EX-99.2 4 f41233exv99w2.htm EXHIBIT 99.2 exv99w2
Exhibit 99.2
ARUBA NETWORKS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
     On January 4, 2008, Aruba Networks, Inc. (the “Company”) entered into an Agreement and Plan of Reorganization (the “Agreement ”), by and among the Company, AirWave Wireless, Inc., a Delaware corporation (“ AirWave ”), Aloha Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of the Company (“ Merger Sub ”), Gary Hegna, Greg Murphy, Bryan Wargo, Kevin Beals, Paul Gray and, with respect to Article VII, Article VIII and Article IX thereof only, Westbury Equity Partners SBIC, L.P., a Delaware limited liability partnership, Ignition, LLC, a Delaware limited liability company, and Idealab Holdings, L.L.C., a Delaware limited liability company, Robert Headley as shareholder representative, and U.S. Bank National Association as escrow agent. The Agreement provides that, upon the terms and subject to the conditions set forth in the Agreement, AirWave will merge with and into Merger Sub, with Merger Sub continuing as the surviving corporation as a wholly-owned subsidiary of the Company. A description of the Agreement is contained in the 8-K filed by the Company on January 9, 2008 and is incorporated herein by reference.
     On March 20, 2008, following the satisfaction or waiver of the conditions to closing contained in the Agreement, the Company completed its acquisition of AirWave. The total purchase price for AirWave was approximately $24.6 million.
     The accompanying unaudited pro forma condensed combined financial statements as of and for the six months ended January 31, 2008 and for the year ended July 31, 2007, are based on the historical financial statements of the Company and AirWave after giving effect to the merger. The unaudited pro forma condensed combined balance sheet combines the Company’s and AirWave’s respective balance sheets as of January 31, 2008 and December 31, 2007, respectively, and gives effect to the merger as if it occurred on January 31, 2008. The unaudited pro forma condensed combined balance sheet includes adjustments that are directly attributable to the merger. The unaudited pro forma condensed combined statement of operations for the six months ended January 31, 2008 combines the Company’s historical consolidated statement of operations for the six months ended January 31, 2008 with AirWave’s historical consolidated statement of operations for the six months ended December 31, 2007, and is presented as if the merger had taken place on August 1, 2006. The unaudited pro forma condensed combined statement of operations for the year ended July 31, 2007, combines the Company’s historical consolidated statement of operations for the year ended July 31, 2007 with AirWave’s historical consolidated statement of operations for the year ended September 30, 2007, and is presented as if the merger had taken place on August 1, 2006. The unaudited pro forma condensed combined statements of operations include adjustments directly attributable to the merger and that are recurring in nature. The pro forma adjustments are based upon currently available information and assumptions that are factually supportable.
     The merger has been accounted for under the purchase method of accounting with the Company as the acquirer. Under the purchase method of accounting, the purchase price, including directly related transaction costs, was allocated to the AirWave assets acquired and liabilities assumed based on their estimated fair values as of the effective date of the acquisition, March 20, 2008. The excess of the purchase price over the net of the amounts assigned to tangible and identifiable intangible assets acquired and liabilities assumed is recognized as goodwill. The final purchase price allocation is dependent upon the completion of the valuation of Airwave’s net assets acquired and liabilities assumed. The Company expects to complete the valuation work within 12 months of the date of merger. The final purchase price allocation and its effect on results of operations may differ significantly from the pro forma amounts included in this section, although these amounts represent management’s best estimates as of the date of this document.
     The unaudited pro forma condensed combined financial statements have been prepared for illustrative purposes only and are not necessarily indicative of the financial position or results of operations in future periods or that actually would have been realized had the Company and AirWave been a combined company during the periods presented. The unaudited pro forma condensed combined financial statements, including the notes thereto, should be read in conjunction with the Company’s historical consolidated financial statements included in its Annual Report on Form 10-K for the year ended July 31, 2007, filed on October 12, 2007, and in its Form 10-Q for the quarterly period ended January 31, 2008, filed on March 7, 2008, as well as Airwave’s historical consolidated financial statements included in this Form 8-K/A.

