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FORM S-1

SYNAPTICS INCORPORATED

2381 Bering Drive

Francis F. Lee

Copies to:

     Approximate date of proposed sale to the public:  As soon as practicable after the effective date of this Registration Statement.

     If any of the securities being registered in this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.

     If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.               

     If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.               

     If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.               

     If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box.

CALCULATION OF REGISTRATION FEE

     The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

PROSPECTUS

                                    Shares

Common Stock

      This is the initial public offering of Synaptics Incorporated. We are selling           shares of our common stock.

      There is currently no public market for our shares. We anticipate that the initial public offering price will be between $     and $     per share. We have applied to have our common stock approved for listing on the Nasdaq National Market under the symbol “SYNA.”

      See “Risk Factors” beginning on page 7 to read about certain risks that you should consider before buying shares of our common stock.

      Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

      The underwriters may purchase up to an additional          shares of common stock from selling stockholders at the initial public offering price less the underwriting discount to cover over-allotments.

      The underwriters expect to deliver the shares against payment in New York, New York on             , 2001.

Bear, Stearns & Co. Inc.

                                    Banc of America Securities LLC

                                                                        SG Cowen

ING Barings

The date of this prospectus is                , 2001

(inside front cover)

The top of the page has the Synaptics logo on the left side and to the right of the logo, the words, in quotations, "enriching the interaction between humans and intelligent devices."

Directly below the header is a centered grouping of an image and text. The text reads "TouchPad(TM)" with a line underneath and below that line are the words "We are the leader in TouchPads for notebook computers. Our TouchPad provides the most accurate, comfortable, and reliable method to provide screen navigation, cursor movement, and a platform for interactive input." To the left of the text is an image of a person's finger using a TouchPad.

Directly below this is another centered grouping of an image and text. The text reads "TouchStyk(TM)" with a line underneath and below that line are the words "The TouchStyk is a self-contained, easily integrated, modular pointing stick solution that uses the same capacitive technology as our TouchPad. Our modular approach allows OEMs to include our TouchPad, our TouchStyk, or a combination of both interfaces in their notebook computers." To the right of the text is an image of a person's finger using a TouchStyk.

Directly below this is another centered grouping of an image and text. The text reads "ClearPad(TM)" with a line underneath and below that line are the words "Our capacitive touch screen solution consists of a clear thin sensor that can be placed over any viewable surface, including display devices, such as LCDs. ClearPad is lightweight, reliable, durable and accurate and enables visual information display in conjunction with touch commands." To the left of the text is an image of a person holding a ClearPad between a finger and thumb.

Directly below this is another centered grouping of an image and text. The text reads "Spiral(R)" with a line underneath and below that line are the words "A thin lightweight, low power, inductive pen-sensing solution where the Spiral sensor lies behind an LCD screen, effectively permitting 100% light transmissivity and lower overall power consumption resulting from reduced backlighting requirements." To the right of the text is an image of a person holding a personal digital assistant device in their hands and tapping the screen with a pen.

Directly below this, at the bottom of the page, is another centered grouping of an image and text. The text reads "QuickStroke(R)" with a line underneath and below that line are the words "QuickStroke provides a fast, easy and accurate way to input Chinese characters. Our patented software can be used in conjunction with our TouchPad to recognize handwritten, partially finished Chinese characters, thereby saving considerable time and effort." To the left of the text are images of the company logo and two Chinese characters below the logo that denote QuickStroke and a screen shot from the QuickStroke program.

PROSPECTUS SUMMARY

      This summary highlights information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing in our common stock. You should read this entire prospectus carefully, especially “Risk Factors” and our consolidated financial statements and related notes.

Our Business

      We are a leading worldwide developer of custom-designed user interface solutions that enable people to interact more easily and intuitively with a wide variety of mobile computing and communications devices. We currently supply approximately 53% of the touch pads used in notebook computers throughout the world. Our new pointing stick is designed to address the portion of the notebook market that uses the pointing stick as the interface solution. We estimate that approximately 70% of notebook computers use touch pad interfaces while 25% of notebook computers use pointing stick interfaces. Our new pointing stick can be used with our touch pad to take advantage of the growing trend to dual pointing interface solutions. We believe our extensive intellectual property portfolio, our experience in providing interface solutions to major original equipment manufacturers, or OEMs, and our proven track record of growth in our expanding core notebook computer business position us to be a key technological enabler for multiple applications in many fast-growing markets. Based on these strengths, we are addressing the opportunities created by the growth of a new class of mobile computing and communications devices, commonly called intelligent appliances, or iAppliances. iAppliances include personal digital assistants, or PDAs, and smart phones as well as a variety of mobile, handheld, wireless, and Internet devices. We believe our existing technologies, our new product solutions, and our emphasis on ease of use, small size, low power consumption, advanced functionality, durability, and reliability will enable us to successfully penetrate the market for iAppliance interface solutions. Our OEM customers include Acer, Apple, Compaq, Dell, Gateway, Hewlett-Packard, Intel, Samsung, and Sharp.

