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Emultek is re-inventing itself. It was a provider of simulation-based software for the design, development and support of embedded systems software applications. Now it is a company that puts superb product simulations on the web to be used for customer education, for product demos in e-commerce, and for other applications. It's changing its name from Emultek to E-sim. From boring to big-time in one effort, in other words. Company appeared yesterday at the Israeli High-tech Conference at the New York Society of Security Analysts. It was open to the public and I attended. Management confirms that a new web portal called www.livemanuals.com will go into beta test early next week, probably Monday. Official launch is in early fall according to current plan. Target Audiences: A) Retailer -- product simulations can be used in sales training (wouldn't you like your salesperson to actually know how a camera/phone/vcr works?), product demo, point-of-sale support. B) Manufacturer -- product simulations can be used in product support for e-commerce, in focus groups to determine how to make products more intuitive to use, etc. Livemanuals.com has already signed up lots of early adopters, including big-name OEMs (Samsung, Olympus, Audiovox, etc.) and even smaller US firms like Sensory Science (ticker: VCR). C) Net portal - for rich multimedia product reviews. In fact, company said ZDNet has already signed agreement to use EMU simulations when they review a product that has such a simulation available. What's a product simulation good for? Imagine yourself with your new Nokia phone, for instance, and you can't figure out how to put phone numbers in memory. And you also can't figure out the instructions in the manual or have lost the manual that came with the phone. You can go on Livemanuals.com, call up the appliance you want info on and -- if the OEM has signed on -- you'll get a beautifully rendered product demo, a very lifelike simulation complete with video and voiceover explaining how to do what you want to do. This is a fabulous idea. EMU said big companies pay as much as $8/customer on customer education for items like this. Having a simulation will drive that cost down very low. E-commerce demos: now, imagine wanting to shop on the web. As things stand today, when you go to an e-commerce site you basically get a print catalog on your computer screen. EMU's simulation solution will allow the potential customer to interact with the item on the screen. You could point at the buttons on the phone, click, and dial in a number and see the number show on the screen and hear the dial tone. You could open the phone, turn it around. It's a virtual "feel" of the product in your hand. What manufacturer will want to be left out? If you can't find his product on the site but can find a competing product and virtually try it out, it raises the possibility you'll purchase the other product. He must put his products on the site to avoid that possibility. Other applications: EMU has hired away some top sales people from Cablevision to spearhead the project. I spoke with one who said they were viewing the software tool even for its advantages in long-distance learning, i.e., medical products. Simulations can be used, for instance, to teach a new diabetic how to use the small machines that test for blood sugar. Or how to use medicine inhalers, etc. What's the bottom line for EMU? EMU said it plans initially to make money on the project by 1) charging OEMs to build the simulations and by charging OEMs for use of the simulation on their corporate website. 1) Management said it will charge $5K to $15K per simulation, depending on the complexity of project. It will keep its own production costs as low as possible and is establishing a team of 100 software engineers in Bangalore, India (1/3 cost of similar engineers in Israel) to develop a high volume/low cost simulation software "factory." The simulation will appear on the OEM's site and on the Livemanuals.com site. 2) If the customer goes to Livemanuals.com, the view is free. If the customer clicks through on the OEM site, EMU said it will get $1 per click through. It can get this amount, according to EMU people, because large companies spend up to $8/customer on what is called "customer educational support," which basically means having people on telephones to answer customer questions about how to use products. If companies can switch to EMU's website support, it will save them a lot of money. Paying $1/customer to EMU is worth it. 3) In e-commerce applications, it hopes to get a percent of each sale for use of this "enabling" technology. Where's the rub? Fabulous idea, but how to get from here to there? How to build the net relationships that drive traffic to the site? First, EMU must make more portal partners. ZDNet is the first -- an important one -- but more are needed to make the site well-known. Perhaps it will trade demos for banner advertising. The demos are so spectacular though, I can't imagine this will be a big problem, and ZDNet is certainly a top line portal as reference for future potential partners. Cash burn is now $1.2 million/quarter. Company says they expect to be cash flow positive in 9 months. I bet they're being over-optimistic. Grabbing market share is the internet norm and also results in more red ink than one originally hopes for. But the business model is a good one. Big idea/small company. Only 67 employees, waiting for 100 new engineers from India. How to get big enough to carry out the big idea? They're going to need more money, bigger partners. Someone bigger who sees how great these simulations are and realizes the company has only 10 million shares (only 2 million in the float) may offer to buy them out. This is a wild card in the investment scenario. How to value the stock? The company suggested that their simulations are an "enabling technology" much the same as Vignette's and Real Networks' technologies. It would certainly bring e-commerce up to the next level of customer interaction. The idea itself is not patented, but EMU's simulations themselves are patented. So their first-to-market lead may establish them as the de facto leader in this emerging market. Ariella | ||||||||||||
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