ParkerVision Q4 2005 Earnings Call
March
7, 2006
Jessica
Paul Henning of Cameron and Associates
Jeff Parker
Michael Ciarmoli with Boenning & Scattergood
Wilson Jaeggli with Southwell Partners
Scott Robertson of Halpern Capital
Greg Weaver with Current Capital
Daniel Lewis with Gem Partners
Jessica:
Good day everyone and welcome to ParkerVision's fourth quarter and year
end 2005 earnings conference call. Today's conference is being recorded. At
this time, for opening remarks and introductions I would like to turn the call
over to Mr. Paul Henning of Cameron and Associates. Please go ahead sir.
Paul Henning:
Thank you Jessica. Before we get started I want to remind listeners that
this conference call will contain forward looking statements which involve
known and unknown risks and uncertainties about our business, and the economy,
and other factors that may cause actual results to be materially different from
our expected achievements and anticipated results.
Included in these are factors such as the ability to maintain technological
advantages in the marketplace, ability to sufficiently increase manufacturing
capacity to meet demands, achieving family market introduction and acceptance
of products, maintaining our patent protection and the availability of capital,
among others.
Given these uncertainties and other factors for our business, listeners are
cautioned not to place undue reliance on any forward looking statements
contained in this conference call. Additional information concerning these and
other risks can be found with our filings with the SEC. On today's call we'll
hear first from Cindy Pearlman, Chief Financial Officer of ParkerVision, and
then Jeff Parker will discuss the business of the company. Let's turn it first
over to Cindy. Cindy?
Cindy Poehlman: Thank you Paul and thank all of you for joining us
this afternoon. I'd like to review just briefly a few financial highlights from
2005 and then I'll turn the call over to Jeff Parker for an update on business
activities.
Most notable from a financial standpoint in 2005, were the exit from our retail
activities and the strengthening of our cash position through the sale of
equity securities. The company raised approximately $20 million in March of
2005 from the sale of common stock. This funding enabled us to focus our
development efforts on our D2P Transit Technology which was announced in the
first quarter of 2005. In the second quarter last year, management and the
board announced our decision to exit our retail business. This decision was
predicated by the opportunities for growth in the wireless space with regard to
our D2P technology, coupled with the increased product development and
marketing expenditures that would be required to expand the retail product
business. The decision to exit retail not only sharpened our focus from an
operation standpoint, but also had a very positive impact on our cost of
operation.
We indicated in previous conference calls that we expected our operating costs
to be reduced by about 25% following completion of our retail exit. As you can
see from our earnings release this morning our operating expenses for the
fourth quarter were down to $3.6 million. Excluding the one time cost related
to the retail exit, our first half operating expenses were about $11.7 million.
This compares to $7.7 million from the second half of the year, and that
reflects a reduction of 34%.
Of the company's $23 million net loss for 2005, approximately $8 million of
that or 39 cents per share can be specifically attributed to incremental
operating costs related to retail and the one time cost to exit the retail
business. Those one time costs which were incurred in the second quarter of
2005 included personnel severance costs and losses for the reduction of retail
related assets to their estimated market value; including inventory,
manufacturing property and equipment, and certain intangible assets.
It's important to point out that all of our 2005 revenue is attributable to
retail product sales. As of the end of last year, we have no remaining deferred
revenue on our balance sheet, and our expectations are that there will be no
further revenue or returns related to retail products in 2006.
From a cash standpoint, we used approximately $18 million in cash in 2005 for
operations, capital expenditures, and intellectual property protection. Our use
of cash in the fourth quarter of 2005 was approximately $4 million, which did
include about a half a million of prepayments for items related to 2006. We
ended the year with a cash balance of approximately $10.5 million, and last
month we completed the sale of an additional $2.4 million shares of common
stock, netting approximately $16.3 million. With over $25 million in cash on
the balance sheet we believe we are well positioned to execute on our business
strategy. On that note, I will turn the call over to our CEO Jeff Parker to
provide an update on our business activity.
Jeff Parker:
Thank you Cindy and good afternoon everyone and thank you for joining us
on the call today. I want to begin by putting in perspective the
accomplishments and progress we've made both during the past year as well as
into our current quarter. We'll talk about commercializing our RF technology
specifically the D2P technology. And I'm also going to include an update
regarding our continuing discussions with OEMs.
During the first half of 2005, we made two important decisions that helped
accelerate our progress. We exited the consumer business and we positioned our
D2P technology as a solution for the 3G mobile handset market. Although our
retail products were well received, we determined that we needed to apply our
resources toward the commercialization of our technology with OEMs in the
cellular market place. The consumer business provided both validation and
visibility for our core technology and was a necessary step in paving the way
toward our current focus.
