HAREHOLDER ALERT - November 11, 1999
The following is a copy of the presentation given by e.Digital
Corporation's president and CEO Alfred H. (Fred) Falk on November 10 at a
conference of the Japan-U.S. Telecommunications Research Institute(JUSTRI)
in Washington, D.C. Mr. Falk's presentation was very well received by
attendees at the conference.
JUSTRI CONFERENCE PRESENTATION
Presented by Alfred H. Falk at
The Cosmos Club, November 10, 1999
Good afternoon, ladies and gentlemen. I am certainly honored to be here
and we hope that you find our presentation beneficial. I'd like to begin
by talking about e.Digital's history and then share with you our vision on
portable devices that interface with the Internet.
Over five years ago, e.Digital made the decision to develop a digital voice
recorder using a new form of memory chip called Flash. What made this
memory unique was that it did not require power to maintain stored
information, unlike RAM memory. Before we could start developing the
recorder, we had to develop a flash file system that could manage and
manipulate the information being stored on the flash. During the
development process our engineers identified other features to incorporate
into the file system such as user interface support and power management,
that made it act more like an operating system and therefore we named it
MicroOS™. Even though MicroOS was specifically designed for use with Flash
memory, it was designed so that it could also be used with other
non-volatile memories such as computer hard drives including IBM's new
microdrive™ which is a hard drive in the same form factor as a
CompactFlash™ card. MicroOS allows us to store and manipulate not only
voice information but also still images, music and full motion video.
Our first product, was a portable digital voice recorder that integrated
with the PC through a PC Card hardware link. Creating a connection device
between the portable, battery-powered digital voice recorder and the PC,
allowed users to download voice files, not only for transcription, but also
to attach voice files to e-mail and send them over the Internet.
In November 1996 we were approached by Lanier Worldwide about developing a
new product for use as a patient data collection device in healthcare and
medical facilities. This digital voice recorder and docking station became
part of an entire medical document management system, developed jointly by
e.Digital and Lanier. The system includes PC's loaded with
application-specific document management software, patient management
databases, and in the near future, medically-tuned voice-to-text
transcription software.
The Lanier recorder is an excellent example of the convergence of many
technologies into one compact device that meets the needs of a specific
group of users. This includes a large LCD, numeric keypad, built-in
barcode scanner, removable flash memory, and high speed infrared data
transfer.
As a result of our experience in developing portable digital dictation
devices, our company was invited to participate in the Voice Technology
Initiative for Mobile Enterprise Solutions (VoiceTIMES) earlier this year.
This organization was founded by IBM in April 1999 and includes seven
inaugural members: IBM; e.Digital; Dictaphone; Intel; Norcom Electronics;
Olympus; and Philips. With the explosive growth of mobile devices and the
increasing demand for network access, the VoiceTIMES initiative was formed.
VoiceTimes is an alliance that was established to develop open
specifications that offer technical guidelines for companies integrating
voice technology into their mobile solutions. These are products that will
be used in conjunction with speech-to-text technology. The VoiceTIMES
initiative completed and published its first round of specifications on
October 26.
In July of 1997, we were the first company to record and play back CD
quality music utilizing SanDisk's CompactFlash. A year later we were
approached by Lucent Technologies to design for them an Internet music
player featuring Lucent's PAC compression and our MicroOS operating system.
Again, using removable Flash memory, we developed prototypes that were
used in October 1998 for a live, Los Angeles/New York demonstration of
downloading secure music files over the Internet. I am sure you have seen
recent articles about the Internet music industry, and you've heard the
interesting statistic that, over this past summer, the acronym "MP3"
overtook the word "sex" as the most commonly searched-for word on the
Internet. This is indeed indicative of a revolution, which has only just
begun. According to research by EE Times magazine and Forrester Research,
the digital music player market will grow from approximately 1.2 million
units in 1999 to a total of over 32 million units sold by 2003. Also
according to Forrester Research, digital downloading will add $1.1 billion
to the U.S. music industry by 2003.
If you have been following the birth of the Internet music industry this
year, I'm sure you are aware of all the MP3 music players that are
currently on the market. Based on industry information we expect the five
major record labels to make desirable content available in several secure
formats such as ePAC, AAC, Sony's A-Track, Qdesign's Music Playback and
Microsoft's Windows Media Player. As some of you are aware, IBM announced
that it is using only ePAC encoded music for their Madison Project which is
being conducted in San Diego. Part of this project is a beta test to
demonstrate that Internet downloadable music can be made secure. As IBM
announced, most of the major record labels are supporting this project by
providing real top 20 content that the participants of the project are
downloading to their computers. We firmly believe that over the next two
years, Internet music players that invisibly support multiple formats will
be the product of choice by digital music consumers.
At the end of this presentation you will see and hear the e.Digital
Internet music player featuring ePAC music compression.
Surveying the state of the art in voice technology applications today,
developments by such companies as IBM, Dragon Systems, Lernout & Hauspie,
AT&T, and Microsoft are enabling new time-saving applications not only for
voice command recognition, but also for language translation, speech to
text and text to speech. According to Moore's Law, computing power doubles
every 18 months and will continue to do so for at least the next 6 years.
Taking advantage of this computing power, future computers will be able to
translate hidden meaning by deciphering changes in intonation that signal
anger, sarcasm, joy, fear, or excitement. Today our interaction with
computers is mostly limited to typing and reading. Our future interface
with computers will be talking and listening, often utilizing portable
devices.
One of the biggest applications for portable devices will be field
information-gathering. Professionals such as insurance claims adjusters,
field delivery personnel, and equipment maintenance personnel will
eventually use speech-enabled portable devices to collect information. Via
wireless systems, voice data will be transmitted to a home office and
translated by special software programs into text.
Portable digital devices today are at a similar point in the development
cycle as the cellular phone industry was seven years ago. People want to
have portable access to the same Internet experience they're currently
having at their desktop. The rising generation is already accustomed to and
expects instant access to a vast world of information. Anything less than
instant gratification of their information and entertainment needs is
unacceptable to them. New generations of portable devices and computers
will be expected to meet these demands.
According to Semico Research, sales of Flash memory devices will double
from $4 billion this year to $8.5 billion in less than two years.
According to International Data Group, more than 55 million non-PC devices
will be connected to the Internet by 2002; a year later, non-PC Internet
connections are expected to outnumber those from PCs. As increased
bandwidth becomes available, standards are established, and pricing remains
competitive, our industry will explode as numerous convergent technologies
become available to every consumer in the palms of their hands. We envision
a future of full featured easy to use portable devices that incorporate
large displays where the interface between the user and the device is
speech rather than hard to use miniature keyboards or complicated hand
writing recognition software. These devices will talk and listen and
feature wireless speech communication, speech-to-text/text-to-speech
conversion, downloadable music files, downloadable full-motion-video files,
and other convergent applications. We ask for your continued support in
enabling this future and we thank you for this opportunity to present to
you this afternoon.
Mr. Falk then demonstrated the e.Digital portable Internet music player
featuring ePAC music compression.
# # #
Note: e.Digital and MicroOS are trademarks of e.Digital Corporation. All
other product, company, or service names are the property of their
respective owners.
_____________________________________________________
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
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