ParkerVision Special Investor Relations Call
June 28, 2005
Jeff L. Parker, Chief Executive Officer
Cliff Calista with Emerging Growth Equities
Mark Gaskill with MKG Financial Group
Joe Graves with Lehman Brothers
Sedra Feta (sp?) of Fire (Sire?) Capital
George Sheil (sp?), with George Sheil, Inc.
Kent Williams with
Moderator: Good day ladies and gentlemen and welcome to the ParkerVision Inc. Special Events conference call. My name is Cara and I will be your coordinator for today. At this time, all participants are in a listen only mode. However we will be facilitating a question and answer session towards the end of todayís conference.
Before we get started, I want to remind listeners that this conference call will contain forwardlooking statements which involve known and unknown risks, uncertainties about our business in the economy and other factors that may cause actual results to be materially different from our expected achievements and anticipated results. Included in these risks are factors such as the ability to maintain technological advantage in the marketplace, ability to sufficiently increase manufacturing capacity to meet demand, achieving timely market introduction and acceptance of our products, maintaining our patent protection and the availability of capital, among others. Given these uncertainties and other various factors about 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 in our filings with the SEC. I would now like to turn the presentation over to your host for todayís call, Mr. Jeff Parker, Chief Executive Officer.†† Please proceed sir.
Jeff Parker: Thank you and good afternoon to all of you and thank you for joining us for this conference call. So this morning we announced that we will be exiting our retail activities and moving forward as a pure play fabless semiconductor company. Let me start by saying that exiting retail was a difficult decision given the hardworking and dedicated retail team that weíve assembled at ParkerVision, and the support that weíve received from our retail channel partners. However, by so doing, we have enhanced by no small margin our probability for success with our OEM centered business model.
I would like to take a few minutes to explain the decision in greater detail. We entered retail a little over a year and a half ago with three main goals: number one, to showcase our technology, and to continue to build awareness in the technology marketplace for what we had and will continue to develop. Number two, to validate that our technology in practice met the performance and reliability claims that we had predicted it would deliver. And number three, to generate initial revenue for the company from our technology, and ultimately cash flow to further fund growth opportunities. We clearly met the first two of these objectives. As far as showcasing our technology, we are no longer hearing skepticism from potential OEM partners about the validity of our technology. In the course of our retail efforts, we manufactured tens of thousands of units. Our product reviews and customer testimonials have been exemplary, senior executives at some of the leading retailers around the country have replaced market leading brands of WiFi products to use our products in their homes and offices and the reliability of our products has been excellent. In addition, many of our prospective OEM customers have purchased and evaluated our consumer products, which has helped establish our credibility with regard to our technology and our performance claims.
We were successful in showcasing our technology and proving that our WiFi product based on our technology worked as well or better than we predicted.†† It has been gratifying to hear from so many end users commenting that our product is one of the few wireless products theyíve used that performs according to the claims. Regarding our third goal, over the course of this year, we find that the ability to achieve significant retail revenue growth is clearly at odds with other investments in growth opportunities that we strongly believe are in the best interests of building value at ParkerVision and that we are pursuing aggressively.
Ever since we announced the latest advancements of our digital wireless technology earlier this year, specifically with the introduction of our Direct to RF Power, or D2P technology and products there has been a growing and significant interest on the part of OEMs to engage us in active discussion about the incorporation of our technology into their next generation of products. While we believe it would have been possible to expand our retail channel of distribution, and our wireless networking offering to include 802.11G as well as cordless phone products, it became evident that the resources and capital required to expand our retail campaign is in contention with properly supporting the rapidly growing OEM business prospects. Thus we concluded it is in the best interests of ParkerVisionís shareholders that we ensure the fastest success in securing OEM design wins by narrowing our investment of both human and financial resources to that of a pure-play fabless semiconductor provider and curtail our retail campaign efforts.
From a financial standpoint, although the company will record a one time restructuring charge in its second quarter statement of operations of approximately 4.5 to 5.5 million dollars, 85 percent of which represents non-cash charges for impairment of inventory, and other retail assets, the benefit going forward will be a reduction by 25 to 35 percent in recent cash utilization rates. This reduction in cash usage allows us greater financial flexibility as we move through the OEM sales cycle.