      Our TouchPad™ is a small, touch-sensitive pad that senses the position of a person’s finger on its surface to provide screen navigation, cursor movement, and a platform for interactive input. Our TouchPads offer various advanced features, such as virtual scrolling; customizable tap zones to simulate mouse clicks, launch applications, or perform other select functions; Palm Check to eliminate false activation; and Edge Motion to continue cursor movement when the user’s finger reaches the edge of the touch pad. Our TouchPads are custom designed to meet our OEMs’ specifications regarding electrical interface, size, thickness, functionality, and driver software for various advanced features. We have added stylus capabilities to our TouchPad to allow pen based applications, such as drawing, signature capture, and handwriting recognition, without sacrificing the accurate, comfortable finger input capabilities of the TouchPad. TouchStyk™, our recently introduced pointing stick solution, enables computer manufacturers to offer end users the choice of a touch pad, a pointing stick, or a combination of both interface devices. TouchStyk is a self-contained, easily integrated module that uses the same sensing technology as our TouchPad. Our QuickStroke® provides a fast, easy, and accurate way to input Chinese characters and has the potential to become a primary interface for the Chinese language market. Using our proprietary pattern recognition technology that combines our patented software with our TouchPad, QuickStroke can recognize handwritten, partially finished Chinese characters, thereby saving considerable time and effort.

      We are offering various solutions for use in the emerging markets for iAppliances, such as PDAs, smart phones, smart handheld devices, Web terminals, Internet appliances, interactive games and toys, and automotive controls and displays. Our ClearPad™ touch screen solution is a thin sensor that can be placed over any surface, including display devices, such as liquid crystal displays, or LCDs. The ClearPad is a lightweight, low power consumption solution, and its flexible design allows it to be mounted on curved surfaces. ClearPad is an extension of our capacitive TouchPad technologies. Unlike standard resistive touch screens, ClearPad eliminates the need for an internal air gap, which greatly decreases internal reflections and their associated impact on display quality. This makes ClearPad an excellent solution for devices with color displays or for use outdoors. Our Spiral™ is a thin, lightweight, low power consumption, inductive pen-sensing system. The Spiral sensor lies behind an LCD screen, effectively permitting 100%

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      Our interface solutions extend beyond the notebook computer market and have broad applicability across many market segments. We believe our interface solutions are feature rich, highly accurate, easy to use, and reliable and offer OEMs in these various market segments modularity and design flexibility for their products. Our solutions enable our customers to solve their interface needs and differentiate their products from those of their competitors.

Our Opportunity

      We believe our company is well positioned to benefit from the continuing growth in the notebook computer market as well as the explosive growth that is occurring in the iAppliance markets.

      Technological Leadership. We have developed and own an extensive array of application specific integrated circuit, or ASIC, firmware, software, pattern recognition, and touch sensing technologies, which provide us with significant competitive advantages. Our intellectual property includes more than 57 patents issued and 25 patents pending. We conduct ongoing research, development, and engineering programs that concentrate on advancing our technologies and expanding them to serve new markets, enhancing the quality and performance of our product solutions, and developing new product solutions. Our technology enables us to develop innovative, intuitive, user-friendly interfaces that address the needs of our customers and improve their competitive positions. Our vision is to develop interface solutions that integrate touch, handwriting, vision, and voice capabilities that can be readily incorporated into various electronic devices.

      Expanding Market Leadership. We believe significant growth potential exists in our core notebook computer interface market. The market for notebook computer interfaces continues to grow as businesses are increasingly replacing desktop computers with notebooks. IDC forecasts an overall compound annual growth rate, or CAGR, of 16.7% for notebooks during the period from 2000 to 2004 compared to 12.8% for desktops during the same period. In addition, our TouchStyk will enable us to address the portion of the notebook computer market that utilizes pointing sticks as the interface; new TouchPad offerings will provide us with the opportunity to expand our leadership in the portion of the notebook computer market that utilizes touch pads; and our dual pointing solutions will enable us to serve the expanding portion of the market that includes both interfaces. We estimate that approximately 70% of notebook computers use touch pad interfaces while 25% of notebook computers use pointing stick interfaces.

      Significant iAppliance Opportunity. We believe our interface solutions address the need for portability, connectivity, and functionality demanded by manufacturers and end users in the rapidly growing iAppliance markets. Our cost-effective solutions offer ease of use, low power consumption, a small form factor, high reliability, and durability and foster larger and clearer-resolution display screens. These characteristics are critical to iAppliances that allow for information access, management, and exchange anywhere and anytime.

      Marquee Global Customer Base. Our OEM customers include eight of the world’s ten largest notebook computer OEMs. We supply our OEM customers through their contract manufacturers. Our long-standing relationships with these customers, as well as our relationships with consumer electronic manufacturers, should support our efforts to supply them with interfaces for the iAppliances that a number of them are developing. We provide worldwide customer sales and support through offices or representatives in the United States, the United Kingdom, China, Japan, Hong Kong, Taiwan, and Thailand.

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Our Strategy

      Our objective is to expand our position as the world’s leading supplier of interface solutions for the notebook computer market and to become a leading supplier of interfaces for the emerging high-growth iAppliance markets. Key elements of our strategy to achieve this objective include the following:

Our Offices

      We maintain our principal executive offices at 2381 Bering Drive, San Jose, California 95131, and our telephone number is (408) 434-0110. Our Web site is located at http://www.synaptics.com. The information contained at our Web site does not constitute part of this prospectus.

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The Offering

      The number of shares of common stock to be outstanding after this offering is based upon our outstanding shares as of December 31, 2000, assuming the exercise of a warrant to purchase 32,000 shares of our Series E preferred stock and the conversion of our outstanding preferred stock into common stock. These shares exclude 4,095,868 shares of common stock issuable upon the exercise of outstanding stock options at December 31, 2000 with a weighted average exercise price of $2.50 per share and 354,187 shares reserved for issuance under our stock option plans at December 31, 2000.

