More on Winbond Settlement and Future Royalties
Heya friend.. :) Nice to see you over on the flip-side. :)
Let's see what I can do to answer your questions:
<<It would seem that SSTI may finally be getting those licensing revenues that have been eagerly awaited for some time. I think this would be a major step forward for SSTI and I have re-evaluated my take on the company.>>
Welp, SSTI is a wonderful company primarily b/c of the strength of it's patent portfolio, and the strength of the SuperFlash technology. For those who don't know, SSTI has 23 patents, many of which surround Superflash. I recently had the opportunity to get a copy of the full, uncensored <g>, 40 page coverage initiation thesis from First Union, and it can actually answer a lot of your questions..
<<The question I have is why there has been no chatter on this thread about Winbond in the past?>>
Haven't heard any from me, primarily b/c I haven't been chattering much period on this website, but I hope to improve that.. it's a refreshing change of pace from the Yahoo "battle royale". I learned about this a long time ago when I read about things in the 10-Q's..
From the Q2 '00 report:
freeedgar.com
On July 31, 1998, we filed suit against Winbond Electronics Corporation in
the U.S. District Court for the Northern District of California, San Jose
Division. Winbond has answered the complaint and has counter-claimed. Since
then, the parties have amended the complaint and the answer and counterclaim.
As of February 24, 2000, we have asserted eight causes of action, including
breach of contract, misappropriation of trade secrets and other contractual
and tortious claims. Our suit seeks damages and equitable remedies to prevent
Winbond from using any of our technology.
Winbond has answered and asserted counter-claims for a declaration that it
is not in material breach of the agreement, breach of the agreement, breach
of the covenant of good faith and fair dealing, interference with prospective
economic advantage, unlawful business practice in violation of state law,
common law unfair competition, a declaration that Winbond is not obligated to
pay us under the agreement and/or they own or jointly own the technology
embodied in their products, misappropriation of Winbond's trade secrets,
unfair competition in violation of the Federal Lanham Act, and common law
fraud and misrepresentation. Winbond seeks, in part, restitution of the
payments made, and other damages, and an injunction.
On April 17 and 21, 2000, respectively, the District Court granted our
motions for partial summary judgment on Winbond's restitution counterclaim
and defense of contract modification by course-of-dealing. On May 1, 2000,
Winbond announced its intention to pursue, as part of its defense, certain
allegations that we do not own the licensed technology and that we have
committed antitrust violations. We believe that the substantive allegations
in the Winbond counter-claims are without merit and we intend to vigorously
defend ourselves against the action. We intend to vigorously pursue our
complaint. The trial is set for January 9, 2001.
<<Is this an expected outcome and what kind of dollar settlement is anticipated?>>
Well, personally, I expected it due to the inherent patent strength and their discussions on the subject, but not quite this soon. As you can see above, it was set to go to trial in 2001. Perhaps I'm reading into this too much, but I'm wondering if this settlement is pointing to similarities with Intel's settlement. As you well know, SSTI shortly afterwards inked an important deal with Intel for Firmware Hub rights, which is a big dollar deal for us.. perhaps the settlement is pointing to a similar deal with Winbond? The company when you look through the website clearly wants to focus some efforts on the flash memory market, and with this settlement has it's wings clipped. shrug..
In terms of dollar settlements, I would only be making guesses, but from my conversion of the Taiwan dollar, Winbond is set to make 1.5 billion this year. So, it's probably quite significant.
<<The relative lack of licensing revenues from SuperFlash has been somewhat surprising to me for some time.>>
Welp, maybe we should talk about this a little more, and I think the First Union paper does a good job in explaining the future:
SST currently licenses its Superflash technology and fabrication process to leading device manufacturers (IDMs) and wafer foundries, and it intends to develop additional relationships by entering into new licensing agreements in the near future *hint hint*. Wafer foundries and IDMs prefer designing SuperFlash technology into their embedded flash memory applications rather than traditional flash memory because SuperFlash memory provides them with the most efficient and inexpensive solution for monolithic flash and IC applications. In return, IDMs provide the company with licensing fees and royalties per product sold, while foundries pay up-front licensing fees plus royalties per wafer sold. We expect the royalties from IDMs to be a major contributor to future intellectual property-related revenues, as SST licensees (such as TSMC, Motorola, Sanyo, Samsung, IBM, Analog Devices, and Seiko Epson) begin mass production of SuperFlash-enabled embedded solutions during the course of 2001.
In 1999, SST's intellectual property revenues generated by licensing fees and royalties increased by 164% to $6.6 million, compared to 1998 levels. While we do not anticipate a significant increase in licensing revenues during 2000, we do expect licensing revenue growth to accelerate drastically during 2001 for two major reasons. First, as the company's embedded design wins are finalized and it's licensees begin shipping their first SuperFlash-enabled embedded products and applications, we expect royalty revenues to increase dramatically. Second, we believe that simplicity, reliability, and cost-efficiency of SuperFlash technology and its manufacturing process will continue to attract the interest of major flash wafer producing companies, resulting in numerous mutually beneficial licensing agreements in the future. We expect the company to receive approximately $5.6 million in licensing and royalty revenue during 2000 (versus $6.6 million in 1999) and roughly $20 million during 2001. Beyond 2001, we believe that there is meaningful potential for rapid growth in the company's royalty revenue stream as the number of ICs with embedded SuperFlash memory increases. Our 2002 estimate calls for royalty revenue of $30 million, 50% above 2001 levels.
This provide any insight?
<<Is the Winbond settlement a shot in the arm for SSTI?
If so, how big of a shot?>>
Well, I think so.. for the reasons I described before.. the size of it, welp.. I guess we'll have to wait until the new 10-Q comes out. :) Hope this helps, Aus, and all the best.
Docpaul |