Iíd like to spend a few minutes discussing the history of our company as it relates to our OEM efforts in an attempt to help you understand why we are so bullish about our opportunities in this market. When we first announced the availability of our initial D2D transceiver ICs a few years ago, we did not find the level of acceptance from the OEMs that we had hoped for or expected. There were a number of factors that played into that OEM reaction. Some was skepticism that our digital receiver technology was not based on the tradition analog architectures and therefore would perform as we claimed it would. The complex nature of transceiver designs, and the commitment required by an OEM to do extensive system analysis combined with significant design changes to an OEMís product interfaced to our transceivers added up to a risk that early adopters were unwilling to take. As a response to the skepticism, we decided to showcase our technology by incorporating it into a complete and mass production worthy WiFi product. We believe this has answered a lot of important questions for OEMs and has also enabled us to guide them with confidence based on real world experience.
It was not coincidental that while our retail efforts were getting under way our core engineering research team remained hard at work assessing what the company could do differently with regard to its ultimate OEM goals. Our new ultra efficient Direct to RF Power amplifiers which we call D2P, and whose launch we announced this past January, have been extremely well received by the OEM community. And frankly, the feedback we are getting from OEM prospects regarding this initiative has provided much of the impetus for the timing of this decision. This leads to the obvious question of what is our OEM sales strategy, and what is the cycle time for this market.
The sales strategy that we are utilizing is one in which we have targeted a number of tier one and tier two OEMs including cellphone handset manufacturers and WiFi companies. These markets are forecast to consume over 4 billion dollars in RF power amplifiers and transceivers next year alone for these two markets, and this is growing. They will require over 1.8 billion units for their products. Successful visits to OEM prospects earlier this year have yielded active dialogues that are markedly different from past chip sales efforts. These visits, both here and
overseas, have resulted in significant ongoing discussions with various tier one and tier two prospects that have included technology reviews, demonstrations, exploration of their product and business needs and we are currently scheduling additional visits to these prospects in the next weeks for further prototype demonstrations and business discussions. While timing can be difficult to predict, our progress with OEM prospects to date is on target with our best schedule expectations. Though we arenít in control of all factors in the cycle, we certainly intend to be aggressive in our product development and sales efforts and forging business relationships to occur sooner rather than later. We are very confident in our ability to turn some of this OEM interest into tangible business relationships that will generate substantial future revenue for the company, particularly now that we have narrowed our focus to succeed at securing OEM and design wins.
As we exit the retail space, I think itís important to acknowledge
the relationships afforded to us in the retail community. Weíve established
relationships with CEOs and other senior management at some of the largest
Moderator: Ladies and gentlemen, if you wish to ask a question at this time, please key star followed by one on your telephone. If your question has been answered or you wish to withdraw your question, key star followed by two. Please stand by for your first question.
Moderator: And your first question comes from the line of Devon Waits, with Gravitas. Please proceed.
Devon Waits: Yes hi, I wondered if you could help me identify where you sort of sit in achieving your targets with your current cash position and what you feel you are going to need to ultimately get this to an OEM, as far as what your cash needs would be.
Jeff Parker: Well ok, that is a good question, thank you. Right now when I say that I feel like we are trekking right along our best expectations itís been our view that what OEMs want to see is enough proof of the technology that they know that it will fit into their product in a way that is acceptable to them and so these demonstrations weíve been doing have been very important, theyíve also been very well received. There will be quite a few of those in the ongoing weeks. We expect that a number of OEMs will probably be asking for a certain chip level integration even beyond what our prototypes currently show and we are trekking right along the path that we had hoped to be able to deliver those to them in the not too distant future. A lot of the OEMs we are talking to are now beginning to get deeper into the dialogue about the business discussions and how our technology and chips can be formed for their needs.
How that all relates to our cash needs and where we are today at the rate itís currently moving along and appears to be poised to continue to clip along, is that we should have enough capital to bring our initial OEM design wins in long before we have additional capital needs. So I am very comfortable that we are very well positioned especially with todayís narrowing of focus to be able to bring in those first design wins and still have plenty of cash runway in front of us,
and my further view is that once we have those design wins, there is a plethora of ways that the company can continue to fund its needs going forward, hopefully not the least of which could include some of the OEM funding opportunities themselves, whether itís prepayments with milestones, non-recurring engineering fees, thereís a whole variety of possibilities.
