Letter to Shareholders
May 15, 2001
Dear USVO Shareholder:
We have been relatively quiet on the "news front" over the past few months but things have been very busy in our offices at Mystic as we prepare for the launch of our new suite of streaming rich media services.
As we announced several months ago, our business plan has evolved to be primarily services-based, largely replacing our previous reliance on hardware sales. This change was the result of our ongoing analyses of the industry and our customers: it was clear that the technology sector was changing rapidly; we resolved to stay ahead of these changes and develop something that would be needed and would generate revenues in even the toughest economic times. While we believed the market was becoming tighter, the downturn was deeper and more tenacious than we had anticipated. What once affected only the smaller companies now has affected even the giants, the bellwethers in the technology field.
Our analyses indicated that business customers would start becoming less willing to make large up-front investments in their own Internet video systems, but we believed they would still want the services and capabilities those systems could provide. They were moving away from creating or expanding their own IT departments to handle the ongoing maintenance and other issues related to operating these complex systems, and there was greater reluctance to being saddled with expensive legacy equipment that quickly became obsolete.
StreamHQ™, which we announced in December, provided answers for these trends but we also knew it needed to do much more than just provide Internet streaming… and this extra value would be the differentiator in our streaming services. The best path to success would be to provide accountability for results as well as providing an innovative means of delivering streaming rich media services to our business customers.
Although we have continued to market our hardware-based systems, companies that had already committed to buy have been delaying their orders because they too are being affected by the dramatic deterioration in the technology sector. New customers in the pipeline have been asking for delays as well. There were no cancellations of orders as such, but there were across-the-board delays with the promise that once things improved, the orders would "get back to normal." Figuring that "normal" would probably never be the same again, we took this as further confirmation that switching toward a services-based business model that would provide ongoing revenues was the right decision.
We resolved to create the very best infrastructure possible and started by using the best hardware and software available, working with technology leaders EMC, Cisco, Oracle and others. We matched this with our top team of technology specialists-software developers, programmers, engineers and others-to develop the extensive proprietary management software that ties all this together and provides the versatility and functionalities we believe will be required of the next generation of the Internet. This new infrastructure meets or exceeds the ECOsystem (EMC, Cisco, Oracle) industry benchmarks for scalability, reliability and non-obsolescence.
Our system includes streaming media services, data capture and reporting of streaming events, asset management, user authentication, and digital rights management. We also are developing products that combine various capabilities of this infrastructure to deliver unparalleled features to our customers. The first is our streaming Email product, described briefly in the presentation on our website. This streaming Email product with its unique capabilities will be launched in the coming weeks.
We have dedicated our most intensive concentration of managerial and technical effort to the critical tasks of developing and refining our new streaming rich media services. We have made a significant investment in the infrastructure to support this services-based approach and have hired a number of technical specialists to develop the proprietary software behind this infrastructure. We also have begun building a larger, more experienced sales team to bring our new products to market and generate revenues.
As a result of this focus on the future, compounded by the reality of tight economic times and deteriorating technology market especially in purchases of hardware, our current sales have decreased. As can be seen in the Form 10Q for the first quarter of this year, USVO had essentially no sales revenues. This decline in sales began in the fourth quarter of 2000; it is continuing through the first two quarters of 2001. This isn't a surprise in the face of the dramatic changes to the industry and to our company, but we realize it will be a disappointment to our many faithful shareholders.
As we launch our first streaming rich media products this summer, we expect our operating results will begin to improve. In June we will have an exhibit at the StreamingMediaWest conference in California. This is the premier conference in the streaming media field and it will be a good venue for the official launch of the first of our new products, a streaming Email that utilizes the infrastructure we are building and takes advantage of many of its unique features. We also will demonstrate this product and describe our infrastructure in some detail at our Annual Meeting in Providence, Rhode Island on June 28. We will be advertising our streaming Email product in high-profile publications and via web marketing as part of our intensive sales and marketing efforts to help make this launch successful.
We also are continuing our initiatives to bring Internet streaming media to education in the U.S. and throughout Latin America, and our patent law firm, Sullivan & Worcester, is hard at work representing our pioneer patent in digital video. We increasingly are being sought out to speak on industry panels and at other high-profile events because there is widespread interest in what we are doing to bring streaming rich media to an ever-wider audience and to make the Internet a tool that businesses will use more and more often in the future.
We appreciate the patience our shareholders have shown throughout this downtrending market and we appreciate the support and confidence you are showing in our future as we develop a new infrastructure that provides the services, results and accountability our business customers demand.
Sincerely yours,
Edwin Molina, President and CEO
This letter to shareholders may contain forward-looking statements. Actual results may differ materially from those projected in any forward-looking statement. Investors are cautioned that such forward-looking statements involve risk and uncertainties, which may cause actual results to differ from those described. |
