Addressing issues like IP traffic management and quality of service, including application performance and response times, the cost of downtime and poor service levels, administration costs, and control and management of rapid growth and complexity is critical for a company's success. Zona Research estimates the cost to U.S. eCommerce companies associated with poor or degraded services was US$4.35 billion in 1999.

Services that use Internet-based technologies, whether deployed across the Internet, intranets or extranets, are commonly referred to as eBusiness applications. Whether they are used within a traditional corporate enterprise or are the defining element of a dot/com company, they are managing an increasing portion of many companies' interactions with their customers, suppliers, partners, employees and other parties.

Availability, performance and response time of these applications is critical since it directly impacts the operational success of a company's business.

Some of these products focus on external network performance issues. Internet caching technologies as well as content delivery services, which store commonly accessed data at a location separate from its source and closer to the requester, are both popular techniques to improve
content download times and overall response time. These techniques, however, do not address the challenges of executing Internet-based transactions that usually require data to be changed or modified in real time.

Systems management and some network management software products are being used in corporations to monitor and report on the health and status of applications and server systems. They help diagnose and notify systems administrators of problems and failures. Many of these products trigger alarms when a change occurs in system or network status, so that system administrators can take corrective action.

Corporations are increasingly aware that the service availability and scalable performance provided by server load balancing, traffic management and systems management products do not adequately address the increasing challenges of conducting eBusiness.

Hardware-based products may introduce performance bottlenecks because the computing power necessary for sophisticated traffic management functions consumes all available processing capacity in these devices, resulting
in delays.

In addition, some products represent new potential failure points themselves, limiting their effectiveness as high-availability alternatives. Even if they can ensure that a service is available and responding to requests, they may not be able to ensure that the service responds fast enough to satisfy users' expectations or provide minimum service levels and response times.

eBusiness applications must be able to handle problems such as traffic surges, intermittent delays or network service interruptions. These problems generally occur without warning and have an immediate impact on availability and service levels. They need to be quickly detected, diagnosed and isolated, and corrective action often must take place within seconds in order to maintain an on-line presence and adequate levels of service.

Even when these products are used together there is generally no automated, integrated way to take corrective action to restore service. In an attempt to address the
limitations of existing products, some users have resorted to internally developed "redundant" alternatives that attempt to integrate the capabilities of independent, standalone traffic management and systems management products. These alternatives, however, may be unreliable and often require manual user intervention to restore a failed service.

Such intervention, when performed by site operators, often takes too long and is prone to errors. So an opportunity exists for a comprehensive, standards-based Internet services management solution that transparently optimizes the performance, availability and service response times of eBusiness applications. To reduce costs and simplify administrative overhead, this solution should also facilitate the administration and control of the distributed computing environments that support these eBusiness applications.

This platform is uniquely suited to the requirements of eBusiness applications. The company's distributed software architecture is more feature-rich, flexible, scalable and fault-tolerant than either server load balancing and traffic management alternatives or systems and network management options.

Resonate currently has over 250 customers worldwide, ranging from high volume Internet sites to large corporate enterprises deploying eBusiness applications. Some of the company's key customers include Charles Schwab, DoubleClick, eBay, E*TRADE, Federal Express, Morgan Stanley Dean Witter Online and Yahoo!/Geocities.

The company released Global Dispatch in the first quarter of 1998 and Commander in the third quarter of 1999. From inception through 1999, Resonate derived approximately 85% of its product revenue from its Central Dispatch product.

Although its revenue increased in each quarter during 1999, costs also increased due to the development of technology, products and services, continued recruitment of research and development personnel, the need to build a sales force and a professional services organization and to expand its general and administrative infrastructure.

In the fourth quarter of 1999, Resonate derived approximately 75% of its product revenue from sales of Central Dispatch, from which the company expects to derive a significant portion of its revenue for at least the next two years.

Its current relationships with these systems integrators typically are structured as non-exclusive co-marketing and resale arrangements. Also, Resonate has entered into a limited number of reseller arrangements in which its products are embedded in the reseller's products, for which it receives a royalty from the reseller. To date, revenue from these reseller arrangements has been insignificant.

Resonate depends upon its relationships with Brokat Infosystems, IBM and Sun Microsystems to help distribute and market its products.

To achieve broader distribution of its products, Resonate expects to continue investing in the development of indirect sales channels. For the year ended December 31, 1999, it derived 79% of its revenue from its direct sales force and 21% from indirect channels.