      Except when otherwise indicated, the information in this prospectus

      All references to “we,” “us,” “our,” “Synaptics,” or “the company” in this prospectus mean Synaptics Incorporated and all entities owned or controlled by Synaptics Incorporated, except where it is clear that the term means only the parent company.

      TouchPad™, TouchStyk™, ClearPad™, Spiral™, and Incremental Recognition Technology™ are trademarks of Synaptics and QuickStroke® is a registered trademark of Synaptics. All other trademarks, service marks, and trade names referred to in this prospectus are the property of their respective owners.

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SUMMARY CONSOLIDATED FINANCIAL DATA

      The following table sets forth our summary historical consolidated financial data. You should read this information in conjunction with our consolidated financial statements, including the related notes, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. The financial data as of December 31, 2000 and for the six months ended December 31, 1999 and 2000 are derived from financial statements that are unaudited.

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      The as adjusted consolidated balance sheet data gives effect to the following:

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RISK FACTORS

      Before you invest in our common stock, you should be aware that there are risks, including those set forth below. You should carefully consider these risk factors, together with all the other information included in this prospectus, before you decide to purchase shares of our common stock.

Risks Related to our Business

We depend on one product and one market for our revenue.

      Historically, we have derived our revenue primarily from our TouchPads for notebook computers. Our new TouchStyk product solution also is targeted at the notebook computer market. The personal computer, or PC, market as a whole recently has experienced a slowdown in growth. While our long-term objective is to derive revenue from multiple interface solutions for both the notebook computer market and the iAppliance markets, we anticipate that sales of our TouchPads and TouchStyks for notebooks will continue to represent the most substantial portion of our revenue, at least in the near term. As a result, a decline in the demand in the notebook portion of the PC market would have an adverse effect on our revenue.

Our emerging iAppliance interface business may not be successful.

      Our emerging iAppliance interface business, from which we expect to derive substantial revenue, faces many uncertainties. Our inability to address these uncertainties successfully and to become a leading supplier of interfaces to the iAppliance markets would result in a slower growth rate than we currently anticipate.

      Various target markets for our iAppliance interfaces, such as those for PDAs, smart phones, smart handheld products, Web terminals, Internet appliances, and interactive games and toys, are uncertain, may develop slower than anticipated, or could utilize competing technologies. The market for these products depends in part upon the development and deployment of wireless and other technologies, which may or may not address the needs of users of these new products.

      Our ability to generate significant revenue from the iAppliance markets will depend on various factors, including the following:

      Many manufacturers of these products have well-established relationships with competitive suppliers. Penetrating these markets will require us to offer better performance alternatives to existing solutions at competitive costs. We do not have any significant backlog of orders for our interface solutions to be incorporated in products in these markets. The revenue and income potential from these markets is unproven. We cannot assure you that our solutions will be adopted by significant segments of these markets, or at all.

      Many iAppliance products have only recently become available to consumers, and widespread market acceptance is uncertain. In addition, the commercial success of these products is unknown. Gaining acceptance in these markets may prove difficult because of our different approach to interfaces. The failure of any of these target markets to develop as we expect, or our failure to penetrate these markets, will impede our anticipated sales growth and could result in substantially reduced earnings from those we anticipate. We cannot predict the size or growth rate of these markets or the market share of these markets that we will achieve.

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Our new interface solutions may not be commercially accepted.

      Our emerging TouchStyk, ClearPad, and Spiral solutions have no established track record. The failure to incorporate these technologies successfully into our customers’ products as the interface of choice would adversely affect our ability to increase our revenue. To succeed, we must help potential customers recognize the performance advantages of our solutions. The ability to produce these new products in sufficient quantities and the revenue and income potential of our new solutions are unproven.

Our historical financial information may not be indicative of our future performance.

      Our historical financial information primarily reflects the sale of TouchPads for notebook computers. While we expect this portion of our business to continue as an important contributor to our financial performance, we believe our future financial performance will be significantly impacted by sales in the iAppliance markets. We do not have an operating history in the iAppliance markets upon which you can evaluate our prospects, which may make it difficult to predict our actual results in future periods. Actual results of our future operations may differ materially from our anticipated results.

The products of our customers may not achieve market acceptance.

      We do not sell any products to end users. Instead, we design various interface solutions that our OEM customers incorporate into their products. As a result, our success depends almost entirely upon the widespread market acceptance of our customers’ products, many of which are just emerging, particularly in the case of iAppliances. We do not control or influence the manufacture, promotion, distribution, or pricing of the products that incorporate our interface solutions. Instead, we depend on our customers to manufacture and distribute products and to generate consumer demand through marketing and promotional activities. Any significant slowdown in the demand for our customers’ products or the failure in the marketplace of new products of our customers would adversely affect our profitability.

      Because our success depends on the widespread market acceptance of our customers’ products, we must continue to maintain our relationships with the leading notebook computer OEMs. In addition, we must identify areas of significant growth potential in the emerging iAppliance markets, establish relationships with OEMs in those markets, and assist those OEMs in developing products that use our interface technologies. Our failure to identify potential growth opportunities, particularly in the iAppliance markets, or establish relationships with OEMs in those markets, would adversely affect our business. Even if our technologies successfully meet our customers’ price and performance goals, our customers may not achieve commercial success in selling their products that incorporate our interface technologies.