 

 

ARUBA NETWORKS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of January 31, 2008
(In thousands)
                                 
    Historical     Pro Forma  
    Aruba     AirWave     Adjustments     Combined  
    (Note 1)     (Note 3)          
ASSETS
                                
Current assets
                                
Cash and cash equivalents
   $ 65,412     $ 1,134     $ (16,591 ) A   $ 49,955  
Short-term investments
     47,879       —       —       47,879  
Accounts receivable, net
     25,748       2,259       —       28,007  
Inventory
     17,329       —       —       17,329  
Deferred costs
     2,781       —       —       2,781  
Prepaids and other
     2,973       112       —       3,085  
 
                        
 
                                
Total current assets
     162,122       3,505       (16,591 )     149,036  
 
                                
Property and equipment, net
     6,380       220       —       6,600  
Intangible assets, net
     3,445       —       17,500  B     20,945  
Goodwill
     —       —       6,639  C     6,639  
Deferred costs
     447       —       —       447  
Other assets
     796       29       —       825  
 
                        
 
                                
Total assets
   $ 173,190     $ 3,754     $ 7,548     $ 184,492  
 
                        
 
                                
LIABILITIES AND STOCKHOLDERS’ EQUITY/ (DEFICIT)
                                
Current liabilities
                                
Accounts payable
   $ 1,732     $ 264     $ —     $ 1,996  
Accrued liabilities and other
     20,342       2,077       (765 ) D     21,654  
Income taxes payable
     522       —       —       522  
Deferred revenue
     20,253       2,791       (1,067 ) E     21,977  
 
                        
 
                                
Total current liabilities
     42,849       5,132       (1,832 )     46,149  
 
                                
Deferred revenue
     6,174       —       —       6,174  
Other long-term liabilities
     161       —       —       161  
 
                        
 
                                
Total liabilities
     49,184       5,132       (1,832 )     52,484  
 
                        
 
                                
Stockholders’ equity/ (deficit)
     124,006       (1,378 )     1,378  F     132,008  
 
                     8,002  G        
 
                        
 
                                
Total liabilities and stockholders’ equity/ (deficit)
   $ 173,190     $ 3,754     $ 7,548     $ 184,492  
 
                        
The accompanying notes are an integral part of these Unaudited Pro forma Condensed Combined Financial Statements.

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ARUBA NETWORKS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Six Months Ended January 31, 2008
(In thousands, except for per share amounts)
                                 
    Historical     Pro Forma  
    Aruba     AirWave     Adjustments     Combined  
    (Note 1)     (Note 3)          
Revenues
                                
Product
   $ 72,627     $ 2,933     $ —     $ 75,560  
Professional services and support
     12,822       1,158       —       13,980  
Ratable product and related professional services and support
     1,926       —       —       1,926  
 
                        
 
                                
Total revenues
     87,375       4,091       —       91,466  
 
                                
Cost of revenues
                                
Product
     22,841       —       1,113  H     23,954  
Professional services and support
     4,203       279       270  H     4,752  
Ratable product and related professional services and support
     692       —       —       692  
 
                        
 
                                
Total cost of revenues
     27,736       279       1,383       29,398  
 
                        
 
                                
Gross profit
     59,639       3,812       (1,383 )     62,068  
 
                                
Operating expenses
                                
Research and development
     17,386       1,404       —       18,790  
Sales and marketing
     40,525       2,431       618  H     43,574  
General and administrative
     8,595       1,196       —       9,791  
 
                        
 
                                
Total operating expenses
     66,506       5,031       618       72,155  
 
                        
 
                                
Operating loss
     (6,867 )     (1,219 )     (2,001 )     (10,087 )
 
                                
Other income, net
     3,202       6       (439 ) I     2,769  
 
                        
 
                                
Loss before provision for income taxes
     (3,665 )     (1,213 )     (2,440 )     (7,318 )
 
                                
Provision for income taxes
     452       5       —  J     457  
 
                        
 
                                
Net loss
   $ (4,117 )   $ (1,218 )   $ (2,440 )   $ (7,775 )
 
                        
 
                                
Net loss per common share, basic and diluted
   $ (0.05 )                   $ (0.10 )
 
                            
 
                                
Shares used in computing basic and diluted net loss per common share
     77,538               1,519  K     79,057  
 
                          
The accompanying notes are an integral part of these Unaudited Pro forma Condensed Combined Financial Statements.

