WebEx Communications, Inc.

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WebEx Communications, Inc.

3979 Freedom Circle
Santa Clara, California 95054
U.S.A.
Telephone: (408) 435-7000
Toll Free: (877) 509-3239
Fax: (408) 496-4303
Web site: http://www.webex.com

Public Company
Incorporated: 1995 as Silver Computing
Employees: 2,091
Sales: $308.42 million (2005)
Stock Exchanges: NASDAQ
Ticker Symbol: WEBX
NAIC: 511210 Software Publishers; 518210 Processing, Hosting, and Related Services

WebEx Communications, Inc. is the world's leading provider of online meeting services. Through its web site, clients can host real-time business meetings, conferences, and training seminars in which multimedia presentations and software programs can be simultaneously viewed and/or controlled by participants. Other WebEx offerings enable users to remotely operate, program, or troubleshoot computers. The company serves more than 23,000 customers that range from small businesses to Fortune 500 corporations and the U.S. Department of Defense.

EARLY YEARS

WebEx Communications was founded in California in 1995 by Subrah Iyar and Min Zhu. India-born Iyar had immigrated to the United States in 1982 to seek business opportunities, and worked for Apple Computer and Intel before serving as vice-president and general manager of Quarterdeck Corporation's Internet business division. Zhu had grown up in Communist China and come to the United States on a scholarship to Stanford University, after graduation working for IBM and Price Waterhouse. In 1991 he founded a software company called Future Labs to market a document collaboration software program he had developed. Several years later the firm was purchased by Quarterdeck for $13 million, and Zhu and Iyar went into business together under the name Silver Computing.

At first the company had a hard time making ends meet, and half of its engineering staff was soon hired out to consulting projects to bring in revenue. Although they initially avoided seeking venture capital, Iyar and Zhu later sold stakes to several firms including Baan Investments.

In mid-1997 Silver changed its name to Stellar Computing, and then in December to ActiveTouch. In early 1998 the firm bought the technology assets of Zhu's former company Future Labs from Quarterdeck, and a few months later the ActiveTouch Server and ActiveMeetings software application were introduced. From the company's web site clients could schedule or instantly activate meetings for sales, support, or business purposes. All participants could access information in a variety of formats, with presentation sharing, screen synchronization, form completion, and other features available. ActiveTouch also licensed its software to other firms for incorporation into their products.

In February 1999 the company introduced a variation on ActiveMeetings called WebEx, which was a free service that allowed up to six Internet-connected customers to meet in real time to share presentations, documents, and software applications. Unlike competing products such as Microsoft's NetMeeting, it did not require that all computers have the same software loaded onto them, with users able to share their own programs directly through the WebEx browser. The free service was supported by advertisements, but customers could upgrade for a fee to a commercial-free version that offered more features. To facilitate the online meetings, ActiveTouch provided telephone conference call services as well.

Customized versions of the software were also available, and some companies licensed it for incorporation into their own programs. The first such agreement was reached with Compaq, which integrated it into a customer care product called NetACD. ActiveTouch promoted WebEx with various methods including a Volkswagen Beetle giveaway, and by the fall over 25,000 businesses were using it and more than 100 had paid for enhanced services. In September, ActiveTouch became known as WebEx, Inc.

INITIAL PUBLIC OFFERING IN 2000

In early 2000 the company changed its name to WebEx Communications, Inc., and filed for an initial public stock offering, and in July 3.5 million shares were sold on the NASDAQ. Investors were enthusiastic, and the price jumped from $14 to $58 per share within a month. The firm continued to be led by Chairman and CEO Subrah Iyar and President and Chief Technical Officer Min Zhu.

WebEx soon began shifting toward an all-paid service model and signed 700 new users during the third quarter of the year including 3M, Toyota, and Hewlett-Packard, while AT&T and Global Crossing integrated its programs into their own software products. In August the WebEx Meeting Center was introduced, which allowed users of Windows, Macintosh, and Solaris computers to collaborate across all three platforms. The company also opened a European headquarters in Amsterdam and sales offices in Australia and Hong Kong, while boosting its staff by 67 to 362.