Our sales may not increase if we fail to continue to satisfy our customers.

      Our ability to meet the expectations of our customers exposes us to a variety of risks, including the following:

Our failure to address these risks may prevent our sales from growing.

We rely on a limited number of companies for a significant portion of our sales.

      Sales to four companies that provide manufacturing services for major notebook computer OEMs accounted for 24%, 13%, 13%, and 12% of our net revenue during the fiscal year ended June 30, 2000, and 28%, 8%, 8%, and 8% of our net revenue for the six months ended December 31, 2000. Additionally, receivables from two of these contract manufacturers comprised 54% and 7% of our accounts receivable at

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      Our current customer base consists primarily of major U.S.-based OEMs that sell notebook computers worldwide. Competitive advances by Japan-based OEMs at the expense of U.S.-based OEMs could result in lost sales opportunities.

Our revenue may decline if our customers seek alternative sources of supply.

      We serve as the sole source provider for many of our customers. Those customers may choose to reduce their dependence on us by seeking second sources of supply, which would adversely affect our business. We must continue to demonstrate to our customers that we have adequate alternate sources for components, that we maintain adequate alternatives for production, and that we can deliver our products on a timely basis.

We rely on others for our production and any interruptions of these arrangements could adversely affect our business.

      We contract for all of our production requirements. The majority of our manufacturing is conducted in China, Thailand, and Taiwan by manufacturing subcontractors that also perform services for numerous other companies. We do not have a guaranteed level of production capacity. The loss of our relationships with our manufacturing subcontractors or assemblers or their inability to conduct their manufacturing and assembly services for us as anticipated in terms of cost, quality, and timeliness could adversely affect our ability to fill customer orders in accordance with required delivery, quality, and performance requirements. Qualifying new manufacturing subcontractors, and specifically semiconductor foundries, is time-consuming and could disrupt our relationships with our customers.

We depend on third parties to maintain satisfactory manufacturing yields and delivery schedules.

      We depend on our manufacturing subcontractors to maintain high levels of productivity and satisfactory delivery schedules at manufacturing and assembly facilities in China, Thailand, and Taiwan. We provide our manufacturing subcontractors with six-month rolling forecasts of our production requirements. We do not, however, have long-term agreements with any of our manufacturing subcontractors that guarantee production capacity, prices, lead times, or delivery schedules. Our manufacturers serve many other customers, a number of which have greater production requirements than we do. As a result, our manufacturers could determine to prioritize production capacity for other customers or reduce or eliminate deliveries to us on short notice. At times, we have experienced lower than anticipated manufacturing yields and lengthening of delivery schedules. Lower than expected manufacturing yields could increase our costs or disrupt our supplies. We may encounter lower manufacturing yields and longer delivery schedules in commencing volume production of our new products. Any of these problems could result in our inability to deliver our product solutions in a timely manner and adversely affect our operating results.

Shortages of components and materials may delay or reduce our sales and increase our costs.

      The inability to obtain sufficient quantities of components and other materials necessary for the production of our products could result in reduced or delayed sales or lost orders. Any delay in or loss of sales could adversely impact our operating results. Many of the materials used in the production of our

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      From time to time, materials and components used in our product solutions or in other aspects of our customers’ products have been subject to allocation because of shortages of these materials and components. During fiscal 2000, limited manufacturing capacity for ASICs resulted in significant cost increases of our ASICs. Similar shortages in the future could cause delayed shipments, customer dissatisfaction, and lower revenue.

We are subject to lengthy development periods and product acceptance cycles.

      We provide interface solutions that are incorporated by OEMs into the products they sell. OEMs make the determination during their product development programs whether to incorporate our interface solutions or pursue other alternatives. This process requires us to make significant investments of time and resources in the custom design of interface solutions well before our customers introduce their products incorporating these interfaces and before we can be sure that we will generate any significant sales to our customers or even recover our investment. During a customer’s entire product development process, we face the risk that our interfaces will fail to meet our customer’s technical, performance, or cost requirements or that our products will be replaced by a competitive product or alternative technological solutions. Even if we complete our design process in a manner satisfactory to our customer, the customer may delay or terminate its product development efforts. The occurrence of any of these events would adversely affect our operating results.

We do not have long-term purchase commitments from our customers.

      Our customers do not provide us with firm, long-term volume purchase commitments. As a result, customers can cancel purchase commitments or reduce or delay orders at any time. The cancellation, delay, or reduction of customer commitments could result in reduced revenue, excess inventory, and unabsorbed overhead. Substantially all of our sales to date have been in the notebook computer market, and we expect an increasing portion of our sales will be in the emerging iAppliance markets. All of these markets are subject to severe competitive pressures, rapid technological change, and product obsolescence, which increase our inventory and overhead risks.

We face intense competition.

      We serve intensely competitive markets that are characterized by price erosion, rapid technological change, and competition from major domestic and international companies. This intense competition could result in pricing pressures, lower sales, reduced margins, and lower market share. Some of our competitors, particularly in the iAppliance markets, have greater market recognition, larger customer bases, and substantially greater financial, technical, marketing, distribution, and other resources than we possess and that afford them competitive advantages. As a result, they may be able to introduce new product solutions and respond to customer requirements more quickly than we can. Our competitive position could suffer if one or more of our customers decide to design and manufacture their own interfaces, to contract with our competitors, or to use alternative technologies.

