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Technology Stocks : e.Digital Corporation(EDIG) - Embedded Digital Technology -- Ignore unavailable to you. Want to Upgrade?

To: JimC1997 who wrote (5965)	6/19/1999 6:58:00 PM
From: Kerry Sakolsky	Respond to of 18366

JimC, Lucent's PAC technology is already used in satellite broadcasting. I've read that PAC will be used in digital AM radio. Lucent's compression scheme doesn't always lend opportunity to EDIG. EDIG might get a shot when digital radio becomes a means of internet access. EDIG could design a potable or car device that would allow one to communicate or download files through the internet. Just a thought. Kerry

To: JimC1997 who wrote (5965)	6/19/1999 8:18:00 PM
From: JimC1997	Read Replies (1) \| Respond to of 18366

Recently there was a protracted discussion on the Raging Bull message board about the merits of technical analysis verses fundamental analysis in predicting stock values. I hope that you will indulge me in this note about my own view of equity valuations and how it might apply to e.Digital. I believe that there are six primary determinants of stock prices, listed below in the order I think is most significant: 1. Reality: The expected economic consequence of the company's business prospects, defined as the discounted present value of its future cash flow. Earnings, dividends, EBITDA are variously used as measurements of this cash flow. Here the known business prospects are used, so projections of the market size, market share attained and earnings/revenue stream from the music player market and the dictation equipment market are appropriate. The unknowns such as the IBM voice connection, the undisclosed Intel products and any future revenue from general applications of MicroOS are too vague at this point to include in the projection. 2. Perceptions: This is where "news" is important to valuation. While informed shareholders (SI and Raging Bull message board readers?) may agree on the business prospects the perceptions of the much wider group of shareholders who do not follow the company closely (or at all) affect the stock price. And even within the "informed" shareholders there is a wide range of perceptions about the company's prospects. So press releases and news coverage, by extending the consensus knowledge of the company's business prospects to the wider set of investors, can cause the stock price to rise, usually on much greater volume. The "CNBC factor" is an example of this. Mention on one of the popular CNBC shows, particularly Squawk Box, is almost certain to increase the stock's price. 3. Risk: The perceived degree of uncertainty of the company attaining its business prospects lowers the stock price below the simple discounted cash flow value. The greater the uncertainty, the higher the markdown. For EDIG, while the Lucent relationship was well known last Fall, the specifics announced in April removed some of the uncertainties and the stock price rose. (Helped by the wider exposure that the press release provided.) Future disclosures of contract volumes will further reduce risk, as will the resolution of the SDMI deliberations. Other components of risk are the actions of competitors and the company's financial condition. The latter had much to do with the stock's long status under $0.10/share. 4. General economic/equity market conditions: Since future cash flows are discounted to arrive at the present value of the company, higher interest rates reduce the present value significantly. This is one of the reasons for the recent decline in the internet stocks. Money flows into and out of the equity sector have an impact on overall stock prices, as do the relative valuation (attractiveness) of alternative investments (bonds, real estate, gold, collectibles, etc.) Tax policy changes also have a big impact on equity valuations. Within this category of valuation factors I would also include the relative attractiveness of the stock's industry group, which is largely determined by its relative performance in the expected economic conditions. When a company reaches a state of maturity, all of the factors in this category have a much greater weight on its stock price. EDIG is clearly susceptible to broad market and economic factors, but the impact of changes in its business prospects, perception and risk are much larger in the near-term. 5. Inertia: Here is the one area in which technical analysis may (my training and experience say this is unlikely) be useful. The "stickiness" of stock prices (the tendency to remain unchanged due to the lack of trading) despite changes in the prior four factors is one aspect of inertia. The other aspect is the tendency of price change movements to continue beyond an equilibrium point ("momentum"), which leads to a fall-back or bounce-up (depending upon the direction of the initial move.) EDIG has certainly demonstrated both of these characteristics in the past two months. This gives rise to the desire to take trading profits on major moves. Personally, I would avoid such attempts until the stock reaches some level of maturity through wider exposure and greater knowledge of its business prospects. 6. "Noise": This is just a catch-all for the failure of stocks to follow the expected direction implied by the above five factors. This is where erroneous assessments of business prospects, irrational views of risk (either under-estimating or over-estimating) and "market manias" fall. Over time this factor must be zero, since the market always exercised good judgement in the long-run, but in the short-run it creates real investment opportunities. Sorry if this sounds pedantic, it is not meant to be, just some thoughts about the stock on a Saturday afternoon. Jim

To: JimC1997 who wrote (5965)	6/20/1999 12:39:00 AM
From: Jules Burke	Read Replies (2) \| Respond to of 18366

It is my belief that these digital satellite radio systems will be using compression. Lucent is betting on EPAC in satellite transmissions. I believe that CD Radio is counting on Lucent's secure compression; thus, this explains why CD Radio is using Lucent's chip set in all of the car radio units. edtn.com "Because PAC is the only audio coder designed in conjunction with channel coding schemes to resist radio channel impairments, the audio compression algorithm has been optimized for DIGITAL BROADCAST." AAC vs EPAC battle is also ocuring in the digital SATELLITE broadcast field: eet.com "At issue is a decision by Lucent Technologies to break ranks with USA Digital Radio (Linthicum, Md.) and set up a unit to pursue its version of the Perceptual Audio Coding (PAC) codec. USA Digital Radio prefers the newly standardized MPEG-2 Advanced Audio Coding (AAC)." public1.lucent.com Lucent Digital Video, announced in January, 1998, markets its industry-leading MPEG-2 encoders to the broadcast, cable, wireless cable, fiber optic and SATELLITE markets.