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ARUBA NETWORKS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Year Ended July 31, 2007
(In thousands, except for per share amounts)
                                 
    Historical     Pro Forma  
    Aruba     AirWave     Adjustments     Combined  
    (Note 1)     (Note 3)          
Revenues
                                
Product
   $ 107,939     $ 5,476     $ —     $ 113,415  
Professional services and support
     12,847       2,207       —       15,054  
Ratable product and related professional services and support
     6,713       —       —       6,713  
 
                        
 
                                
Total revenues
     127,499       7,683       —       135,182  
 
                                
Cost of revenues
                                
Product
     36,035       —       2,225  H     38,260  
Professional services and support
     4,863       429       540  H     5,832  
Ratable product and related professional services and support
     2,470       —       —       2,470  
 
                        
 
                                
Total cost of revenues
     43,368       429       2,765       46,562  
 
                        
 
                                
Gross profit
     84,131       7,254       (2,765 )     88,620  
 
                                
Operating expenses
                                
Research and development
     25,654       2,440       —       28,094  
Sales and marketing
     60,115       4,138       1,237  H     65,490  
General and administrative
     14,600       1,394       —       15,994  
In-process research and development
     632       —       —       632  
 
                        
 
                                
Total operating expenses
     101,001       7,972       1,237       110,210  
 
                        
 
                                
Operating loss
     (16,870 )     (718 )     (4,002 )     (21,590 )
 
                                
Other income (expense), net
     (7,137 )     9       (715 ) I     (7,843 )
 
                        
 
                                
Loss before provision for income taxes
     (24,007 )     (709 )     (4,717 )     (29,433 )
 
                                
Provision for income taxes
     375       1       —  J     376  
 
                        
 
                                
Net loss
   $ (24,382 )   $ (710 )   $ (4,717 )   $ (29,809 )
 
                        
 
                                
Net loss per common share, basic and diluted
   $ (0.70 )                   $ (0.82 )
 
                            
 
                                
Shares used in computing basic and diluted net loss per common share
     34,808               1,519  K     36,327  
 
                          
The accompanying notes are an integral part of these Unaudited Pro forma Condensed Combined Financial Statements.

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ARUBA NETWORKS, INC.
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRO FORMA PRESENTATION
     On March 20, 2008, following the satisfaction or waiver of the conditions to closing contained in the Agreement, the Company completed its acquisition of AirWave Wireless, Inc. (“AirWave”). AirWave designs and sells specialized software to centrally manage large, multi-vendor wireless LAN, mesh, and WiMAX networks.
     These unaudited pro forma condensed combined financial statements have been prepared based upon historical financial information of the Company and AirWave giving effect to the acquisition and other related adjustments described in these footnotes. No transactions occurred between the Company and AirWave in the six months ended January 31, 2008 and for the year ended July 31, 2007. These unaudited pro forma condensed combined financial statements are not necessarily indicative of the financial position or results of operations that would have been achieved had the merger actually taken place at the dates indicated and do not purport to be indicative of future financial position or operating results. The unaudited pro forma condensed combined financial statements, including the notes thereto, should be read in conjunction with the Company’s historical consolidated financial statements included in its Annual Report on Form 10-K for the year ended July 31, 2007, filed on October 12, 2007, and its Form 10-Q for the quarterly period ended January 31, 2008, filed on March 7, 2008, as well as AirWave’s historical consolidated financial statements included in this Form 8-K/A.
     The unaudited pro forma condensed combined balance sheet was prepared by combining the historical consolidated balance sheets of the Company and AirWave as of January 31, 2008 and December 31, 2007, respectively, assuming the merger occurred on January 31, 2008. The unaudited pro forma condensed combined statement of operations for the six months ended January 31, 2008 combines the Company’s historical consolidated statement of operations for the six months ended January 31, 2008 with AirWave’s historical consolidated statement of operations for the six months ended December 31, 2007, and is presented as if the merger had taken place on August 1, 2006. The unaudited pro forma condensed combined statement of operations for the year ended July 31, 2007, combines the Company’s historical consolidated statement of operations for the year ended July 31, 2007 with AirWave’s historical consolidated statement of operations for the year ended September 30, 2007, and is presented as if the merger had taken place on August 1, 2006. AirWave’s historical consolidated statement of operations for the three months ended September 30, 2007 is included in both the pro forma condensed combined statement of operations for the six months ended January 31, 2008 and the year ended July 31, 2007. AirWave’s total revenues for the three months ended September 30, 2007 were $1,764,000. AirWave’s net loss for the three months ended September 30, 2007 was $498,000. Pro forma adjustments to the combined historical results are discussed in Note 3.
     The unaudited pro forma condensed combined statements of operations do not reflect operational and administrative cost savings (“synergies”) that management of the combined company believes may be achieved as a result of the acquisition, or non-recurring one-time costs that may be incurred as a direct result of the acquisition.
2. PRELIMINARY PURCHASE PRICE ALLOCATION
     On March 20, 2008, the Company completed its acquisition of AirWave.
     The unaudited pro forma condensed combined financial statements reflect the total purchase price for AirWave of approximately $24.6 million which consists of the following (in thousands):
         