      Our ability to compete successfully depends on a number of factors, both within and outside our control. These factors include the following:

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Our business will suffer if we do not keep pace with technological innovations.

      We operate in rapidly changing markets. Technological advances, the introduction of new products, and new design techniques could adversely affect our business unless we are able to adapt to the changing conditions. Technological advances could render our solutions obsolete, and we may not be able to respond effectively to the technological requirements of evolving markets. As a result, we will be required to expend substantial funds for and commit significant resources to

      Our business could be hampered if we are unable to develop and utilize new technologies, or our competitors or customers do so more effectively than we do.

Our efforts to develop new technologies may not result in commercial success.

      Our research and development efforts with respect to new technologies may not result in customer or market acceptance. Some or all of those technologies may not successfully make the transition from the research and development lab to cost-effective production as a result of technology problems, competitive cost issues, yield problems, and other factors. Even when we successfully complete a research and development effort with respect to a particular technology, our customers may decide not to introduce or may terminate products utilizing the technology for a variety of reasons, including the following:

      The nature of our business requires us to make continuing investments for new technologies. To facilitate the development of our inductive technology, we completed the acquisition of Absolute Sensors Limited during fiscal 2000. We may be required to make similar acquisitions and other investments in the future to maintain or enhance our ability to offer technological solutions.

      Significant expenses relating to one or more new technologies that ultimately prove to be unsuccessful for any reason could have a material adverse effect on us. In addition, any investments or acquisitions made to enhance our technologies may prove to be unsuccessful.

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We must continue to enhance our existing product solutions and develop new product solutions.

      Our future operating results will depend to a significant extent on our ability to continue to provide new interface solutions that compare favorably with alternative solutions on the basis of time to introduction, cost, and performance. Our success in maintaining existing and attracting new customers and developing new business depends on various factors, including the following:

A technologically new interface solution that achieves significant market share could harm our business.

      Our interface solutions are designed to integrate touch, handwriting, and vision capabilities. New computing and communications devices could be developed that call for a different interface solution. Existing devices also could be modified to allow for a different interface solution. Our business could be harmed if a technological breakthrough allows a new interface solution to displace our solutions and achieve significant market acceptance.

We face risks associated with international operations.

      Our manufacturing and assembly operations are conducted in China, Thailand, and Taiwan, and we have subsidiaries in Taiwan and England. These international operations expose us to various economic, political, and other risks, including the following:

      Changes in policies by the United States or foreign governments resulting in, among other things, increased duties, higher taxation, currency conversion limitations, restrictions on the transfer of funds, limitations on imports or exports, or the expropriation of private enterprises also could have a material adverse effect on us. Any actions by countries in which we conduct business to reverse policies that encourage foreign investment or foreign trade also could adversely affect our operating results. In addition, U.S. trade policies, such as “most favored nation” status and trade preferences for certain Asian nations, could affect the attractiveness of our services to our U.S. customers.

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Our business may suffer if international trade is hindered, disrupted, or economically disadvantaged.

      Political and economic conditions abroad may adversely affect the foreign production and sale of our products. Protectionist trade legislation in either the United States or foreign countries, such as a change in the current tariff structures, export or import compliance laws, or other trade policies, could adversely affect our ability to sell interface solutions in foreign markets and to obtain materials or equipment from foreign suppliers.

      We transact business predominantly in U.S. dollars and bill and collect our sales in U.S. dollars. In the future, customers may make payments in non-U.S. currencies. In addition, a portion of our costs, such as payroll, rent, and indirect operating costs, are denominated in non-U.S. currencies, including British pounds and Taiwan dollars.

      Fluctuations in foreign currency exchange rates could affect our cost of goods and operating margins and could result in exchange losses. In addition, currency devaluation can result in a loss to us if we hold deposits of that currency. The Chinese renminbi has experienced significant devaluation against most major currencies over the last five years. Hedging foreign currencies can be difficult, especially if the currency is not freely traded. We cannot predict the impact of future exchange rate fluctuations on our operating results.

      Sales to Taiwan-based contract manufacturers for OEMs based in the United States account for a significant percentage of our net sales. In fiscal 2000, sales to Taiwan-based contract manufacturers for U.S.-based OEMs alone accounted for 88% of our net sales. In the future, we expect sales to OEMs based in Europe and Asia to increase.

A majority of our outsourced operations are located in Taiwan, increasing the risk that a natural disaster, labor strike, war, or political unrest in that country would disrupt our operations.

      A majority of our outsourced operations are located in Taiwan. Events out of our control such as earthquakes, fires, floods, or other natural disasters in Taiwan or political unrest, war, labor strikes, or work stoppages in Taiwan would disrupt our operations. The risk of earthquakes in Taiwan is significant because of its proximity to major earthquake fault lines. An earthquake like the one that occurred in Taiwan in September 1999 could cause significant delays in shipments of our product solutions until we are able to shift our outsourced operations. In addition, there is currently significant political tension between Taiwan and China, which could lead to hostilities. If any of these events occur, we may not be able to obtain alternative capacity. Failure to secure alternative capacity could cause a delay in the shipment of our product solutions, which would cause our revenue to fluctuate or decline.

Variability of customer requirements may adversely affect our operating results.

