Great questions from Sentinel and answers from Jim Collier:
Posted by: Sentinel
In reply to: None Date: 2/20/2002 11:27:45 PM
Post # of 9977
Jim Collier email:
Answers to previously submitted questions:
Mr. XXXXXX,
I have expended a considerable amount of time reviewing and answering your questions (see below) as fully and freely as I can. I hope that my answers address most of your concerns. However, some are inappropriate and will not be answered. I cannot discuss the S3. I believe that has been made clear. I also will not discuss termination of staff or personnel history for what should be obvious reasons.
Regards,
Jim Collier
-----Original Message-----
From: XXXXXXXXXXXXXXX
Sent: Wednesday, February 20, 2002 10:29 AM
To: Jim Collier
Subject: Shareholder questions / Corporate Restrictions
Hello Mr. Collier..
Some few days ago, I sent you a rather large list of questions and issues I was hoping to discuss with you at some point soon. Subsequent to that, we shareholders were informed of the webcast, and asked to submit questions if we wished. I assumed that you would use those questions for that event and that management would be addressing at least the majority of them. I was a bit disappointed that only 1 (out of 42) question was used, and that was actually one of the "cream puffs". Now I understand that the quiet period surrounding the SEC filing prohibits you from answering ALL those questions, as well as many others you probably received, but since everybody I've spoken to was surprised by the brevity of the webcast and the fact that more questions weren't answered, I guess I am curious as to why more of the submitted questions were not addressed. I included the list again below. Do you mean to say that all the questions on this list are subject to the quiet period restrictions? Please know that I thought that, while brief, the webcast was informative to a degree and, on the whole, fairly positive and a good start to what I'm happy to hear will be a quarterly event series.
Please review the list again however, and let me know if we can't discuss at least some of these at your convenience. Thanks very much for your time and consideration.
Regards,
XXXXXXXXXXXXXXX
Shareholder
QUESTION LIST:
e.Digital Self-Branded Music Players:
1. What is management's view of retailing as an operational strategy?
Retail sales will play a major role in our business plan going
forward.
2. Is it a stop gap "revenue bridge" because OEM's have not stepped up to the plate as previously thought they would?
No, this will be a core function that will augment planned license and ODM fees.
3. Having products of our own clearly demonstrates EDIG can perform, and you have stated that this has piqued the interests of OEM's and retailers. If these OEM's do indeed step up now, wanting to brand EDIG products, will EDIG back away from the self-branding campaign it has undertaken, or will you continue to go head to head with your own customers?
No. Edig will offer OEM (ODM) customers unique industrial designs for use with our basic reference designs.
4. With EDIG's turnkey end-to-end solution, there is advantage in having volume retailers (Walmart, Best Buy, Circuit City, etc.) brand EDIG products directly, bypassing OEM's. Is this part of the marketing plan and is this happening presently?
Yes to both questions.
5. Will this not further alienate the OEM's we were trying so hard to woo all of last year?
As I explained in the conference call, the OEMs did not go to market because of the ecomomics of the market. I don't know why you think that there was any alienation. We have and still maintain close relationships with OEMs.
6. Why would they do they do business with a company which may undercut them directly with its own products in the marketplace? Is our technology so unique that they would have no choice but to come to EDIG in order to put out a cutting edge DAP?
Please see my response above.
7. In short, once we are out in the brick and mortar stores, competing against them, why would OEM's utilize EDIG technology?
What OEMs are we competing against? There isn't a single OEMs that we have had discussions with that would be in competion with our products. The only other juke box type product (other than Creative, Archos and Sonic Blue) is by Musical, who is a close partner of ours.
8. Subscription services have been mentioned recently. How does EDIG's product line fit into this niche, and how will EDIG earn revenues from the music portals (AOL Music, MSN Music, etc.) and subscription services (PressPlay, etc.)?
Edigital branded products are secure subscription enabled and are in the market place without cost to the subscription providers. They will require a firmware upgrade (fee) to enable subscription access to specific providers (recurring fee).
9. Are there likely to be portal-branded players, for instance an AOL Renegade (or clone thereof) which will be tailored to the details of the various services?
Designer players are a potential area that we are exploring for specific customers.
10. Are the less expensive low-end players, like the Renegade, even going to make money for EDIG, or are you simply shooting for a breakeven on the players, using them to build brand awareness only, and making "Powered by e.Digital" a more familiar phrase?
Our entry level flah memory players have very attractive margins.
11. Do retailers see advantage to utilizing the "Powered by e.Digital" tagline, or the EDIG brand name as opposed to their own?