Common stock (1,518,774 shares at $5.17 per share)
   $ 7,852  
Vested portion of assumed stock options
     150  
Cash
     16,326  
Transaction costs
     265  
 
      
 
        
Total consideration
   $ 24,593  
 
      
     The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values on the acquisition date. The excess of the purchase consideration over the fair value of the net assets acquired has been allocated to goodwill. The preliminary purchase price allocation may be adjusted after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions of preliminary estimates. The purchase price allocation will be finalized within 12 months of the date of acquisition. The final purchase price allocation and its effect on results of operations may differ significantly from the amounts included herein.
     The following is a summary of the preliminary allocation of the purchase price as of March 20, 2008 (in thousands):

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Cash and cash equivalents
   $ 560  
Current assets
     978  
Property and equipment
     96  
Non-current assets
     15  
 
      
Total tangible assets acquired
     1,649  
 
        
Amortizable intangible assets:
        
Existing and core technology/ patents
     8,900  
Customer contracts
     4,600  
Support agreements
     2,700  
Tradenames/trademarks
     600  
Non-compete agreements
     700  
Goodwill
     7,655  
 
      
 
        
Total assets acquired
     26,804  
Current liabilties
     (1,738 )
Non-current liabilities
     (473 )
 
      
Total liabilities assumed
     (2,211 )
 
      
 
        
Total
   $ 24,593  
 
      
     Identifiable intangible assets having finite lives arising from the merger of AirWave are valued at $17.5 million with a weighted average remaining useful life of 4.6 years.
3. PRO FORMA ADJUSTMENTS
     The accompanying unaudited pro forma condensed combined financial statements have been prepared as if the merger was completed on January 31, 2008 for balance sheet purposes and on August 1, 2006 for statements of operations purposes and reflect the following pro forma adjustments:
(A)   To record cash consideration paid by the Company, as discussed in Note 2 (in thousands):
         
Cash consideration
   $ 16,326  
Transaction costs
     265  
 
      
 
        
Total cash consideration
   $ 16,591  
 
      
(B)   To record the fair value of identified intangible assets as follows (in thousands):
                         
    Estimated  
            Useful     Annual  
    Fair Value     Lives     Amortization  
     
Existing and core technology/ patents
   $ 8,900       4     $ 2,225  
Customer contracts
     4,600       6       767  
Support agreements
     2,700       5       540  
Tradenames/trademarks
     600       5       120  
Non-compete agreements
     700       2       350  
 
                    
 
                        
Total intangible assets
   $ 17,500             $ 4,002  
 
                    
(C)   To record goodwill resulting from the acquisition.
(D)   To eliminate the liability associated with AirWave’s dividend payable which was not assumed by the Company in connection with the acquisition.

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(E)   To adjust AirWave’s deferred revenue to fair value, representing the fair value of the legal performance obligations under AirWave’s existing contracts.
 
(F)   To eliminate the historical stockholders’ equity of AirWave.
 
(G)   To record the equity consideration of the purchase price as follows (in thousands):
         
Common stock (1,518,774 shares at $5.17 per share)
   $ 7,852  
Vested portion of assumed stock options
     150  
 
      
 
        
Total equity consideration
   $ 8,002  
 
      
(H)   To record amortization expense related to purchased intangible assets as follows (in thousands):
                 
    Six months ended   Year ended
    January 31, 2008   July 31, 2007
     
Amortization expense included in cost of product revenues
   $ 1,113     $ 2,225  
Amortization expense included in cost of professional service and support revenues
     270       540  
Amortization expense included in sales and marketing expenses
     618       1,237  
     
 
                
Total amortization expense
   $ 2,001     $ 4,002  
     
(I)   To adjust interest income. The decrease in interest income was determined by applying the average rate of return on the Company’s short-term investments over the period presented to the assumed net decrease in the Company’s cash balance used to fund the acquisition.
 
(J)   As the Company has incurred operating losses since inception and only records a tax provision for foreign and state income taxes, there is no adjustment to the tax provision as a result of the acquisition.
 
(K)   To adjust pro forma basic net loss per share to reflect the issuance of 1,518,774 shares of the Company’s common stock related to the acquisition of AirWave as if the shares had been outstanding throughout the periods presented.

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