      OEM suppliers must provide increasingly rapid product turnaround and respond to ever-shorter lead times. A variety of conditions, both specific to individual customers and generally affecting the demand for their products, may cause customers to cancel, reduce, or delay orders. Cancellations, reductions, or delays by a significant customer or by a group of customers could adversely affect our business. On occasion, customers require rapid increases in production, which can strain our resources and reduce our margins. Although we have been able to obtain increased production capacity from our third-party manufacturers, we may be unable to do so at any given time to meet our customers’ demands if their demands exceed anticipated levels.

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Our operating results may experience significant fluctuations.

      In addition to the variability resulting from the short-term nature of our customers’ commitments, other factors contribute to significant periodic and seasonal quarterly fluctuations in our results of operations. These factors include the following:

      Accordingly, you should not rely on period-to-period comparisons as an indicator of our future performance. Fluctuations in our operating results may result in a decline in the price of our stock.

We must effectively manage our growth.

      The failure to manage our growth effectively could adversely affect our operations. We have increased the number of our interface solutions and plan to expand further the number and diversity of our solutions and their use in the future. Our ability to manage our planned growth effectively will require us to

      As we expand and diversify our product and customer base, we may be required to increase our overhead and selling expenses. We also may be required to increase staffing and other expenditures, including expenses in order to meet the anticipated demand of our customers. Our customers, however, do not commit to firm production schedules for more than a short time in advance. Any increase in expenses in anticipation of future orders that do not materialize would adversely affect our profitability. Our customers also may require rapid increases in design and production services that place an excessive short-term burden on our resources and the resources of our third-party manufacturers.

We depend on key personnel.

      Our success depends substantially on the efforts and abilities of our senior management and technical personnel. The competition for qualified management and technical personnel, especially engineers, is intense. The loss of services of one or more of our key employees or the inability to hire, train, and retain key personnel, especially engineers and technical support personnel, could delay the development and sale of our products and have a material adverse effect on us. Although we maintain non-competition and

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We must protect our intellectual property.

      We believe that our success depends in part on protecting our proprietary technology. We rely on a combination of patent, copyright, trade secret, trademark, and other intellectual property laws, confidentiality procedures, and contractual provisions to protect our intellectual property. These measures may afford only limited protection, and we cannot be certain that these measures will adequately protect our intellectual property. Despite our efforts to protect our intellectual property both under the laws of the United States and under the laws of foreign countries, we face risks associated with our intellectual property, including the following:

We may be required to incur substantial expenses and divert management attention and resources in defending intellectual property litigation against us.

      The industries in which we compete are characterized by numerous allegations of and lawsuits involving infringement of intellectual property rights. Third parties may claim we are infringing their patents and intellectual property rights and assert infringement claims against us. The defense of any such claim, regardless of its merit, could result in our incurring substantial expenses and diverting significant management attention and other resources away from our operations. In the event of an adverse result in any future litigation or claim, we may be required to

We may incur substantial expenses and divert management resources in prosecuting others for their unauthorized use of our intellectual property rights.

      Should any of our competitors file patent applications or obtain patents that claim inventions also claimed by us, we may choose to participate in an interference proceeding to determine the right to a patent for these inventions because if we fail to enforce and protect our intellectual property rights, our business would be harmed. Even if the outcome is favorable, this proceeding could result in substantial cost to us and disrupt our business.

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If we become subject to product returns and product liability claims resulting from defects in our products, we may fail to achieve market acceptance of our products and our business could be harmed.

      We develop complex products in an evolving marketplace. Despite testing by us and our customers, defects may be found in existing or new products. These defects could result in a delay in recognition or loss of revenue, loss of market share, or failure to achieve market acceptance. Additionally, these defects could result in financial or other damages to our customers; cause us to incur significant warranty, support, and repair costs; and divert the attention of our engineering personnel from our product development efforts. In such circumstances, our customers could also seek and obtain damages from us for their losses. A product liability claim brought against us, even if unsuccessful, would likely be time consuming and costly to defend.

Potential strategic alliances may not achieve their objectives.

      We anticipate that we will enter into various additional strategic alliances. Among other matters, we will explore strategic alliances designed to enhance or complement our technology or to work in conjunction with our technology; to provide necessary know-how, components, or supplies; and to develop, introduce, and distribute products utilizing our technology. Any strategic alliances may not achieve their intended objectives, and parties to our strategic alliances may not perform as contemplated.

Any acquisitions that we undertake could be difficult to integrate, disrupt our business, dilute stockholder value, and harm our operating results.

      We expect to review opportunities to acquire other businesses or technologies that would complement our current interface solutions, expand the breadth of our markets, enhance our technical capabilities, or otherwise offer growth opportunities. While we have no current agreements or negotiations underway, we may acquire businesses, products, or technologies in the future. If we make any future acquisitions, we could issue stock that would dilute existing stockholders’ percentage ownership, incur substantial debt, or assume contingent liabilities. Our experience in acquiring other businesses and technologies is limited. Potential acquisitions also involve numerous risks, including the following:

      We cannot assure you that we would be successful in overcoming problems encountered in connection with any acquisitions, and our inability to do so could adversely affect our business.

The PC and electronics industries are cyclical.

      The PC and electronics industries have experienced significant economic downturns at various times, characterized by diminished product demand, accelerated erosion of average selling prices, and production over-capacity. In addition, the PC and electronics industries are cyclical in nature. We seek to reduce our exposure to industry downturns and cyclicality by providing design and production services for leading companies in rapidly expanding industry segments. We may, however, experience substantial period-to-period fluctuations in future operating results because of general industry conditions or events occurring in the general economy.