To that end, in the spring of last year, we began to position our D2P
technology as a solution for the coming needs of the mobile handset
marketplace, particularly as OEMs seemed to provide more efficient and cost
effective 3G mobile handsets. Our website, investor and marketing
presentations, and our collateral material were all created and designed to
articulate our story and reflect this focus.
At the AeA conference in November, we went a step further. For the first time,
we shared with you the results of tests on D2P technology using industry
accepted standards and equipment. These tests, I might add, showed extensive
improvement over existing technology that inherently limits what OEMs are able
to achieve today in improving cost and efficiency.
While all of this was happening we had begun initial and follow up meetings
with major OEMs to present the technology and review their needs and plans
particularly in relation to the coming 3G cellular market. These meetings with
OEMs helped confirm what we already suspected. The OEMs, being influenced by
their customers, the wireless network carriers, needed to address battery life,
cost, and additional features, among other issues, and we're pushing up against
the limitations of existing technology.
At the same time, carriers world‑wide are committed to rolling out 3G
full scale, which continues to drive the need of the looming 3G marketplace. As
these discussions progressed, we felt the elegant design of D2P presented an
attractive and solid solution. As I noted on the last conference call, a number
of these OEM meetings had progressed to business discussions and proposals in
the latter part of 2005. Other OEMs wanted to stay engaged actively, but also
wanted to see if our D2P technology scaled an integrated silicon as we had
projected that it would. Some OEMs commented that they viewed the integration
steps as an important validation that both ParkerVision and our technology are
ready for prime time.
At the very end of last year, we received our first D2P fully integrated chips
back from the IBM fab. We had set the expectation for these first ICs
conservatively, perhaps realistically, for both the OEMs and ourselves. What I
mean by that is that there are many different goals that would be ideal to
converge, but are unlikely to do so in our very first fully integrated chip.
Efficiency, RF frequency performance, RF wave form quality, and other features
create a matrix of specifications which you wouldn't expect to perfectly line
up on your first pass of the chip.
Our commitment to the OEMs was that we had hoped to get enough of these
specifications on the first chip to provide them a meaningful written report.
But we thought it would be subsequent ship spins before we had a chip that
would be good enough to bring to their labs. As it turns out, good planning,
and excellent skills by our technical team, and a little luck doesn't hurt
either, gave us a chip that by the middle of January we determined was
something that OEMs should see firsthand. The chip, frankly, exceeded my
expectations. This verified our simulations and demonstrates that D2P can be
practically integrated into a silicon IC, in this case, a silicon germanium IC.
This has been a key milestone as more OEMs can now proceed with more
sophisticated testing and due diligence at a faster pace and better understand
how the technology fits into their own business needs and plans.
This chip removes a major portion of risk for those that were concerned that we
would get hung up at this step of RF integration. Frankly, it has significantly
widened our OEM audience for those engaging ParkerVision in business
discussions to determine how they can get access to adopt this technology in the
products.
We have looked in the past few weeks at the 3GSM congress in
I, like all of you, want our first deal to be finalized as soon as possible. I
will plead guilty to setting an aggressive goal for completion of our first OEM
deal by the end of last year. One of the benefits of that goal is that it sets
a pace and urgency within our own company to move everything necessary for D2P
adoption along as fast as possible.
Although I may have been aggressive in my estimate of timing, seeing how far we
have come technically and how rapidly our OEM audience is expanding, I may have
been conservative in my thinking of the potential and possibilities for our
technology.
With all of this great progress, one question that you may have is with regard
to the recent strengthening of our balance sheet from a private equity offering
completed last month. The question being, "Why now?"
The timing of this funding was important for several reasons. First, from a
financial perspective it is important that the company show it has the
wherewithal to go all the way without interruption or distraction in the
development of our technology to commercial adoption. This provides confidence
to our own internal team, our suppliers, and quite frankly, to the public
market.
Additionally, we did not want our balance sheet to become a topic of
negotiation with OEMs. This funding demonstrates to our potential OEM customers
the strength of our technology and the solid regard of our company within the
financial community.
In less than one year's time we have exited one business and firmly established
ourselves in another that has immediate potential and enormous growth
opportunities. We have used industry accepted testing to demonstrate and
measure the validity and outstanding performance of D2P. We have strengthened
our balance sheet and produced the first fully integrated D2P chip to better
demonstrate and further prove our technology.
And most importantly, we have engaged in multiple and
multi‑faceted discussions with mobile handset manufactures who represent
over 65 percent of the total market.
It has indeed been a busy, and I believe, very productive time for
ParkerVision.
Let me review a number of market issues that you have heard me mention before,
but I think bear repeating.
The current analog RF transmitter technology has reached a point of diminishing
returns. Customers are demanding greater functionality, efficiency, and
features. The 3G cellular platform has great promise but has practical needs in
performance, and cost reduction that D2P helps in a very meaningful way.
