e.DIGITAL'S RESPONSE TO THE SMART MONEY ARTICLE PUBLISHED
TODAY.
FYI, here is the response we are forwarding to Smart Money and Dow Jones in response to the article.
Best regards,
Wendy Ravenel
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October 19, 1999
Smart Money Magazine
Attn: Bob Sabat, Executive Editor
1755 Broadway, 2nd Floor
New York, NY 10019
Dear Mr. Sabat:
We are writing in response to the article, "Street Smart: Surfing Wipeout", by Jena McGregor, published in the November 1999 article of Smart Money. We realize that there are editorial concerns and space constraints affecting every article, but we were very disappointed to see erroneous statements about our company and to see the insinuation that no one should consider investing in it.
The article apparently reflects the activities of a day trader who freely admits he did no research before making three purchases into our stock. The real cautionary tale here is that this person used Internet bulletin boards or chat rooms for company "news" when he should have read the company's web site or called and asked for an investor's information package. These are reasonable steps that everyone should take before investing their hard-earned money in any stock, no matter which stock exchange it trades on, and no matter how good a "tip" they get from a "friend" on the Internet.
The author of the article had access to spokespersons from the company and information from our web site and investor's information package. Also, the author admitted in person to talking with several other e.Digital investors who have done very well in the stock. (Incidentally, investors who bought in at the market price of $0.05 in January, 1999, are holding a profit of 2600% at the current $1.30 market price.) We feel that the one-sided focus of this article leaves the reader with a very negative and undeserved impression of our company, and that a deliberate choice was made to omit positive information in order to achieve a more dramatic effect.
Addressing the errors: defining e.Digital as a company that "makes software for digital music players" is incomplete. It leaves out the fact that e.Digital's patented MicroOS? flash memory file management system is applicable to a wide variety of portable digital devices, supporting all types of data including voice, music and video. Also, the company's overall success does not depend on "enter[ing] the MP3-player market by Christmas." The company's current revenue stream comes from licensing its technology for use in portable voice recorders for heavy dictation users. Customers Intel Corp., and Lanier Worldwide, Inc., a $1.6 billion subsidiary of Harris Corp., account for most of our revenue, and are focused on portable voice recorder applications including integration with voice-to-text and text-to-voice programs.
Secure, portable, Internet music players are a newer area of development, not just for e.Digital, but for an entire industry. e.Digital and Lucent Technologies are co-marketing a portable Internet music player design to a number of potential licensees. Standards currently being defined by the 120-plus members of the Secure Digital Music Initiative (SDMI) will have an effect on the introduction of any new portable music players. The five major record labels have yet to announce the availability of 90% of the most popular music content in digital form on the Internet.
The company admits it has a history of losses. All its financial information is available online through its web site and through the SEC's EDGAR database. In the past year, however, e.Digital has made vast improvements to its balance sheet, significantly reducing long-term debt and reducing overhead costs. The revenue drop mentioned in the article needs to be seen in the proper context. During the two years in question, the company moved away from retail products where it was experiencing huge losses (inventory was liquidated to a private label customer), and moved toward the business of providing OEM technology, intellectual property, design services, R&D, and manufacturing services for name-brand customers. The current quarter will show substantially increased revenue from a contract that is effective through December 2001, and other financial improvements of material importance to the company's long-term success.
In addition to our contracts with Intel, Lanier, and Lucent, e.Digital is an inaugural member of the VoiceTIMES Alliance, along with founder IBM, Intel, Philips, and others. The members of this alliance are taking the lead in developing open standards for the use of voice technology in a number of devices, across a variety of platforms.
We encourage current and prospective investors to educate themselves about the company by visiting edig.com, or by calling (858) 679-1504 to request an investor's package containing the latest financial statements, press releases and product information.
Again, we are disappointed to see that our company was so poorly characterized in Smart Money. We look forward to more objective coverage in the future.
Best regards,
Alfred H. Falk Robert Putnam
President & CEO Vice President, Investor Relations
CC: Dow Jones Business News Editor, New Jersey office
_____________________________________________________
Wendy Ravenel
Investor Relations/Public Relations
e.Digital Corporation
13114 Evening Creek Drive South
San Diego, CA 92128
(858)679-1504 PHONE
(858)486-3922 FAX
Note new area code (858) as of June 1999
edig.com
investor@edig.com |