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Legislation affecting the markets in which we compete could adversely affect our ability to implement our iAppliance strategy.

      Our ability to expand our business may be adversely impacted by future laws or regulations. Our customers’ products may be subject to laws relating to communications, encryption technology, electronic commerce, e-signatures, and privacy. Any of these laws could be expensive to comply with, and the marketability of our products could be adversely affected.

We must finance the growth of our business and the development of new products.

      To remain competitive, we must continue to make significant investments in research and development, marketing, and business development. Our failure to increase sufficiently our net sales to offset these increased costs would adversely affect our operating results.

      From time to time, we may seek additional equity or debt financing to provide for expenses required to expand our business. We cannot predict the timing or amount of any such requirements at this time. If such financing is not available on satisfactory terms, we may be unable to expand our business or to develop new business at the rate desired and our operating results may suffer. Debt financing increases expenses and must be repaid regardless of operating results. Equity financing could result in additional dilution to existing stockholders.

Risks Related to this Offering

You may not be able to sell our stock at a favorable price or at all.

      Before this offering, there has been no public market for our common stock. An active public market for our common stock may not develop or be sustained after this offering. The price of our common stock in any such market may be higher or lower than the price you pay. If you purchase shares of common stock in this offering, you will pay a price that was not established in a competitive market. Rather, you will pay the price that we negotiated with the representatives of the underwriters. Many factors could cause the market price of our common stock to rise and fall, including the following:

      In addition, stocks of technology companies have experienced extreme price and volume fluctuations that often have been unrelated or disproportionate to these companies’ operating performance. Public announcements by technology companies concerning, among other things, their performance, accounting practices, or legal problems could cause the market price of our common stock to decline regardless of our actual operating performance.

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Our board of directors has the ability to reject an acquisition that you would accept.

      Our certificate of incorporation and the Delaware General Corporation Law contain provisions that may have the effect of making more difficult or delaying attempts by others to obtain control of our company, even when these attempts may be in the best interests of stockholders. Our certificate also authorizes the board of directors, without stockholder approval, to issue one or more series of preferred stock, which could have voting and conversion rights that adversely affect or dilute the voting power of the holders of common stock. Delaware law also imposes conditions on certain business combination transactions with “interested stockholders.”

Our officers, directors and affiliated entities own a large percentage of our company and could significantly influence the outcome of actions in ways that could cause our stock price to decline.

      We anticipate that our executive officers, directors, entities affiliated with them, and other 5% or greater stockholders will, in total, beneficially own approximately      % of our outstanding common stock after this offering. These stockholders, acting together, would be able to influence significantly all matters requiring approval by our stockholders, including the election of directors. Thus, actions might be taken even if other stockholders, including those who purchase shares in this offering, oppose them. This concentration of ownership might also have the effect of delaying or preventing a change of control of our company, which could cause our stock price to decline.

Management will have discretion over the use of proceeds from this offering and could spend or invest those proceeds in ways with which you might not agree.

      Our management will have broad discretion with respect to the use of the net proceeds of this offering, and you will be relying on the judgment of our management regarding the application of these proceeds. We currently expect to use these proceeds to increase working capital and for other general corporate purposes. In addition, we may use a portion of the net proceeds to acquire or invest in complementary businesses, products, or technologies. These investments may not yield a favorable return.

Substantial future sales of our common stock could cause our stock price to decline.

      The market price of our common stock could decline as a result of sales of a large number of shares of our common stock in the market after this offering or the perception that these sales could occur. Based on shares outstanding as of December 31, 2000, and assuming the exercise of a warrant to acquire 32,000 shares of our Series E preferred stock and the conversion of all of our preferred stock into 11,105,517 shares of common stock upon completion of this offering, we will have outstanding                shares of common stock. Of these shares, the common stock sold in this offering will be freely tradeable, except for any shares purchased by our “affiliates” as defined in Rule 144 under the Securities Act of 1933. Of the remaining 17,491,236 shares of common stock,                shares held by our officers, directors, and certain stockholders will be subject to 180-day lock-up agreements with the underwriters. Bear, Stearns & Co. Inc., in its sole discretion, may release any portion of the securities subject to these lock-up agreements. After the 180-day lock-up period, these shares may be sold in the public market, subject to prior registration or qualification for an exemption from registration, including, in the case of shares held by affiliates, compliance with volume restrictions. After the lock-up period,                of these shares will be immediately available for sale in the public market without registration under Rule 144(k). The remaining shares held by our existing stockholders will become available for sale under Rule 144 or Rule 701 at varying times following the offering and after 90 days after the offering.

      Stockholders owning 11,105,517 shares are entitled, under contracts providing for registration rights, to require us to register our securities owned by them for public sale. In addition, based on options outstanding as of December 31, 2000, after this offering, 4,095,868 shares will be subject to outstanding options. We intend to file a registration statement to register shares issuable upon the exercise of outstanding stock options and shares reserved for future issuance under our stock option and stock purchase plans as well as to register for resale 3,100,747 shares previously issued upon exercise of options.

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We do not pay cash dividends.

      We have never paid any cash dividends on our common stock and do not anticipate that we will pay cash dividends in the near term. Instead, we intend to apply any earnings to the expansion and development of our business.