Well over one billion, in fact, closer to two billion 3G handsets are expected
to be delivered by the end of this decade. The convergence of all these market
factors, in my mind, makes our D2P solution an idea whose time has truly come.
3G is the right market application for ParkerVision to emerge as an important
wireless industry player.
Our OEM meetings, particularly over the past month, have made me more confident
than ever about our direction, the strength of our technology, and how it meets
the needs of important potential customers and partners.
For myself and our team, we appreciate your continued support and I would now
like to open up this call for your questions.
Woman 1:
Thank you sir. To ask a question please press the star key followed by
the digit one on your telephone. Also if you're listening on a speaker phone you
may want to disengage your mute button to allow your signal to reach our
equipment.
Once again that's star one to ask a question and we'll pause for just a moment
to assemble our question roster. [silence] Star one for questions please. [silence] We'll
take our first question from Michael Ciarmoli with Boenning & Scattergood. Go
ahead please.
Michael
Ciarmoli: Hey Jeff, how are
you doing?
Jeff Parker:
Hi Michael.
Michael
Ciarmoli: Just if you could
talk a little bit about the negotiations and what the major hang ups or hurdles
appear to be and whether or not you're seeing more interest in a licensing
model or ship sales model?
Jeff Parker:
OK. Those are good questions.
The discussion about what ParkerVision is willing to do to engage with an OEM
to get access to the technology is basically us finding the right balance
between what early adopters are asking for, the size of the market they
represent, and the terms and conditions that they're requesting.
So you might imagine that especially before we had a
fully integrated chip some of the early adopters who started asking us for
business proposals and who started negotiating on those proposals had their own
ideas on what they thought the value of their adoption before we had the next
step of technology done, was worth.
And in our view it's a process of kind of striking a balance between their view
on that and what they can represent in terms of the market opportunity that
they can reach out and get and the terms and conditions they're asking for.
We have not had anybody we've started a negotiation with frankly, walk away
from the table yet. Everybody is still talking. And the fact that we've now got
this chip back and that it works as good as it does, and we've ‑‑
by the way, this is just the first of chips that'll come as a steady stream of
chips throughout the whole year on our way to a product that can be fielded in
a handset ‑‑ I think strengthens our negotiating position in the
sense that it brings additional OEMs who maybe are a little more conservative
and wanted to see that step happen, frankly, because they've seen a lot of
other RF technology start ups not be able to succeed in this important
integration step or take so long to succeed that the technology was just too
far out there for them to get serious about it earlier than later.
So that's brought, frankly, quite a few more OEMs into the business discussion
dialog and frankly, more proposals have gone out and more dialogs are now going
on. But nobody has walked away from the dialog yet and I think that is
extremely encouraging.
In terms of what are they looking for, chips or licensing? It is heavily
weighted toward licensing. The kind of OEMs we are talking to have
sophisticated teams of very talented people. They can help us scale much
quicker and they can use the technology in system partitioning ways that
frankly bring even more benefits and opportunities than what we showcase when
we talk about this as kind of a stand alone adjunct to what they are currently
doing.
I think the nice balance that we have struck is how we are bringing this
technology to market is, when you look at our presentations, we talk about how
everything that is around the D2P can remain intact. We don't change what your
base band processor has to do, we don't change what your synthesizer has to do,
and we don't change the duplexer that you feed the signal in to. All that can
remain intact.
Basically, what you are doing is you are collapsing all of these redundant
components and circuits into a much more elegant, much more highly efficient
and much less expensive solution. So that's exciting to them and then they can
go one step further in the license where they can actually partition this in a
way that frankly gives them even more efficiency, less cost, it extends all
those benefits even further. So, the licensing model seems to be where most
people are focused and where a lot of our proposals frankly are centered
around.
Michael
Ciarmoli: OK.
Jeff Parker:
Thank you for your question.
Michael
Ciarmoli: No problem.
Woman 1:
Just a reminder to ask a question, please press star one and we'll now go
to Scott Robertson of Halpern Capital. Go ahead please.
Jeff Parker:
Scott?
Woman 1:
Looks like his line just disconnected.
Woman 1:
Do we have someone else in the queue? I apologize if I mispronounce Wilson Jaeggli with Southwell Partners. Go ahead.
Wilson Jaeggli: That's
close enough.
Jeff Parker:
That was pretty good.
Wilson Jaeggli: Yes,
that wasn't bad. Wilson Yeagley [sp]. Hi, Jeff. You mentioned a string of chips
throughout the year. Can you kind of outline for us when I guess what we will
be moving to, d2d, direct to data?
Jeff Parker:
No, basically, this first chip, that's a good question, is really the
core of the technology in that it takes the data and does the conversion to the
RF domain and sends it out to the antenna. There are interface circuits and
there are digital circuits that will get married up to that, much lower risk
but still have to be done.