Devon Waits: Ok, and then one additional thing, how do you foresee keeping the investment community informed of, kind of as you go by these hurdles with these OEMs, and with your progress?
Jeff Parker: I believe weíll do that in two ways, some which are kind of at our discretion, and some that are more mandatory of course by material events. Obviously the material event one is more easy to answer, when we have our first OEM design win it will be our pleasure to rejoin you on another conference call and say hereís who our first OEM is, hereís the application and share with you what those are about. And as I said earlier, the sooner the better. The more discretionary ones will be things that we will share that deal with specifications for certain kinds of applications that we are showcasing, prototype demonstrations, perhaps at our annual meeting this year we will demonstrate the technology, weíre taking that technology around the world and showing it, we have also had people whoíve come to our Florida facilities to see it.
So we will likely do that, we will keep the community updated as we have notable things to talk about as we advance the technology towards tangible products, but I also will share with you that the lionís share, the vast majority of our efforts will be heads down on securing these OEM design wins. It will be a balance between the two, but certainly weighted toward letís bring these OEM design wins in because frankly I think those will speak for themselves the loudest and they will have the most meaningful evidence that we are executing the way that the company needs to, to become a cash flow positive shareholder value generating machine.
Moderator: Your next question comes from the line of Cliff Calista with Emerging Growth Equities. Please proceed.
Cliff Calista: Hi Jeff. You mentioned these prototype units, can you give us some color on that? Are these CDMA, are they performing up to specs, and what some of those specs might be? And how many people might have seen them already?
Jeff Parker: Ok yeah, great question. The prototypes are somewhat flexible, and I think that this is one of the reasons that this it is creating a nice growing pace with these OEMs in the dialogues we are having. We can set them up to showcase CDMA, wide band CDMA, GSM. We have had in some of the OEM visits requests for us to, hey can you show us this other standard or this other thing we want to do with it and in many cases, not all, we have been able to reconfigure the demonstrator literally within sometimes a few hours, sometimes a half a day, but certainly in a timeframe that the traditional technology approaches that they have been used to putting in their products, you couldnít do these kinds of things in that short a time frame frankly, and you couldnít do the kinds of multi mode things that we showcase on the fly.
We will show someone the prototype where we are putting CDMA through the prototype, it then goes to various pieces of equipment which these OEMs all have in their own laboratories, generally speaking HP or Agilent equipment, and it shows them the quality of the output of the RF signal, it shows whether we pass or fail the standard under a variety of conditions, and it allows them to change various parameters of the prototype,†† i.e. what happens under various voltage operating conditions or various power output conditions, thereís a lot of different things they want to see, and then how do those testers then report the results and are we still passing the results, and thus far what they have seen is that we not only pass but we pass with no small margin, which tells them that they have manufacturing margin, that we are not pushing the technology to its limits.
And then theyíve been asking can we show some of the newer things down the road that they are very interested in, you know youíll be hearing about applications such as HFDPA which is a an extension of the wide band CDMA standards, where service providers want to deliver higher bandwith, wide area networking for both cellphones and smartphones and even into portable computers, PC laptops, and do it at data rates of† 2, 3, 5, 10 megabits per second. OEMs want to see how does this work for WiMax, how does this work for WiFi, and so we are showing them all these different variations, some of it on the fly some of it has to be slightly re set-up but weíre able to do all of that today. Some of the standards that theyíre asking for, some of the newer standards have just been passed and weíre evolving our prototypes rather rapidly to show that yes we can do those as well. Itís a pretty complex matrix, but I think Iíve mentioned in previous dialogues that assessing the transmit and the power amplifier chain against what we did earlier of complete transceivers a few years ago is a much more simplified affair and that is true. People come in and for a few hours for a particular standard they can get through this and really know a lot about the technology that if they were looking at a whole transceiver and how it fits into their system, would have taken weeks and in some cases even months. So it is helping move the dialogues along at a much accelerated clip over our previous experience.
Cliff Calista: So they are coming into
your place in
Jeff Parker: Weíve had them come to
our place in
Cliff Calista: Are these tier one, tier two guys, or what kind of people?†† Both?
