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To: peter grossman who wrote (9275)	3/3/2001 7:08:38 PM
From: James Connolly	Read Replies (2) \| Respond to of 10309

Re: Does anyone have the three reported quarterly royalty figures? Peter, According to my records the royalty numbers for the last few quarters were as follows (numbers in millions): Q1= 19.9 Q2= 17.6 Q3= 25.9 Q4= 36.0 ------------- Total= 99.4 Revenues for FY01 were $438 million, royalties were therefore 22.7% of revenues in FY01. Note the $99.4 million royalties = $X(non-lily pond royalties)+$Y(lily pond royalties) Royalties appear to be growing at a rate of somewhere between 50% and 70% y/y. Regards JC.

To: peter grossman who wrote (9275)	3/3/2001 7:35:03 PM
From: Don Lloyd	Respond to of 10309

Peter - ...OTOH, I thought that by far the least impressive was the .06 earnings guidance for Q1, half of analyst estimates. Any thoughts? 1. As indicated by management, and admitted by the analysts, NO management guidance for any part of FY2002 has ever been provided prior to this week's earnings release, with the sole exception of a 30% revenue growth projection for FY2002 vs FY2001. This means that the existing estimates for Q1 were little more than random numbers with no historical record of the merged company to rely on. 2. Most companies show a seasonality pattern that results in the weakest sequential revenue transition occurring between the fourth and first fiscal quarters. This is due to a corporate-wide preference for any corporation to recognize marginal revenue in the ending fiscal year as opposed to allowing it to slip into the new fiscal year. This varies enormously in the degree of effect from industry to industry and from company to company. The effect will generally be largest where the customer perceives that his maximum pricing negotiating leverage will occur at the end of the supplier's fiscal year AND where the timing of the purchase of the product is not critical to the customer's own operations. 3. With revenues projected to fall 11% sequentially due to the seasonality, eps is projected to fall 68% sequentially. This sounds bad, but in reality simply reflects the fact that costs in a given quarter will continue to grow largely independently of the actual revenue recognized in the same quarter. Combining this with the fact that both operating and net margins are still relatively small percentages of revenue, this results in earnings being highly leveraged to the level of revenue in a given quarter. Regards, Don