Shareholder Meeting Q & A Session Transcript:
(Courtesy of Yamar at RB)
Q: (From elliot55) That thing [the player] sounds like it's really cranking...traditionally, walkman type players have had a pre-amp in [them] and I was wondering if you guys were designing it with a real kick-butt pre amp in it...I really want it to blow my head right off [Laughter from audience]
A: Our interest all along has been high-quality audio, making sure nothing was lost in the compression, and that's where Lucent steps in. The player will also be very feature rich and have all the things to support good audio playback.
(elliot55): Excellent and one more thing...this isn't really a question, it's more of a comment: JIM SEYMOUR CAN KISS MY BUTT!
[Cheers & applause]
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Q: I recently heard David Bowie in an interview saying the downloading of music was dependent on broadband and high-speed connections. How does [the player] fit into this?
A: Basically, it's really up to the telecommunications industry to take care of that for us. And there's some technology being developed to get around that [bandwidth limitations]...it's really rocket sciencey type stuff so we really can't talk about it today. That's the really fundamental limit today of PC growth, so if you look at where Intel and IBM are spending their money, that's where it is. Also that's what we'll be talking about at JUSTRI, how the telecommunications industry can help us.
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Q: I just have one small question and a comment. I'm an ancient shareholder, since March of last year, when we all had a wonderful time and loaded up on this at a nickel and six cents. I just wanted to say, I've owned a lot of stocks and was a broker for 15 years, that I've never had such receptivity to questions/comments and warm support, I remember talking to Robert after his 75th phone call of the day and I'm sure it was just as nice as his first. Wendy has been fantastic. Fred has been fantastic. [Interrupted by loud cheers and applause]
Can you give us a little insight on the Intel prototypes?
A: Well, as I said earlier, there are some changes occurring in regards to what Intel would like us to come out with...and I really can't go into any detail beyond that. We hope to be able to make some announcements soon about that.
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Q: There was an article recently in the SD Tribune about the Madison Project and it was not secure at all, the person was able to copy the downloaded music...it was easily copied. Would you care to comment on that?
A: I'm not aware of the article but I know, through meetings we've had, the purpose of the project is to demonstrate how downloading music of the internet IS secure...that surprises me to hear that. I don't know how to comment on that. The Madison Project is also more than just music, there's also other parts to that as far as downloading through the high-speed cable modems and security is an issue they're discussing and looking at it.
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Q (2nickles (in purple shirt)): On this particular player here, being round, is it easier to manipulate the buttons?
A: No, actually the core design can be any shape the customer wants it to be. We have a whole slew of other industrial design ideas as to what this thing could look like. We just happened to choose this shape because it's so different from anything that's out there right now. So the design is very flexible...when this thing ends up it being a final product, this is only an engineering prototype for this meeting, Comdex and WebNoise, it will be about 3/4 of an inch smaller in diameter than this. [Oohhs & Aahhhs]
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Q (From drhunt): You mentioned a lot of CODECs but you failed to mention AT&T's a2b, is there a reason for that? And also why hasn't e.Digital accepted an equity investment from one of its partners?
A: If the a2b CODEC has been ported to the TI DSP that we're using, the player will support it. At this point I'm not aware if that's happened yet but if it does the player will support it. In regards to your second question, um, i'll probably have to throw you a "no comment" at this point, unfortunately...remember I have corporate council sitting right here. [Laughter]
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Q: I had an opportunity to see the Lanier healthcare products at a trade show and I was tremendously impressed by them and the digital device. VTT for doctors & other professionals would be the creme de la creme. Can you give us some idea how soon you'll be able to convert digital voice files from the handheld, through the docking station, to text on the PC?
A: We have already been demonstrating VTT in our engineering lab, that technology exists already, and we have been talking with Lanier on how to modify the Cquence device to support VTT. I can't give you a timeline, because that's up to Lanier to determine, but that technology does exist today.
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Q: Someone earlier said they had been a shareholder since last March....I bought 27,000 shares in 1994 at $3.75. [Laughter & applause] And I'm delighted with the new management. But my question springs from the prototype. It brought back bad memories of the Flashback, all grey...will the aesthetic of the final player be different?
A: Yes, the big difference between the Flashback and this product is that the Flashback was a product sold by Norris under it's own name. This product will be sold by well-known OEM companies and they will make sure that this product looks like a professional product before it goes out in the marketplace.