Jeff Parker: Yes.
Cliff Calista: Ok so youíve had a few.
Jeff Parker: And weíve been asked to expand our dialogues to additional groups within these OEMs. Weíve had with some OEMs dialogues now that are as active as daily, some of itís by email, some of itís by phone call, some of itís both, but I can tell you there are a lot of meetings that are already set up and many more in the works that are a result of these conversations, and it keeps expanding and growing. And what I am personally very excited about is that there are a number of OEMs that are leading us into a dialogue about product families they want to apply this to, not just a product and they want to be participatory in our product road map, and how does this roll out over the next six months, twelve months, eighteen months, two years. These are exactly the kinds of dialogues when we announced this in late January that I said this is why we are making the announcement. We donít want to build chips that donít have product homes, we want to build chips that are exactly what OEMs want to put in their products, and that before we finish them, they commit to doing so. And this is the track we are on right now.
Cliff Calista: Ok, great then.
Jeff Parker: Thank you.
Moderator: Again ladies and gentlemen, to ask a question you may key star followed by one on your telephone. Your next question comes from the line of Mark Gaskill with MKG Financial Group. Please proceed.
Mark Gaskill: Hey Jeff, how are you doing?
Jeff Parker: Iím fine Mark, how are you?
Mark Gaskill: Real good. Quick question, obviously wireless is and everything that you are doing is really important but one of the areas that you also bring to the table has to do with the battery life, and the question I have because weíre hearing so much, so many of the OEMs out there are designing out products that are just going to do more and†† more and more, how much of the decrease in battery pull or increase in battery life is also part of what you are hearing from these guys?
Jeff Parker: Well we are hearing that, but we are really hearing everything. This is why I am encouraged, because this is the impetus behind why we are talking about various product families and we are working with in certain OEMs many different divisions who are kind of focused on different objectives. Some of them are focused on handsets that are more, less feature rich letís say, lower cost, so we can really help them in reducing component count and taking cost out of their product but yet not sacrificing quality and in some cases either reducing the battery which is an additional cost savings but doesnít reduce battery life or flipping the products, where yeah they are trying to do more: putting more standards, adding in higher speed data networking, big displays that consume a lot of power, all sorts of features, cameras, et cetera, and there they are looking for every ounce of power savings they can so that they donít reduce battery life. Iíve seen some phones recently that were pretty stunning, where you are not in the too distant future going to be able to get multiple channels of television through these networks right on your cellphone. I saw a demonstration of a 40 channel handset that was just amazing and you might imagine that that television feature takes a lot of power. So theyíre looking for every place they can save power, so in that case we are focused there.
Whatís happening with the technology in these dialogues is we are showing OEMs how they can push and pull and influence it by being involved early at this point with what these chips end up looking like. We have, and I am not at liberty to share with you the application, but we had a very interesting, exciting visit where an OEM came in and said look, this is an OEM we had visited, team came over to visit us from over seas as the result of a visit, and frankly this was a group that didnít want to wait for our return, and they have a very interesting application for the cellular phone space, that our technology can really enable them to make certain product features that, I mean they didnít say that they couldnít get there without our technology, but my impression is we certainly make it a lot easier. Maybe we in fact are the enabling piece.
So, thereís kind of three things that we walked through, from we are enabling things that I think people want to do, that they donít have a clear road map to today but they want to do as quickly as possible, to lower end things that are more cost conscious but they donít want to give up quality because you are selling these products to network providers that arenít going to stand for reducing their network quality, and then youíve got the products that are trying to combine more obvious combinations of things that take up a lot of power that we can give them significant energy savings that will help them a lot.
It really truly is at this point all of the above. I could not point to a single, overwhelming, they want to do ďx,Ē it truly is a combination and blend of all of the above and I think that is one of the reasons why we are finding such bullish and rapid acceleration of these dialogues. We are truly solving problems that they havenít found any place else that they can get solved.
Mark Gaskill: Yes, quick follow up question. If you do see some orders come in or begin to come in from the OEMs, do you feel confident that your fab relationships are such that youíll be able to step up to the plate and fulfill orders without too many glitches?