Yes. Retailers are very receptive to the e.Digital brand and are excited about having a new look on their shelves.
12. When will the next generation Treo be rolled out, and what will it's upgraded features include?
The next generation Treo will be out this Sring and will feature greater storage capacity, USB 2.0 interface, lighter plastic construction, real time clock and an enhanced user interface. It wil also be more expensive.
13. When will the next generation MXP100 be rolled out, and what will it's upgraded features include?
That has not yet been determined. However, there will be several firmware upgrades in the very near future. One of which will be a greatly enhanced user interface. These will be available as free user upgrades on our website for those who have already purchased MXP100s.
14. There seems to be an economic incentive for IBM to bundle the MXP100 with their computer (ThinkPads?) offerings in that they receive money for the MicroDrives to offset the bundling cost, as well as getting the MicroDrives into the market before DataPlay rolls out. Yet they have not moved on this and DataPlay rollout is getting closer. Is this still a likely scenario?
I don't know of any linkage at IBM with their microdrive strategy and Dataplay.
15. Which device is most likely to be "bundled" with other PC makers, and what would be a typical volume estimate for such a deal?
I can't comment at this time.
16. Are any talks underway for bundling any devices with non-PC makers?
Yes.
17. In terms of priority, where do self-branded retail, OEM retail, and bundling fall in relationship to each other? That is, how much time, relatively speaking, is devoted to each, and where do they fall in the business plan in terms of importance?
All are being pursued agressively.
DataPlay
1. We have seen EDIG being singled out as DataPlay's primary technology integrator in a press release back in 2001. Are there other companies with the same relationship to DataPlay, or are we favored, receiving the lion's share of referrals from DataPlay?
are not aware of any other company with a similar relationship with Dataplay.
2. Is EDIG's technology necessary to successful designs of efficient DP music players?
Yes
3. Is EDIG technology necessary to successful playback of music pre-mastered on DP discs (music originating with the record labels themselves), as opposed to those made by burning one's existing MP3 library onto blank DP media?
Yes.
4. Will EDIG in fact be in the vast majority of DataPlay enabled music players?
Certainly in the near future.
5. Does EDIG technology have any foreseeable role in DataPlay video game players (which should prove to be extraordinarily successful in my opinion)?
Yes.
6. Does EDIG technology have any foreseeable role in DataPlay enabled PDA's, perhaps in dealing with the convergence of PDA/DAP/cell phones?
I'm not aware of any DP enabled PDAs.
7. Does EDIG technology have any foreseeable role in DataPlay enabled kiosks, where secure music downloads would presumably take place and custom DP discs would be produced?
I don't know of any specific plans for kiosk music distribution at this time.
8. Will EDIG receive royalties for the MTV/Evolution DP player from DataPlay or Evolution?
Yes.
9. Assuming the royalties will come from DataPlay, as was implied by various sources, will this be the standard protocol for other player designs and other OEM's, i.e., they will pay DataPlay who will then pay EDIG?
This is subject to multiple non-disclosure agreements.
Telematics
1. According to various articles, the telematics market will take off when consumers begin to demand these options, as opposed to automakers simply being able to add them. This hasn't happened yet. How far off does management believe the telematics explosion really is?
It has alreadu begun and will continue to grow very dramatically in the next 3-5 years.
2. Does the Eclipse MP3-Changer have immediate potential to be original equipment, or is the focus on aftermarket at this time?
Immediate application will be after market.
3. Is the Eclipse MP3-Changer compatible with units on the road now, or will the aftermarket basically start from year 2002 forward, with original equipment potential following that?
It will be both forward and backward compatible.
4. Assuming this unit can be an upgrade for existing systems, has this unit been under production? If so, since when, and if not, when will it be?
This unit is not yet in production.
5. What kind of margins can we expect to receive from these products as opposed to DAP's? Twice as large? Four times as large? Ten?
Margins will be comparable or better.
6. What is the strategy in the telematics marketing plan? Because the margins are larger, are we striving to remain agnostic, or are we wooing one "sugar daddy" customer with large market share?
We are pursuing multiple customers
7. Are our current OEM contacts for original equipment contracts exclusively luxury car manufacturers, or is there potential for mid-range installation as well?
See previous answer.
The S-3 Filing and Webcast
THIS SUBJECT CANNOT BE DISCUSSED AT THIS TIME.
(Questions deleted)
Management Team
THESE QUESTIONS ARE NOT SUBJECT TO DISCUSSION AT THIS TIME.
(Questions deleted) |