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Q: I can't help but notice everyone is dressed in black, and I know you're not all members of the clergy. Can we draw from inference from that the company will be in black? [Laughter]
A: We have publicly stated, and stand by, when we are fully shipping the Lanier products, and I think this quarter qualifies as fully shipping, we believe that we can return to cash flow positive after 3 full months of shipment of what Lanier is talking about, at our current burn rate we believe we will be break-even to profitable. [Applause] That's without all the other opportunities that are coming our way right now and hence with the start of the Internet Audio Group and the hiring of new engineers, we think we can return to the black sometime very soon, hopefully in the calendar year 2000. I'd also like to say that unlike the specialized Lanier product, this product [the music player] can be used by anyone and as soon as we sign on an OEM or OEMs, the revenue projections on a product like this should completely eclipse the revenue projections we have on the Lanier product. There's a big difference as far as your customer base goes.
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Q (From a long-time shareholder who has never given up on them): NASDAQ listing? Is that a stated company goal in the Spring?
A: Well that's up to all of you out there. As you can tell, by the hiring of the MMW Group and the EPAC music player, we intend to make a lot of music both in the investment community and in the press. We intend, in the next two weeks, the exposure this company is going to have is totally going to eclipse anything this company has ever had before. [Applause]
The only requirement we lack today is a $4.00 share price. [Applause]
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Q: I have seen this company up & down and everything eventually boils down to fundamentals & earnings. What's your projected EPS for this year, next year....
A: Until we are confident that you as shareholders can see through our agreements, licenses and announcements to that effect, to even put that kind of number on paper, I think is premature. We have given you what we can as far as what Lanier has told us, but the revenue from internet music could completely eclipse what we are talking about doing with Lanier, and that would be next year. At this point it does us no good to put out those kind of numbers until we have a path to see how we get there.
Q: One other question, are you subject to any kind of buyout or takeover?
A: One of the good things about having the tremendous float we have out there is that it turns out to be an advantage for institutional investors and large investors who can come into the company without affecting the stock price too much one way or the other. I also think it serves as kind of a poison pill. If someone were going to attempt to buy us up, they would have to buy a large number of shares to gain control and I think that would result in a much higher stock price for all of us if something like that happened.
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Q (edig38): Can you make a comment about your competition? How well are the patents protected?
A: As far as competition goes, yes there are other companies with portable music players out there but they are all MP3 players. But there really aren't any other companies out there that do what we do, that is develop this type of technology. We're not in the business to compete with other MP3 players, this is just one example of the technology that we have. Our business model is to develop technology for major companies. And again, I don't know of any other company out there that is doing this right now.
Q: A follow up to that...what about your device being used in any sort of cell phone? Is that a possibility?
A: That's a possibility, yes.
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Q: What are you worried about most when you put your head down on the pillow at night?
A: This shareholder's meeting...[Laughter]....That's a good question. One more thing before I answer that, as far as competition goes, sometimes your competitors end up being your customers, and that's all I will say in regards to that. What worries me at night? Ahh...finding enough engineers to keep up with it all? I don't know. [Applause]
Fred: We appreciate Bob's technical handling of questions but we hope people won't bother him so much so he will have time to do some important work.
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Q: I was wondering if the new PR firm will be putting out all the good stuff we heard today in the form of a PR tomorrow?
A: Highlights out tomorrow by e-mail and business wire. Obviously with what's going on next week they are going to be heavily involved with the PR tour and also what were doing at Comdex and Webnoise.
Q: I also wanted to ask about licensing of the MicroOS. What's going to be charged?
A: That's something I don't want to talk about yet. We are talking to companies that are definitely interested in licensing out MicroOS and that is as a result of our participation in SDMI. I spent a year going to these meetings and the real benefit to us are the relationships we developed with these top 100 companies in the industry. It was almost humorous because there were more meetings going on in the bar in the evening than there were during the day. [Laughter]
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Q: I'd like to know exactly how many shares we have fully diluted?
A: Fully diluted we're just under 129 Million shares.
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Q: You've shown us the one sample of a product. How many different designs do you have and what are the royalty projections?
A: The royalties are actually based on the core technology that goes inside the "wrapper" as I call it. Whether we come up with the wrapper or the customer does [OEMs] it really doesn't affect the royalty we have coming to us. We have our own library of other designs for a product like this but in talking with other companies, they also have their own ideas of what a product like this should look like and that does not affect the licensing or the royalty part of this thing.
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Q: Wolfpackvoltare, I'm from the RB board. [Cheers & applause] On Bluetooth technology, are we a member and why not if we're not?
A: That is something that Atul Anandpura (sp?) is working on but he is in the process of moving his family to the United States from London. He will be here this weekend...he would be best to answer that question for you, stay tuned.
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