Jeff Parker: We do feel confident, but I can tell you that we are not stopping there, we have a whole program in place where we are going to be very specifically setting up our fab operations, and if you look at a fabless semiconductor company, there is a whole operational side as you throw in design wins that you have to make sure you can deliver, and you can satisfy the OEM that you are not going to be but for the bolt that could build the bridge, so we are very aware of that and we are actively working on that now because frankly the dialogues with these OEMs are taking us into these kinds of discussions where they are drilling down into those areas and we need to be able to answer their questions to their satisfaction that they know that we can be a reliable supplier. The answer is yes I feel comfortable with our fab relationship today, but it doesnít stop there. There is a lot more that needs to be done, and weíre doing it.
Mark Gaskill: Thanks Jeff.
Jeff Parker: Thank you.
Moderator: And your next question comes from the line of Joe Graves with Lehman Brothers. Please proceed.
Joe Graves: Hey Jeff, how are you doing?
Jeff Parker: Hey Joe, Iím well.
*Note: the following section of the recording was unclear. Some words may be missing.
Joe Graves: My question relates specifically to your efforts in 802.11G and the future potential of a complete system on chip site technology. You kind of gave us a view into the future. My feeling was when the PO was first announced, this was going to enable you to have(?) somewhat of a Trojan horse in that it would be able to bring the advantages of digital radio into the shops of a lot of different potential OEMs and then further penetrate with the potential full system on a chip type technology. Is there any kind of view of when that could happen?
Jeff Parker: Joe there is, there is no question that we have all the enabling building blocks to do WiFi system on chip, and do it in a way that enables certain performance or energy advantages that are significant compared to what other people are trying to do or have already done using traditional techniques. We are definitely though letting the OEMs tell us what they want us to build. And right now at this moment I can tell you that the overwhelming dialogues that we are into, truly is around this D2P architecture and chips and technology, not all of it specifically cellphone focused, but a lot of it cellphone focused, and some of it WiFi focused for various applications that they have. One of the things before I think we can give you an accurate prediction that says well we think we can do a single chip WiFi thing based on our technology by date ďxĒ is thatís going to all be dated by what the OEMs ask us to do, and if we end up developing and delivering as many flavors of the D2P chips that I believe is in the works now, that will probably make that offering a little later. If it turns out that there are not as many of those as we thought, then that could make that offering a little earlier. But the one thing that we donít want to do is we donít want to have our eyes too big for our stomach. We want to make sure that what we commit to do for OEMs that our execution is without fail, it has got to be right on. We must. The opportunity here is very very large.
I know years ago when we talked about the technology conceptually and what it could do, everybody was very excited for us to be going after the cellphone market. And for a variety of reasons we werenít ready and we couldnít get there at that time so we did what was appropriate for us to accomplish which was the WiFi space at the time. And a lot of people were like, ok, thatís fine if thatís what we need to do letís go do that, but gee, we sure hope you get back to the cellphone space. Well thatís exactly now whatís happened, and the activity and the increase in that activity really is mostly around the cellphone space, with some WiFi activity, but again Iím going to let the OEMs drive what our product line development looks like. The guys whoíve
got the purchase orders, the guys who hand us the dollars, or various currencies, are the guys that we are going to respond to and thatís going to strongly influence what our product line is going to look like over the next 6, 12, 18 and 24 months.
Itís time for us to turn the technology into cash flow.
Joe Graves: I would agree.
Jeff Parker: Next question, please.
Moderator: Your next question comes from the line of Sedra Feta (sp?) of Fire (Sire?) Capital.
Phil Anderson: Actually itís Phil Anderson, Jeff, how are you?
Jeff Parker: Hi Phil, good thanks.
Phil Anderson: Could you summarize for us, because it sounds to me that you have a number of potential OEM customers who are asking you to do a variety of things, several of them are asking you to do one thing, several another, could you summarize for us where your technology is in its state of development as it relates to being a commercializable technology and provide the functionality that these OEMs are interested in?
Jeff Parker: Yeah, I can definitely give you a sense of that. So, our first highly integrated chips that we will deliver to OEMs will be single band, multi-mode chips, and the reason for that is that is the quickest thing for us to get to them. It is not uncommon today that when they deploy products today they use multiple PAs, so a number of the OEMs we are talking to I think very well will embrace in various models of their products that architecture sooner than later. But that is the roadmap for us to not that long thereafter then deliver multi-mode, multiband chips. And one of the things that we are driving toward, and I think that if you look at our OEM presentation, is what we call a cellphone platform chip, where we have a chip that can do multiple modes, multiple bands, and that really is a very powerful consolidation over what they currently have to do today to get anything near this kind of flexibility into a product.