In the fall WebEx formed a new consulting services unit, and Oracle and Logitech integrated its software into their products. For 2000 the company reported revenues of $25.4 million, up from just $2.6 million the year before. Spending for sales and marketing (which included commercials featuring flamboyant entertainer RuPaul) was high, however, and a loss of $52.4 million was reported. The firm's stock-based compensation plan, which helped it attract employees, had cost an additional $28 million. In May 2001 the company sold an additional $21.5 million worth of stock in a private placement.

The U.S. economy was stumbling, and companies began seeking out collaborative software programs such as WebEx's to save them money on business travel. By late summer, the firm's client total had reached 4,000. The terrorist attacks on the United States of September 11 boosted sales even further when air travel plummeted, with many new customers signed during the fall including pharmacy giant CVS and electronics maker Samsung. The firm also began offering its services through France Telecom and BEA Systems.

In late 2001 WebEx's conferencing software was upgraded to offer multiple language interfaces while Hewlett-Packard added the company's Access Anywhere remote computer control system to its handheld and notebook computers. Sales jumped to $81.2 million for the year and losses fell to $27.6 million.

COMPANY PERSPECTIVES

More than 3.5 million people use WebEx every month to communicate and collaborate online. We continue to develop technological advances without sacrificing the reliability and security that enables on-demand collaboration. Our 23,800 customers understand why we are the proven technology leader, with first-class global support.

Competition was heating up, however, and in early 2002 both Microsoft and Oracle announced they were planning similar products to those of WebEx. The firm soon upgraded its Meeting Center program with technology called MediaTone, which used the international fiber-optic network WebEx had been building for several years, and added an interactive teaching product called Training Center. In April research firm Frost & Sullivan reported that WebEx had a 57.5 percent share of the conferencing software market.

EUROPEAN EXPANSION, NEW SERVICES IN 2002

In the summer of 2002 the firm expanded its Amsterdam office, and in the fall added an online customer assistance feature called Support Center. WebEx also signed a two-year contract to provide conferencing services to Boeing Co., unveiled a product to facilitate wireless meetings with the Microsoft Tablet PC, and bought three small Chinese engineering firms from cofounder Min Zhu during the year. Sales reached $140 million and a first-time profit of $16.4 million was recorded.

In early 2003 WebEx launched an $8 million advertising campaign featuring comedian Lily Tomlin and introduced a new Enterprise Edition of its software, which integrated the Meeting Center, Training Center, Support Center, and OnStage products into a single package. In the spring, with Forbes magazine naming WebEx the fastest-growing technology company in the United States, the firm's Meeting Center was incorporated into Yahoo's Messenger program and WebEx services were launched in Iyar's homeland of India in conjunction with a company called CyberBazaar. A few months later WebEx acquired the latter for $4 million and renamed it WebEx India.

In July 2003 the company bought Presenter, Inc., a web conference recording software maker, and began offering its products under the name Presentation Studio. In September WebEx used an online focus group of customers to help edit a new ad campaign, and in December the company launched a new service that enabled U.S. government employees to host secure online conferences with a credit card.

Sales for 2004 rose to $189 million, with the firm's profit of $59.8 million due in part to a one-time $21.4 million tax benefit. The firm had more than 1,200 employees working at offices in 11 countries and some 8,850 companies using its services, including such new customers as Ingram Micro and Dow Corning. Despite its international presence, more than 93 percent of sales came from the United States. WebEx's market share had risen to 64 percent, though competition continued to be strong as Microsoft and Cisco Systems acquired key competitors.

In early 2004 the company launched a new multilingual European service with telecommunications firm BT, began working with audio/video conferencing provider VCON, partnered with virtual event manager KRM Information Services, and joined with Modern HighTech to introduce service to Korea. WebEx also announced an alliance with cell phone maker Siemens to bring conferencing services to mobile phones via that firm's OpenScape program, and integrated its software into the online customer service offerings of Salesforce.com.

