During recent years, however, the growing trend away from mainframe software development caused Zebra's new license revenues to tumble dramatically. The product is unique in the way it allows mainframe programmers to access existing mainframe systems. It serves as a bridge between the current mainframe environment and the new technologies. For the company's executives, the challenge was to find a financial partner who would not want a high percentage of the company's equity. A Strong and Stable Revenue Stream Zebra enjoys a steady, predictable, and extremely profitable revenue stream from its existing products.
Customers tend to use the product daily as part of their key business applications.
They pay either monthly or annual service fees for routine support of their software. Since they are privately owned, they generally prefer to provide loans to established companies rather than to start-ups. Given Zebra's concerns about equity dilution, going through an SBIC made sense. The investor was granted a security interest in the Zebra X revenue stream. The deal was structured as subordinated debt, meaning that Zebra could obtain new bank financing down the road, if needed.