Increases in Resonate's revenue year-to-year were due to the introduction of new products and wider acceptance of its products because of increased investment in sales and marketing organizations and the development of additional distribution channels.

To date, the company has generated revenue principally from licensing its software products, and, to a lesser extent, providing professional services, including assistance in implementing and integrating its software products and providing maintenance, training and consulting services.

In future periods, the company expects revenue from its indirect channels to increase as a percentage of total revenue. Its license agreements generally provide that customers pay a software license fee for one or more software products for a specified number of servers.

The amount of the license fee varies based on which software product is purchased and the number and processing capacity of servers on which it is deployed. Customers can purchase additional licenses to use previously purchased products at additional locations or on additional servers. In addition, Resonate recently began offering its software products on a subscription basis. Revenue from subscription licenses has not been material to date.

In 1997, Yahoo!/GeoCities accounted for 22% of the company's total revenue and Interactive Futures accounted for 11%. In 1998 and 1999, no individual customer accounted for 10% or more of its total revenue. It's good for any company not to rely on a small number of customers for a major portion of its revenues.

The president and CEO has served since August 1998 and has been a member of the board of directors since October 1998. Prior to taking this position, he was the president of his own consulting firm, which provided interim management services to several venture capital firms. He was also the president and CEO of Computer Aided Service, Inc., an automotive service software company.

The corporate vice president of Resonate has served since August 1998 and has been a member of the board of directors since 1995. Prior to this, he served as Resonate's president and CEO.

The vice president and CFO has served since September 1999. Prior to joining, he was the CFO at Mohr Davidow Ventures. He was also the president and CFO of Red Brick Systems, a provider of data warehousing solutions.

The vice president of marketing has served since March 1999. Prior to that, she was vice president of marketing for Diffusion, Inc., a vendor in the customer relationship management market.

The vice president of engineering has served since March 1999. Prior to that, she was the business unit manager at Legato Systems, a developer of enterprise-strength storage management software for the enterprise computing market.

The vice president of worldwide sales has served since February 2000. Prior to that he served in various capacities with Hewlett-Packard Corporation, most recently as vice president and general manager of sales and marketing for Hewlett-Packard's Customer Support and Professional Services Group.

The chairman of the board has served since January 1996 and has been a director since December 1995. He is a managing member of TechFund Capital, a venture capital fund. In 1993, he created TechFarm Management, Inc., an incubation company for new technology companies, including Resonate. He founded and has been involved in the start-up of numerous Silicon Valley companies, including CHIPS and Technologies, Inc., a semiconductor and related device company, 3dfx Interactive, and Cobalt Networks. He currently serves as Chairman of the Board of 3dfx Interactive and Cobalt Networks, and is a member of the boards of directors of Palm Computing, the portable computing platform and device company, and Bell Microproducts, a computer components company.

Let's look at some of its competitors whose IPOs debuted in the last two years. Arrowpoint Communications (ARPT-NADAQ) debuted on March 31, 2000, pricing at US$34.00, opening at US$65.00 and breaking US$150.00 shortly after the debut. Cisco Systems recently announced plans to buy Arrowpoint. Foundry Networks, Inc. (FDRY:NASDAQ) debuted on September 28, 1999, pricing at US$25.00 and opening at US$109.00. After a 2-for-1 stock split, FDRY still managed to break US$200.00 in aftermarket trading. F5 Networks (FFIV:NASDAQ) debuted on June 4, 1999, pricing at US$10.00, opening at US$13.00 and going as high as US$160.00. Looking at Resonate's competitors, one may conclude that this market is a strong one.

Resonate's revenues have been increasing, but losses also continue to mount. I hate to see a huge loss off a small sales base. But considering that the products are still new, it may not have that much of an impact.

Goldman, Sachs & Co. is the lead underwriter, another plus. Resonate's proposed ticker symbol is RSNT and it plans to trade on NASDAQ.

Resonate has a lot to offer, and depending on market conditions when the IPO debuts, the company could double and maybe even triple. Like all small caps, this is a speculative play, especially with venture capitalists in the management team.

For more information, please contact Resonate, Inc., 385 Moffett Park Drive, Suite 205, Sunnyvale, CA 94089, phone: 408-548-5500, fax: 408-548-5679, Web: www.ResonateInc.com.