SMARTTECH DEBUTS IN 2004

In April a new offering called SMARTtech was introduced that allowed computer service personnel to remotely operate and repair software problems, while additional multimedia capabilities were added to the firm's other programs, and an e-commerce module was installed in the latest release of Training Center. In June a new agreement was signed with America Online (AOL) to integrate WebEx offerings into that firm's Instant Messenger program. The company was shifting much of its support work to India and hiring more employees there, while also initiating a $40 million stock buyback program. In the fall of 2004 WebEx introduced Sales Center to support online sales efforts.

KEY DATES

1995:: Silver Computing is founded by Subrah Iyar and Min Zhu.
1997:: Name is changed to Stellar Computing, then to ActiveTouch.
1998:: Assets of Zhu's former company Future Labs are acquired; ActiveTouch interactive communications software and server is introduced.
1999:: WebEx free meeting-hosting service debuts.
2000:: Name is changed to WebEx Communications; company completes initial public offering.
2002:: Three Chinese engineering companies are acquired; firm reports first annual profit.
2003:: Presenter, Inc. and CyberBazaar are purchased.
2005:: Intranets.com is acquired; small-business meeting offerings are added.

In January 2005 the U.S. Department of Defense chose WebEx to supply it with secure web conferencing services as part of a pilot program, and the company launched a new product called MyWebExPC. Derived from the older Access Anywhere program, it allowed users to remotely access another computer's desktop and was geared toward persons who needed to reach their work computer while on the road or at home. It was initially offered for free to compete with a product of Citrix Systems, which had entered the online conferencing arena. In February WebEx filed suit against Citrix, alleging that its rival had committed "cybersquatting" by purchasing ten domain names similar to WebEx's on the day it launched the MyWebExPC service.

Early 2005 saw the company begin offering a new flat rate pricing plan featuring unlimited monthly usage, which helped boost sales. In the summer WebEx introduced a product called Automatic Record Retention, which could record and archive web conferences for companies needing to comply with newly tightened U.S. securities regulations. The firm also launched an online customer support product called Customer Connect in Japan in partnership with NTT Communications, and acquired a small-business online meeting services firm called Intranets.com of Massachusetts for $45 million. The latter was folded into the newly created WebExOne division, which subsequently introduced small-business meeting services MeetMeNow, PCNow, WebOffice Workgroup, and WebOffice Personal. For 2005 the firm recorded revenues of $308.4 million and net income of $52.7 million. WebEx had by now invested more than $150 million in network infrastructure on five continents to give its users what one reviewer called the "Cadillac" of web conferencing services.

In January 2006 a new on-demand information technology service, WebEx Systems Management Services, was added, and in February a new paid instant messenging service, AIM Pro, was launched in collaboration with AOL. March saw an alliance formed with Xerox Corp. to include WebEx in the new DocuShare CPX application, as well as the introduction of WebEx services through Mexican telecommunications firm Avantel. International sales were growing and now comprised 12 percent of revenues, as the company boosted sales and marketing abroad. The firm's customer total topped 23,000 and it was hosting some 50,000 meetings a day.

In just over a decade WebEx Communications, Inc., had grown to control nearly two-thirds of the market for online meeting services against strong competitors including Microsoft and Cisco Systems. The firm's sizable investment in infrastructure and its numerous strategic alliances positioned it strongly for the future, with many international markets still to be tapped.

PRINCIPAL SUBSIDIARIES

WebEx Australia Pty. Ltd.; WebEx Asia Ltd. (Hong Kong); WebEx China Ltd.; WebEx Communications B.V. (Netherlands); WebEx Communications Deutschland GmbH (Germany); WebEx Communications France, SARL; WebEx Communications India Pvt. Ltd.; WebEx Communications Japan K.K.; WebEx Communications U.K., Ltd.; WebEx Worldwide B.V. (Netherlands); WebExOne, Inc.; Intranets K.K. (Japan).

PRINCIPAL COMPETITORS

Adobe Systems, Inc.; Cisco Systems, Inc.; Citrix Systems, Inc.; Genesys Telecommunications Laboratories, Inc.; International Business Machines Corp.; Microsoft Corporation; Netviewer GmbH; NTRglobal; Oracle Corporation; PCVisit Software AG; Saba Software, Inc.; Salesforce.com, Inc.; West Corporation.