Where OEMs get most concerned is when they look at where the chip is taking the
high powered RF signal and you are moving that around the chip and you are
moving from various circuits, that's where most companies on a product like
this would tend to get in trouble. So that is what they want to see.
They want to see, can you take your base band data signals and really do this
single unified operation that we claim we do and convert it to a RF carrier and
maintain waveform performance. You have to meet the standards of the, the
requirements of the standards, they are wide band CDMA, GSM, Edge etc. Can you
get the efficiency out of it? Does the chip burn up? I mean, there are a lot of
interesting things they want to see.
In fact, one of the most exciting aspects of this chip is to show the power
that comes out of it and have the OEM touch the chip and frankly it feels like
it is room temperature. You don't feel hardly any warmth at all. By the way,
for the efficiencies that we are doing, that is what it should feel like. But
that's not what you see today on the typical transmit chain where you are
finally coming out at high arc power. They tend to get pretty warm.
So those other circuits, the base band circuit, the interface circuits, will
get added to those as the year goes on and this first chip was off the most
difficult frequencies in the cellular market. It's the higher frequency DCF PCF
bands. The 1.7, 1.8, 1.9 GigaHertz. The next chips will add another band to
that which is the 800, 900 MegaHertz band. So maybe this is also an opportunity
for me to try to paint a visual picture of what are we driving to, let's say by
the end of this year.
What we've heard from all of the OEMs we're talking to, I mean, literally
without exception is what they are all looking for is how do they make handsets
that have all the popular GSM bands, which tend to be two low bands and two
high bands. And how do they put Edge and how do they put wide band CDMA, which
wideband CDMA they would like to have three bands, how to put that all into one
handset without building a brick, and without eating up their battery and
without adding cost to their product. So, that's what we're driving for for our
first product by the end of the year that they would be able to do start using
in handsets.
Wilson Jaeggli: So
what...I guess the basic question is: what are...maybe you just outlined it but
what do they want to see so that they are finally convinced this all works in
their machine?
Jeff Parker:
A number of them have seen it and that's why they have asked us for
proposals recently. That's why we have been able to expand our OEM business
negotiating list.
Wilson Jaeggli: What
don't you like about their proposals?
Jeff Parker:
Well, they asked us for the proposal. They say, hey, tell us how you guys
want to do business. Put something on the table and let's use that as a
starting point. Inevitably they start to feed back to us, hey, we like that, we
don't like that. Oh, by the way you forgot this. It's usually the oh‑you‑forgot‑this
that can become the interesting negotiating point. In last year's first
discussions the oh‑you‑forgot‑this point was more centered
around how long someone might get the opportunity to keep use of the technology
away from their competitors for some, what we thought, unreasonably lengthy
period of time.
Wilson Jaeggli: Right.
Jeff Parker:
We'll find the right balance. To me, really, in the absence of me having
set this very aggressive goal, for let's get this done our first deal by the
end of last year. I think if you look at it, and we will look back on this,
this probably is very typical negotiating dialogs. You've got people involved
here who are trying to get the best deal they can for their firms and we're
trying to help to get them to that goal without unnecessarily minimizing how
quickly the technology can be adopted into the broadest sense. Their and our
goals in that sense are a little bit at odds.
Wilson Jaeggli: You
mentioned earlier that you might have been a little too optimistic here in
hoping to have something signed by year end. Without holding your feet to the
fire, and obviously knowing it's a two‑ or three‑party negotiation
here, and who in the world knows when it all comes to fruition, however, with
that caveat, where would you think you could see a contract signed this year,
in some time frame?
Jeff Parker:
That's a great question. I sat in front of the mirror and repeated the
following answer to make sure I would say this on this call. I'm not going to
walk back into quicksand trap again. I've just finished extracting myself and
as sure as I set another goal date, we'll all be feverishly.... Look, we're all
feverish around here working toward getting something signed that makes sense
for everybody as quickly as we can. I just want...I don't want to put a date
out there because I think it puts an artificial....it puts an artificiality, if
there is such a word, in some dynamics frankly between us and the OEMs that I
really don't want to put out there.
I mean, I think what's encouraging, Wilson, and even better than encouraging,
is we've got multiple OEMs now in this negotiating dialog. They know that. The
3GSM Congress, you know, everybody was kind of there in the same location. I
had somebody who was there who's not part of that group but who is a supplier
to our company tell me last week, "boy, you guys really made an impact. I
talked to a lot of companies and people are buzzing around about where you guys
are at and what you are bringing to market. I know a lot of companies that are
seriously looking at you guys and it's a pretty amazing list."