So, nearer term, I see the single band, multi-mode chip, but weíll also have that available in various bands, because there are different bands of operation in Europe versus in Asia versus in the United States, and those are hundreds of megahertz offset from each other, not many gigahertz, so those are variations, those are not complete redesigns of each other and thatís very viable for us to be able to deliver those relatively rapidly one after the other. And my best expectation right now Phil is that weíll be somewhere between a quarter and possibly two quarters beyond that that we would have more of a platform chip that consolidates, i.e. they would use multiple chips from us, which even our multiple chips will still replace a lot of components and is still a big step of high integration.
One of the lessons I think weíve learned as a company from our past few years is that when you have the right solutions, OEMs who get excited about your product and technology offerings, donít wait, they donít need to wait for the ultimate-ultimate level of integration. There are all sorts of revenue opportunities that you get to have with them as you show them enough integration over what they are currently doing today.
Phil Anderson:†† In addition to the functionality enhancements that your technology represents to the OEMs, is it clear to you, or hopefully to they as well, that there is also a dollar value proposition that your technology would offer up if they become customers of the company?
Jeff Parker: Yes, I mean, let me try to understand your question. Ask that again, I want to make sure I am answering the right question.
Phil Anderson: Let me just simplify so that I can understand my own question, which is in essence I can understand what you are telling me regarding the functionality improvements that your technology offers to handset OEMs. Is there also a cost of goods value proposition that the OEM can enjoy in addition to the performance enhancements?
Jeff Parker: Absolutely. And that is simply because we completely eliminate the transmitter section that they need to use today, we integrate much more highly the rest of the puzzle for them in terms of the way to get to amplified RF-power output, and our mission as a company will be to, and who knows, maybe some of my OEM prospective customers are listening to this, our goal will be to offer them very nice cost savings and yet to make sure that ParkerVision, that has made a very significant investment here to get to this point, can realize a fair margin, and I by the way see those two goals as not being mutually exclusive at all.
I believe ParkerVision can receive a very nice margin and we will enable our OEM customers to have significant cost savings to the tune of, some of the examples we show in the OEM presentation which I havenít had any OEM argue with me about, is fifty percent savings, beyond fifty percent savings. These are experienced OEMs, theyíre going to see the chips, theyíre going to see the size of the silicon and know what the production costs are. So the balance weíll find is hereís the value we bring, hereís the savings, and by the way we also deserve and are due an attractive margin so that we can continue to invest and research and bring you even more exciting products to our OEM customers, and I believe that is very achievable.
Phil Anderson: Can the OEM enjoy both the performance enhancement and the cost of goods savings or is it an either/or proposition?
Jeff Parker: They can enjoy both, but I can tell you there is already as an example a particular application I am thinking of where an OEM said youíve shown me four things I can get advantages over, could you enhance these other three things if I didnít care about the fourth? And we said absolutely. So again this is where we are letting the OEMs influence us and the only thing we are trying to balance on that is making sure that as much of the work that we are doing today can be applied across very large product lines, that weíre not doing kinds of specials, thatís a one off kind of a deal that really wouldnít have interest in broad product lines and perhaps among multiple OEMs.
At that, if an OEM said I understand it is going to cost you guys time and money to do that, Iím willing to make it worth your financial while, we are always open to talking about that. But we havenít had to cross that bridge at this point. Yes we can offer OEMs hey you can push and pull the product in a direction to gain more in ďxĒ if you want to give up a little bit in ďy.Ē Iíll give you a specific example: someone said, hey, I love the performance. You guys exceed all the metrics of goodness of the output wave form but I want to exceed it even further, and I donít care if you use a little bit more power. Can you use a little more power and get me even more performance? The answer would be yes.
So we are not going to balance all of the objectives the way we see fit, weíll start at a starting point, which we already have, and then let them influence us from there, and thatís actively happening.
Phil Anderson: I see. And again, so Iím clear, this functionality, is this functionality something which the company is now in a position to demonstrate as people visit you and you go and visit other people?
