prove correct, could cause BakBone's results
to differ materially from those expressed or implied by such
forward-looking statements. These statements include, among others,
any statements, express or implied, regarding BakBone's anticipated
timing for the completion of its financial statements and internal
controls evaluation, the prospects for continued liquidity in the
Company's stock and anticipated growth in the market for the
Company's products. The potential risks and uncertainties may
include, but are not limited to, risks that the review of our
financial statements and internal controls evaluation will result
in adjustments, which may be material, that the Company does not
currently anticipate; risks that accounting issues other than those
we have identified may cause additional delays or adverse
consequences; risks that the review and filing of our financial
statements may not be completed in accordance with our expectations
as to timing; and risks that our stock will not be relisted on the
TSX or the OTCBB; competition in our target markets, potential
capital needs, management of future growth and expansion, risk of
third-party claims of infringement, protection of proprietary
information, customer acceptance of the Company's products and fee
structures, and the success of BakBone's brand development efforts;
risks associated with strategic alliances, reliance on distribution
channels, product concentration, need to develop new and enhanced
products, potential product defects, our ability to hire and retain
qualified employees and key management personnel, and risks
associated with changes in domestic and international market
conditions and the entry into and development of international
markets for the Company's products. Our forward-looking statements
should be considered in the context of these and other risk factors
disclosed in our most recent report filed with the Securities and
Exchange Commission, which may be found at http://www.sec.gov/, as
well as those risk factors disclosed in the current report filed
with the Canadian Securities Administrators, which is available on
SEDAR at http://www.sedar.com/. All future written and oral
forward-looking statements made by us or on our behalf are also
subject to these factors. BakBone assumes no obligation to update
any forward-looking statement to reflect events or circumstances
arising after the date on which it was made. Contact: BakBone
Corporate/Investor Relations Karen Fisher 858-795-7525 BakBone
Media Contact Dani Kenison 858-795-7584 DATASOURCE: BAKBONE
SOFTWARE CONTACT: Karen Fisher of BakBone Corporate/Investor
Relations, +1-858- 795-7525, or , or Dani Kenison, BakBone Media
Contact +1-858-795-7584, or , both for BAKBONE SOFTWARE Web site:
http://www.bakbone.com/
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