They know‑‑everybody out there kind of knows everybody else is
looking at this. You know we're motivated to get deals signed as quickly as
possible. Frankly, we want the OEMs engaged sooner than later so that we can
get them to start telling us, "hey, those Bayesian circuits you're adding,
we want them to be done in this way so that it attaches to this Bayesian"
or "we want to take some of those circuits and stick them in our
Bayesian." Or whatever the ultimate goal that they have is, but the sooner
the better. My hope is that with the kind of pipeline of activity we are
filling up here, we'll have multiple deals unless somebody who has the kind of
size and girth can make us an offer that makes sense for us to balance‑like
I said earlier, that balance between the market size they represent and the
terms and conditions they're asking for. So we'll see. I think these
discussions are going to be ever more interesting as the weeks go by here.
Wilson Jaeggli: Well
are you talking to the people you want to talk to? In other words, have the big
producers, the quality producers, evaluated the product enough to go forward
with the contract?
Jeff Parker:
We are definitely talking to everybody we want to talk to and what was
very pleasing at the 3GSM Congress was that we had set up meetings with very
high level decision makers‑because you know everybody was there‑and
everybody we wanted to see, and had set a meeting with, made their meeting.
I've been to a lot of trade shows and those things are very easy for people to
get distracted, get taken off on other tangents, cancel their meetings.
Everybody showed up and frankly, we had a number of meetings where we had to
push people out of our conference room because the next meeting, the next
appointment, was going to be coming in or passing in the hallway, which isn't a
bad dynamic, by the way. No, we're talking to the companies we want to be doing
business with and we're talking at the level of decision makers.
Wilson Jaeggli: OK.
Jeff, keep up the good work and make it happen.
Jeff Parker:
We're going to make it happen. Thank you for your support.
Woman 1:
Thank you Mr. Jaeggli. We'll go again to Scott Robertson of Halpern
Capital. Go ahead please.
Scott Robertson: Hi
Jeff. Obviously I don't have a D2P in my cell phone here. I got cut off. I want
to talk a little bit or have you talk a little bit about what you're seeing in
terms of speed of movement of the Asian front versus the European front versus
the American front in terms of the vendors and how that's playing out versus
maybe what you expected going in?
Jeff Parker:
Well what is happening with the company today is we are now making
progress on really all the geographic fronts and I wouldn't want to predict
where I think the first deal will come out of. It could literally come out of
any of the locations that you would expect the major handset OEMs or their
major base band partners are located which takes you pretty much around the
world. I mean, Scott, we are hopping. I just looked at my calendar for the next
couple months and even just in the next four weeks we are every place all over
the place. Some people are coming to visit us in our facilities, which is
always a very good sign. Sometimes we're going to their facilities to
headquarters where they've got more of their decision makers that can meet
simultaneously but it's all over the place. And at this point I would not want
to predict where I think it will come out of first and frankly, I wouldn't want
to suggest to you one area of the world is moving faster than another because
at this point I think they're all kind of moving along at a very good pace and
a pace that should get us some deals down here.
Scott Robertson: In
terms of who you're talking to, how much do they know about who else you're
talking to on their own accord and how much do you alert them to, say, you know
I know vendor A is trying to get this deal and maybe they're being tough and
you say well we're dealing with vendor B here and they don't have such an issue
on this or is this stuff you let them find out on their own?
Jeff Parker:
Well as I said earlier, it's kind of‑‑all these industries no
matter how big the dollars are all kinds of incestuous and I never completely understand
who has what channels to what companies, but it is amazing how they all seem to
know what the other company is up to. I think the 3GSM Congress a couple of
weeks ago was a really good place for people to see that there's a lot of
activity on a broad OEM basis looking at how they're going to use this
technology and as I said, what was encouraging was to have one of our suppliers
report back to us that we were kind of the buzz among quite a few of the major
OEMs and I would imagine, Scott, that the word is kind of spreading around
between them whether it's in dinner conversation, casual meetings at the coffee
bar at the show‑‑I have no idea. I can tell you in terms of whether
we actually say to people "hey, you better get moving because your
competitor's moving faster," you know, we have our own negotiating styles
and we try to keep things‑‑you know, we try to motivate people but
we try to take the high road and I think that sometimes what you say‑‑what
you don't say or how you don't say something is just as important as what you
do say.
Look, I believe that people are coming to the conclusion that this is a very
important advance in radio technology. Our presentation in
Scott Robertson: Right.
OK, excellent. Thank you.
Jeff Parker:
Thanks for asking.
Woman 1:
We'll take our next question from Greg Weaver with Current Capital. Go
ahead please.
Greg Weaver: Hi Jeff. I
just have one question in regards to your chip development.
Jeff Parker:
Yes.
Greg Weaver: You
mentioned that by year end you were hoping to have this kind of all in one chip
out. Is that regardless of an OEM deal?