Jeff Parker: It is. And the only caveat I want to put is we are not magicians in the sense that people can ask for just anything and we can magically make it happen. But I can tell you that most of what people have asked us to show them that we werenít prepared to demonstrate, weíve been able to respond to very quickly and at this point even things theyíve asked that we werenít prepared is in the works to be able to demonstrate in the very near future. So at this point we are very, the technology is advanced to do pretty much anything anyone would ask for.
Phil Anderson: Thatís terrific. From the perspective of resources, Jeff, again you are being asked by a number of very serious and very large potential customers to do a variety of things, do you have the resources from an employee and engineering and intellectual capital perspective to service these requests and so on?
Jeff Parker: I think we have the resources to service our first design wins. I think as that occurs, and as any emerging technology growth company must do we need to take stock at how we grow that and we are in dialogue frankly with people who have grown companies from where we think we are starting from to where we believe we are going to be going over the next few years and starting to think about how we line up resources to do that.
Phil Anderson: I see, so you may then, you are inquiring regarding how you could augment your internal intellectual resources if you will to help guide the company through its next stages of evolution.
Jeff Parker: Absolutely. Fabless semiconductor science and growing companies like this has been practiced by a number of very talented people and organizations and we are definitely drawing upon them.
Phil Anderson: Now just one last question, I appreciate all the answers, Jeff. From a capital perspective now that youíve taken out some of your fixed costs here, it would seem to me as an outsider that the company would have adequate capital to perhaps more than adequate capital to continue to finance itself as you go through this process of demonstrating what you have developed, and seek an initial commitment, or an initial customer or customers, which I do make this more of an observation than a question, do you regard the company as adequately capitalized now to finance itself during what Iíll call the demonstration and negotiation period?
Jeff Parker: I think we are adequately capitalized all the way through the first design wins.†† And beyond, frankly.†† Significantly beyond.†† So yes, I am very comfortable with our capital position to be able to do that and I fully expect that once we secure those first OEM design wins that we will take stock at that point and say this is wonderful, weíll have more visibility in terms of what kind of growth opportunities are in front of us, and I expect that there will be a lot of different options open to the company at that point and Iíd really rather not speculate on what those may look like, Iím sure you might imagine what those could be.
Phil Anderson: Ok. Thank you very much and congratulations. Jeff Parker: Thank you.
Moderator: Your next question comes from the line of George Sheil (sp?), with George Sheil, Inc. Please proceed.
George Sheil: Hi Jeff.
Jeff Parker: Hi George.
George Sheil: I unfortunately had a conflict and did not hear the beginning of this call and you may have already answered the question and I apologize to other participants if I am making you be redundant, but I spoke earlier today with one of your people who was trying to explain to me that your PA does not require a transmitter but it isnít a transmitter.
Jeff Parker: Yeah, ok.
George Sheil: Iím trying to make sure how a two-way cellphone or anything like it works without a transmitter and a PA that isnít a transmitter.
Jeff Parker: Sure. Let me see if I can very briefly get you up to speed on that. Today a cellphone or any wireless device that uses a transmitter would take a data signal and inject it into a set of circuits that would convert that data signal to an RF carrier, where that data now is modulated to represent the data, and then that would typically go into a separate power amplifier and then that goes out through the antenna. There can be various filters along the way, this can be done in multiple stages versus typically itís not done in one, it can be done in one of the transmitters, it can be done in two, but itís a chain of events that occur.
What our technology has done and what has gotten the attention of these OEMs is we have figured out a way to unify into a single operation taking the data signal and converting it directly to an RF carrier at the power level for a mobile portable product that you desire. And so it embodies the function of a transmitter and the function of a power amplifier in a single unified operation and the benefit of that is that it gives us extremely reliable waveform quality, it is very small, it eliminates tons of circuits and supporting components. Unlike a transmitter, when youíre coming out of a transmitter on the output side, itís a radio signal, it may not be a real high powered one but itís a radio signal, so thereís a lot of matching components and art to that to match it to†† go into the power amplifier, we donít have that, thatís completely gone now.