You will experience immediate and substantial dilution in the net tangible book value of the shares you purchase in this offering.

      If you purchase shares of common stock in this offering, you will experience immediate and substantial dilution of $     per share, based on an assumed initial public offering price of $     per share. This dilution arises because our earlier investors paid substantially less than the public offering price when they purchased their shares of common stock. You will also experience dilution upon the exercise of outstanding stock options to purchase our common stock. As of December 31, 2000, there were options outstanding to purchase 4,095,868 shares of common stock with a weighted average exercise price of $2.50 per share.

You should not rely on forward looking statements because they are inherently uncertain.

      This prospectus contains forward-looking statements that involve risks and uncertainties. We use words such as “anticipate,” “believe,” “plan,” “expect,” “future,” “intend,” and similar expressions to identify forward-looking statements. Our actual results could differ materially from the results contemplated by these forward-looking statements because of any of the risks to our business described in this prospectus. You should not unduly rely on these forward-looking statements, which apply only as of the date of this prospectus.

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USE OF PROCEEDS

      Assuming an initial public offering price of $     per share, we estimate that we will receive net proceeds of $     million after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds from this offering

      We have not yet determined the exact amounts that we will spend for any of these uses. We are not in any discussions regarding acquisitions. The amounts and purposes for which we allocate the net proceeds of this offering may vary significantly depending upon a number of factors, including future revenue and the amount of cash generated by our operations. As a result, we will retain broad discretion in the allocation of the net proceeds from this offering. Pending the uses described above, we will invest the net proceeds in interest-bearing, investment-grade securities.

      We will not receive any proceeds from the sale of common stock to be sold by the selling stockholders if the over-allotment option is exercised.

DIVIDEND POLICY

      We have never declared or paid cash dividends on our preferred stock or our common stock. We currently plan to retain any earnings to finance the growth of our business rather than to pay cash dividends. Payments of any cash dividends in the future will depend on our financial condition, results of operations, and capital requirements as well as other factors deemed relevant by our board of directors.

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CAPITALIZATION

      The table below sets forth the following:

      The number of shares of our common stock outstanding excludes the following:

      For a discussion of our stock plans, see Notes 8 and 14 to the consolidated financial statements.

      Please read the capitalization table together with the sections of this prospectus entitled “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.

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DILUTION

      Our pro forma net tangible book value as of December 31, 2000 was $12,480,000, or $0.71 per share of common stock. Pro forma net tangible book value per share represents the amount of our total tangible assets less total liabilities, divided by the pro forma number of outstanding shares of common stock. Pro forma outstanding shares of common stock as of December 31, 2000 assumes the exercise of a warrant to purchase 32,000 shares of our Series E preferred stock and the automatic conversion of our preferred stock outstanding into 11,105,517 shares of our common stock.

      Dilution in net tangible book value per share represents the difference between the amount per share paid by purchasers of shares of our common stock in this offering and the pro forma net tangible book value per share of our common stock immediately after completion of this offering. After giving effect to our sale of                shares at an assumed initial public offering price of $     per share and after deducting estimated underwriting discounts and commissions and our estimated offering expenses, our pro forma net tangible book value at December 31, 2000 would have been $     million, or $     per share. This represents an immediate increase in net tangible book value of $     per share to existing stockholders and an immediate dilution in net tangible book value of $     per share to purchasers of shares in this offering. The following table illustrates this per share dilution:

      The following table summarizes on a pro forma basis as of December 31, 2000, the differences between the number of shares purchased from us, the total consideration paid to us, and the average price per share paid by existing stockholders and by the new investors at an assumed initial public offering price of $     per share before deducting the estimated underwriting discounts and commissions and estimated expenses of this offering.

      If the underwriters’ over-allotment option is exercised in full, the number of shares of common stock held by existing stockholders will be reduced to                , or      % of the total number of shares of common stock to be outstanding after this offering, and the number of shares held by new investors will increase to                shares, or      % of the total number of shares of common stock to be outstanding after this offering. See “Principal and Selling Stockholders.”

      In the discussion and tables above, we assume no exercise of outstanding options. At December 31, 2000, there were outstanding options to purchase 4,095,868 shares of our common stock at a weighted average exercise price of $2.50 per share. The discussion and tables also exclude any shares available for future grant under our stock option plans. The issuance of common stock in connection with the exercise of these options will result in further dilution to new investors.

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SELECTED CONSOLIDATED FINANCIAL DATA

      The following selected consolidated financial data should be read in conjunction with our consolidated financial statements and the notes to those statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

      The consolidated statements of operations data presented below for the fiscal years ended June 30, 1998, 1999, and 2000 and the consolidated balance sheet data as of June 30, 1999 and 2000 has been derived from our financial statements, which have been audited by Ernst & Young LLP, independent auditors, and which appear elsewhere in this prospectus. The consolidated statements of operations data for the fiscal years ended June 30, 1996 and 1997 and the consolidated balance sheet data as of June 30, 1996, 1997, and 1998 has been derived from our audited financial statements that are not included in this prospectus. The consolidated statements of operations data for the six months ended December 31, 1999 and 2000 and the consolidated balance sheet data as of December 31, 2000 have been derived from our unaudited financial statements that appear elsewhere in this prospectus. These unaudited financial statements include all adjustments that we consider necessary for a fair presentation of that information. These adjustments are only of a normal and recurring nature. Historical operating results are not necessarily indicative of the results that may be expected for any future period.

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