Jeff Parker:
Yes. We've gotten enough feedback from OEMs, Greg, over the last number
of months we've been in discussions to hear everybody tell us what they're
looking for. The problem we've helped them solve is how do you put multiple
bands of wide band CDMA, multiple bands of Edge and multiple bands of GSM‑‑all
those things today, by the way, take separate power amplifiers and multiple
transmit chains, lots of filters. I mean it's quite kludgy and while there is a
road map to take the traditional technology and make it smaller, it's not
nearly to the level that they want to see it integrated, it's not nearly to the
efficiency that they want to see it increased, it's not nearly to the cost that
they want to see it reduced. So we walk in‑‑what you're seeing
today is a very‑‑people are eking the last couple of percent out of
traditional RF solutions and PAs. It's interesting because I get emails all the
time from people, "hey what do you think of this new PA? What do you think
of this new transmitter? What do you think of this new combination thing?"
And our observation is it seems like the traditional companies are crowing ever
louder about ever smaller improvements. They're kind of peaking out at what
they're going to do with this decades old architecture. We start at kind of the
bottom of our curve which is already much higher in performance and size
improvement and cost reduction. We are going to move up that curve of improvement
very rapid over the next one or two years.
The feedback we have gotten from these OEMs is, this is the standards that we
want, this is the things that are important to us. They are all saying the same
thing. You go into a store to buy a cell phone for a particular carrier, you
may see certain number of handset brands on the shelf, but they are basically
all covering the same frequency bands, the same standards, etc.
So what OEMs today are driving to is, how do we make wide band CDMA edge and
GSM converge and how do we do it in a way that is portable and efficient and so
we know exactly what to drive to. We are going to drive to that and that's why
these negotiations in my opinion become more and more in our favor as the year
goes by because we are getting closer and closer to a production chip that
makes it easier for more and more people to adopt and use it.
Greg Weaver: But
there's no specific base band requirements for one particular guy or processor
he's using...Before you said that you didn't want to get boxed into anything
because you didn't know what the guy wanted at the end of the day. You needed
to have a very generic kind of temporary solution just to show him.
Jeff Parker:
Yes, but the way you can make this thing sing and dance with most of
what's going to be out there, or with enough of what's going to be out there,
that if you had a bridge between what you didn't finish or what you didn't
create and something slightly different, you can do it in a practical sense.
Many of the base band vendors are going to a standard called DIGRF, which is a
digital RF interface standard so that more people can make base bands and RF
talk together without having to be so closely linked together and that really
works in our advantage.
Now, you can take it to another degree and get more optimization if you know
exactly what you are going to integrate together, and you can save some
silicon, you can save some more power, you can save some size and there are all
sorts of benefits, but right now our plan is to develop our product with the
DIGRF interface which we already know quite a few base band companies are
putting into their base bands which are wide band CDMA edge and GSM base bands.
So we know what to drive to and unlike our d2d transceiver, as I mentioned
earlier, we're not asking people to change anything around our chip. We have
learned quite a bit in this industry in the last few years and I think frankly
a lot of what we are hearing in feedback from the OEMs is the result of our
being in the industry now for a few years because they say to us, gee, you know
you guys are right on target. I mean, we never heard of you guys before... Some
of the first conversations, how did you guys know to do this, this and this.
They understand that the chips they are seeing today and the technology we
showed last year, those initiatives were started two years ago, three years
ago. We had to project forward where we thought the industry would need help
and what we could bring in an architectural advantage to that and I think we
are very plugged into the industry at this point and are very much on target
for what they are looking for.
Greg Weaver: So these
will be production ready chips, not prototypes when they are ready. They could
be used in a commercial handset?
Jeff Parker:
Yes, but we'll go through the same thing everybody else does. You'll
start out with alphas, alpha pre‑production and then first production and
so forth and so on, but yes.
Greg:
So what's the cycle after you design one of these guys up in terms of
having something that he can sell?
Jeff Parker:
Well, it depends on the OEM. If an OEM wants a little less level of
integration and they want to get out there quickly it is very possible that
late this year or early next year they can start to use D2P in their products.
If they want a much higher level of integration, or they want their
partitioning thing differently, it will take longer. That's another reason,
Greg, why I was not real keen on locking ourselves in for a long period of time
with a single OEM. I would love to see a number of OEMs worrying about when is
D2P is going to show up in their competitor's handsets.
Greg Weaver: Mm‑hmm.
Jeff Parker:
We want people to be motivated to use the technology for the right
reasons. The right reason is because carriers are demanding better efficiency,
longer talk times, and the cost of 3G handsets is too high.
Greg Weaver: OK, Jeff.
Good luck.
Jeff Parker:
Thank you.
Woman 1:
Once again, to ask a question, please press star one and we'll now go to
Daniel Lewis with Gem Partners. Go ahead please.
Daniel Lewis:
Hi, Jeff. How are you?
Jeff Parker:
Hi. Good. Thanks, Dan.
Daniel:
I have a couple of questions. One is, are the OEMs you're talking to
convinced that the ParkerVision solution is the best one out there and have
they indicated as such.