One of the problems that these chains that I described to you that are traditionally used have is youíve got to take the power output from the transmitter and the power input to the power amplifier and they have to work within a certain range or you end up distorting the radio signal in ways that is unacceptable to the OEM. And so they typically canít get all of the benefit of the power amplifier, they have to do whatís called backoff of its total capacity and that by the way doesnít necessarily mean that it uses less power consumption, it still uses the same power consumption, theyíre just not putting out as much power.
So this is one of the reasons that the efficiency level of these chains is not particularly impressive. We donít have that. So thereís just a whole laundry list of things weíve been able to remove, eliminate, donít have to deal with, and as weíre getting into these dialogues with OEMs, theyíre asking us can you help me improve this, change that, eliminate something else, theyíre also giving us extremely good information to understand how to continue to evolve the technology some of which we can evolve for them very rapidly and give them even in our early chips some feature benefits that frankly we didnít even contemplate but that are very achievable because of our architecture. So I hope I answered your question without getting too much detail. Itís not a transmitter plus a PA, itís just data in, single operation, takes it right to RF, at power, on the channel you desire. So itís multiple operations in one step.
Moderator: And sir your next question comes from the line of Kent Williams with Vista Asset Management. Please proceed.
Kent Williams: Hi Jeff, congratulations on this decision. Just wondering if you could better explain as this business model has changed over the years and execution has always been a question here, and as you are seeing the evolving technology and I assume you are trying to show proof of the technology, that people are looking at the breadth and depth of your intellectual property estate and are realizing that there are multiple ways to license out this technology. I assume that in this next period of time where design wins will be coming, maybe this simpler business model supports more flatter and more of a licensing company rather than a manufacturing fabless company.
Jeff Parker: Well, you know, weíll
see. Right now
We specifically learned from that and thatís why weíve crafted what weíve done. So I think the initial design wins, and probably the foreseeable ones thereafter are going to really be hey ParkerVision deliver to me a solution, not an invitation to a solution, which we are fully prepared to do and enthusiastic to do, and to your earlier point about execution, when I look back on what itís taken to get here it is not lost on me that although I believe we had to do many maybe all of the things weíve done to validate ourselves as a company, as a new technology, it is very painful and slows you down when youíre trying to work in different domains. Putting together a complete finished end-user product, youíre dealing with a whole bunch of design issues that donít have anything to do with your core technology but youíve got to do them. So, narrowing our focus down is a huge step toward being able to deliver on our commitment, and I believe that we must be prepared, whatever we tell an OEM we are going to do, we deliver on our commitment. To the extent we become known as a reliable, go to supplier, I think the world before us is just choc full of huge opportunities.
Now, to your licensing question, one last comment, our technology in my opinion, longer term, does enable certain integration opportunities with other components in the system. Namely perhaps base band processors and things like that. So, do we have longer term the opportunity to become a company that licenses or participates in some business models, our technology being integrated into even a higher, bigger system puzzle, I do believe that, but at this moment, with people trying to get 3G cellphones out, and even 3.5G cellphones out, when I mention to you things like HSDPA and wideband CDMA, and WiMax, these are all things that companies are very focused and excited to get out into the market, and they donít have, their tradeoff right now isnít high level of integration versus getting it to market, itís get it to market. They know theyíve got to get to market. And we are a very significant advancement to helping them do that without ending up with a kind of a Frankensteinís monster on their hands. So, those are all the reasons why I think your foreseeable business model is fabless chips, give them solutions and longer term sure, licensing may very well be in the offing.
Moderator: And sir, you have no further questions, Iíd like to turn the call back over to you for any closing remarks.
Jeff Parker: Well, my only closing remark is to those of you who continue to support us, I really truly appreciate your support, we have always tried to be as transparent as possible so that you understand where we are and where we are going, it has been certainly a lot of work, and a lot of effort thatís been put to get us to this point, it has been somewhat unpredictable, but I do believe we entering into a phase now where with these first design wins we will become a lot more predictable, and I appreciate your patience and I hope that you will continue to support us because I think that without a doubt in my mind, a lot of other people around hereís mind, the best for ParkerVision is yet to come and itís not insignificant growth opportunity.
Thank you very much and I look forward to many more conference calls with I hope all of you on the phone. Thank you.
Moderator: Thank you for your participation in todayís conference. This concludes your presentation, you may now disconnect. Have a great day.