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Technology Stocks : Spyglass -- Ignore unavailable to you. Want to Upgrade?

To: Art Bechhoefer who wrote (1128)	10/21/1999 12:39:00 PM
From: Lane Hall-Witt	Read Replies (1) \| Respond to of 1412

Art, Although SPYG did sell SurfWatch and thus loses licensing revenues from that transaction, it looks to me like SPYG is still licensing a number of its proprietary technologies. For example, look at this recent news release: spyglass.com SPYG is licensing Spyglass Device Mosaic to VM Labs as an embedded component of the NUON technology for DVD players. The terms of this agreement aren't stated, but I assume it would have something to do with the number of NUON systems built. (The DVD manufacturers licenses NUON from VM Labs, which in turn licenses Device Mosaic from SPYG.) I would also imagine the recent licensing deals for Prism involve some kind of recurring revenue agreement. For two examples, see the recent news releases on the Seiko Epson and INKT deals: spyglass.com spyglass.com PHCM licenses its server software on the basis of the number of subscribers in its clients' wireless networks. It would be likely that SPYG charges in a similar manner for Prism, in cases where Prism is embedded in another manufacturer's products. Now, on the other hand, I believe there must be cases where SPYG incorporates its technologies into customized solutions and does not receive recurring licensing fees. The mobile application SPYG recently built for Stanford University may incorporate proprietary technologies, but I doubt there would be any recurring licensing revenues for SPYG. I'd imagine that deal was contracted as a start-to-finish development project, for a lump sum. spyglass.com I haven't asked SPYG specifically about the structure of its licensing agreements when its technologies are embedded into broader products, because I never doubted that SPYG uses the standard licensing strategies that are typically employed: a fee for each unit of the product that uses SPYG's technology or a fee for each user of a service that incorporates SPYG's technology. But it would definitely be worthwhile to ask IR about this if there's reason to believe they license their technologies differently.

To: Art Bechhoefer who wrote (1128)	10/21/1999 7:49:00 PM
From: Shtirlitz	Read Replies (1) \| Respond to of 1412

In my last conversation with Spyglass IR person I specificaly asked the question about royalties. Spyglass will receive royalties, based on the number of units sold. The ammount differs from contract to contract and is usualy between 1 to 10 dollars per unit. They didn't want to disclose the exact amount of every contract. However, most of their contracts have royalties. This is in addition to licensing and support fees. Royalties will be paid to Spyglass after the units will be sold. And most of them are still in the stage of production. Current concensus estimates are 150 million units of internet enabled appliances will be sold by 2002. (IMO this is an understatement. This market will be growing faster.) In any case, most of the Spyglass customers will produce and sell merchadize in high volume (Sony, Motorola, Toshiba, Nokia, ...). Considering the fact that royalties are pure income, and will very positively impact profit margins, I would expect SPYG to do pretty well.