Jeff Parker:
What they have indicated to us as though they've never seen anything that
has the kind of. [beep] doesn't have the quality of the waveform performance
and the efficiency and certainly not the size that we're showing them. Yes,
they have in fact said to us that this is quite an advance over anything else
that they've seen.
Daniel Lewis: Have they
conceded that other technologies that extend the old RF rules are inferior or
are they just not admitting for purposes of negotiating?
Jeff Parker:
I can tell you that we are pretty specific in showing them what the other
traditional base products are capable of doing in terms of efficiency and we
showcase ourselves against that and I have yet to find the first OEM tell me
that you guys are way off. If we show them that mid power level, 50 milliwatts,
17 DBM power out‑‑which is where a 3G phone spends most of its time‑‑when
you add up the power amplifier, including the latest and greatest dual and
triple mode power amplifier that people are using as band‑aids, you add
it to the transmitter and you add it to some of the filtering that needs to be
put through, when it's all done, those things are 6% to 7% efficient. I have
yet to have an OEM say that those are 20% to 30% efficient just like you are
talking about. We haven't had any of that.
Daniel Lewis: Mm‑hmm.
Jeff Parker:
It could be my opinion, if we were way off than an OEM would use that in
a negotiation with us and say hey we think the value proposition you're
showcasing is a lot smaller than what you think it is and we're going to tell
you because that's to our advantage. I haven't heard any of that.
Daniel Lewis: Mm‑hmm.
To clarify, earlier you said that right now there are multiple parties that
have gone to the negotiating phase and it's not a single OEM at that level and
some of them have caught up. Is that fair?
Jeff Parker:
That's absolutely fair.
Daniel Lewis: Lastly,
traditionally companies with concentrated customer bases tend to lose the
ability to maintain their margins over time. Can you review your strategy to be
able to not fall into that trap? Clearly, a lot of the OEMs you're dealing with
presumably assume that they have a great deal of leverage because of their
size. How, over time, would you hope to become that standard that you alluded
to earlier?
Jeff Parker:
I think OEMs are starting to see, and as we get deeper into working with
them, actually getting into the workings of the technology. They are going to
see is this technology is an optimal transfer in how to process data to a radio
signal. We have done with our transmitter technology is that we have divorced
the traditional link between linearity and efficiency. If you look at the way
the wireless standards and the wireless world is moving, it's toward "Give
me more linearity so that I can put more users and more data through whatever
spectrum I get to work with."
The more data and more users they want to put through the wireless pipe, the
more valuable our technology becomes. If the world goes in the opposite
direction, I would tell you there's lots of other ways to do things, and they
don't necessarily need ParkerVision.
But the reason 3G is such a great place for us to emerge is, if you look at the
traditional architectures, the link between linearity and efficiency is running
contrary to the 3G standards. And so, they're kind of hitting the brick wall at
this point, and we take that wall down and completely set up a whole new set of
expectations.
A lot of the OEMs at the 3G Congress were shown‑‑a lot of them like
to look at the efficiency of what's known as the collector on the output of the
power amplifier. And they say, "If you'd just show us the efficiency of
your output, just that one piece of the puzzle." And we do have the
ability to do that. And they would traditionally, Dan, at low power levels
expect to see the efficiency on those things down in some single digit or maybe
very low double digit‑‑you know, 8, 10, 12% kind of number. We're
showing them 50%, 55%‑‑I mean, numbers that are truly off the
chart. And we're in the infancy of the technology.
So, that's my long winded way of telling you that 3G isn't the end of the
wireless journey. It's just another step. We're already talking to people about
4G, 3.5G. Carriers want to be your one stop shop for networking, and in order
for them to do that, they've got to have more bandwidth and more user capacity.
I mean, that's the whole purpose for 3G, but that's just a step on the way to
4G.
Daniel Lewis: Is it too
early for you to start beginning to speak to the carriers?
Jeff Parker:
No, it's not. We actually have plans this year to start rolling that
campaign out. And I don't want to go into any more detail right now, but I will
tell you there are other benefits this technology brings that are not
particularly OEM‑centric. But we believe carriers will be just as excited
about those benefits, for what we can do for their network, as OEMs are of the
benefits you've heard about from us for the last few months as to what we can
do for their products.
So, that's another way that ParkerVision will keep its value proposition up. We
will get our technology‑‑or we'll certainly put a yeoman's effort‑‑toward
getting our technology specified by the guys who own the networks, who are the
guys who ultimately call the shots.
Daniel Lewis: Now, the
business discussions that you had some time ago‑‑you mentioned that
the snag that you hit was related to the level of exclusivity that a
prospective customer might desire relative to what you are willing to provide.
Jeff Parker:
Against the balance of what they might represent in the market.
