Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: mark cox who wrote (8629)	11/27/1999 1:42:00 AM
From: Walter Morton	Read Replies (1) \| Respond to of 18366

What will be announced first the name of an OEM or the Intel project? OT: Speaking of Intel: biz.yahoo.com

To: mark cox who wrote (8629)	11/27/1999 1:46:00 AM
From: JimC1997	Read Replies (1) \| Respond to of 18366

Mark, Various arrangements are possible on contract manufacturing. e.Digital has previously indicated that it established one agreement in which the firm for which it is manufacturing pays for the labor and materials on all work-in-process, then pays e.Digital as finished products are delivered to that firm. The most common arrangement on proprietary products is for the firm which is putting its brand on the product to pay for materials in advance, then pay for labor, overhead and manufacturing profit upon delivery. For example, if a music player had a wholesale selling price of $180 and e.Digital was earning a 20% gross profit from the branding firm, the cost of production would be $144. Assuming the costs of production were split equally between material, labor and overhead, e.Digital might have to invest $96 in each unit (labor and overhead) while the branding firm would have $48 (in materials) invested. These cash flows would show up on the balance sheet of the company prior to delivery. Part would be in accounts payable, part would be in inventory and, after delivery, the manufacturing investment ($96) and the gross profit ($36) would be carried in accounts receivable (prior to cash payment from the branding firm). If you look at the balance sheet reported by e.Digital for September 30, 1999 you will see that the amounts in the above categories are consistent with their Lanier-related production. Thus, it can be safely assumed that no secret production of music players was underway at that time. Billing always occurs at the delivery of the finished goods to the branding firm. Recording of sales of manufactured products is coincident with the billing. Payment would follow, usually in 30 days, but sometimes at the same time as the delivery. e.Digital would not have to wait until the units were sold to retailers or to end-consumers for their payment. Payment for licensed technology, such as MicroOS, would usually occur upon delivery of the finished goods to the branding firm. However, in some cases licensing of technology can involve advance payments. For example, e.Digital might demand payment for, say, 20% of the anticipated annual licensing fees upfront. I believe that we will have an opportunity to observe a variety of these financial arrangements involving e.Digital in the near future. It is my understanding that they are negotiating some contracts in which they would provide full manufacturing support, some in which they would provide their reference design to electronics firms which have their own manufacturing capacity, and other contracts which involve only the MicroOS and related engineering services. It is my understanding that the gross margins on full manufacturing of music players will likely be in the 20% range. JimC