Daniel Lewis: Against
the ‑‑right. So, since that time, you have more OEMs who are, you
know‑‑more serious discussions, more business discussions. Is the‑‑
Jeff Parker:
And some of the more conservative OEMs are the ones who've started to get
actively dialoguing with us about these proposals.
Daniel Lewis: OK, when
you say conservative, what do you mean?
Jeff Parker:
Well, you might imagine conservative OEMs tend to be the larger OEMs.
Right? A guy who has a larger market share tends to be more conservative. But
the guys with the smaller market share tend to be a little bit more willing to
be a little bit more of a cowboy.
Daniel Lewis: OK, and
so conservatives, are they hung up, as well, on the exclusivity term? Is that
the major‑‑
Jeff Parker:
Proposals have been recently delivered. We'll see. We'll see. Those
dialogues are ongoing right now.
Daniel Lewis: OK, very
good then.
Jeff Parker:
OK, Dan. Thanks.
Daniel Lewis: Thank
you.
Woman 1:
We'll go again to Wilson
Jaeggli. Go ahead, please.
Wilson Jaeggli: Jeff,
just in the tone of what you're saying here, a couple of things. Is it fair to
say that versus what you thought three or four months ago, and thought you'd
have something by year end, now you're discovering in dealing with the OEMs that
they want more complete integration than you had originally thought on the
chip?
Jeff Parker:
No. That I haven't seen at all.
Wilson Jaeggli: That's
not the situation?
Jeff Parker:
No, not all. I think what has been surprising to some of the larger, more
conservative OEMs is the distance toward integration that we were able to get
on our first fully integrated chip.
Wilson Jaeggli: OK, so
you think they're surprised at how far you are down the road here.
Jeff Parker:
We have an OEM that I've become pretty friendly with some of the very
senior management, who told me that in the earlier part of their career they
were responsible for some mixed‑signal chip development that they thought
they could do in a certain timeframe, and it took them multiples of that time.
That is not an uncommon experience, especially in RF chips.
But
And we've taken the time‑‑you know, some of our very top people
like to have the philosophy, "It's the 90% planning, 10% execution
strategy." So, you know, it's painful up front because it takes time and money
and effort, but let me tell you, it's going to go a whole lot faster on the
back end.
And that's what they're seeing now. They're seeing the value of what we've done
by being very careful in re‑architecting this whole architecture, taking
a completely new approach and spending enormous amounts of time to understand
our simulations. And by gum, the chips come out and do what they're supposed to
do. You know, you don't build on‑‑it's kind of the old philosophy
of, "We don't have time to do it right the first time, but we'll do it
again five more times." So, we don't build around that.
Wilson Jaeggli: Do you
think these OEMs have we seen enough data and tested the chip they have in hand
enough in here to proceed with a contract with you?
Jeff Parker:
Well, I think that's why some have asked for proposals, yeah. They've
said, "Hey, we've seen enough. Give us a proposal. How do you guys want to
business? We've seen enough to get going on the business proposal."
Wilson Jaeggli: Now,
OK, so‑‑
Jeff Parker:
And I think they also realize this thing isn't going to sit out there,
without customers, forever. We're going to start nailing down customers. And
when we start nailing down customers, that starts taking away certain options
that some of them might have in their ability to negotiate certain favorable
terms for themselves.
Wilson Jaeggli: And
then by the same token, it would require further development. And I guess by
the time you would see revenue, either on a chip or a royalty basis, would be
sometime in '07.
Jeff Parker:
I think that's reasonable, yes. I do think that we can see revenue this
year from, perhaps, access fees. There are major milestones that they'll see
this year that I think customers would be willing to pay us advances on. I do
think this year we can generate some revenue, though. At least from the
conversations we're having now, I haven't seen that to the contrary.
Wilson Jaeggli: Right,
but then royalty or chip‑‑
Jeff Parker:
I see the royalty revenue coming next year. I think that's a very
realistic expectation.
Wilson Jaeggli: OK. All
right. Thank you, much.
Jeff Parker:
Thank you.
Woman 1:
There appear to be no further questions in the queue, so I'll now turn
the call back over to Mr. Parker for any additional or closing remarks.
Jeff Parker:
Well, I don't have anything other than to thank everybody for taking the
time to listen to our report today. I appreciate it. And for our entire team,
we appreciate your continued support of our company.
We are very focused on building shareholder value for all of our supporters and
ourselves, and believe that we're all going for the same goal. And we
appreciate your patience with us as we go through the next steps of this
commercialization journey. We are very‑‑ as I'm sure you heard in today's
report‑‑very excited about the expansion of what's going on with
our OEM dialogues and hope that it won't be too far down the road that we'll be
able to provide you some concrete information about what that all means.
So, have a great week. And thank you again.
Woman 1:
Thank you. That concludes today's conference call. We appreciate your
participation and you may now disconnect.