ParkerVision Q1 2006 Earnings Call

May 11, 2006

Paul Henning

Cindy Poehlman

Jeff Parker

Wilson Jaeggli, Southwell Partners

Scott Robertson, Halpern Capital

Daniel Lewis, Gem Asset Management

John Buker, Harris Nesbitt

Joe Graves, Lehman Brothers

Sherry:  Good day, and welcome everyone to the ParkerVision Incorporated First Quarter 2006 Earnings Results Conference Call. This call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Paul Henning, Cameron Associates. Please go ahead, sir.

Paul Henning:  Thank you, Sherry. 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 differ materially from our expected achievements and anticipated results.

Included in these are factors, such as the ability to maintain technological advantages in the marketplace, the ability to sufficiently increase manufacturing capacity to meet demands, achieving timely market introduction and acceptance of the 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 in our filings with the SEC.

On today's call, we hear first from Cindy Poehlman, CFO of ParkerVision, and then Jeff Parker will discuss the business of the company. Let me turn it over to Cindy. Cindy?

Cindy Poehlman:  Thank you, Paul, and thank you all for joining us this afternoon for our First Quarter update. As usual, I will briefly review the key financial highlights for the quarter and then turn the call over to Jeff Parker for an update on other business activities. First of all, I'd like to apologize for the error in our Earnings Release that was put out this morning, and you have likely seen by the correction that followed, that we are locked for the quarter with 4.3 million, not billion, and thank you to those of you who pointed out the error in our financial caption.

From a financial standpoint, the snowball this quarter saw solid cash position at the end of the quarter with 23.6 million. As you know, we completed a private placement of common stock in February, which increased our cash position by a little over 16 million. In addition, our use of cash for the First Quarter of 2006 was approximately three million. This compares to cash usage of approximately four million in the prior quarter, and cash usage of approximately five million in the comparable period over the first quarter of 2005. Our reduction in cash usage is largely due to reduced operating expenses in all categories, resulting primarily from our retail exit last June.

As you can see from our First Quarter financial results, our quarterly operating expenses decreased by nearly $1 million from 5.4 million in the First Quarter of 2005 to 4.5 million for the same period in 2006. This decrease is despite a $400,000 non‑cash increase in stock‑based compensation during the first quarter of 2006, which resulted from the adoption of FAS statement 123(R) that requires the recognition of compensation expense for employee stock options.

I'd like to spend just a moment on the new stock‑based compensation standard. ParkerVision was required to adopt the standard effective January 1st of this year; we adopted it on a modified perspective basis, which means there is no re‑statement of prior periods to reflect stock compensation expense. The way the standard applies going forward is that we will recognize the estimated share value of any new option grant, as well as the estimated share value of any options that were previously granted that remained unvested at January 1st of this year.

As of the end of the first quarter, the company had just over 600, 000 share options that are unvested. This correlates to just over two million in unrecognized compensation cost that will be recognized over the next three years of these option sets. The amount of future compensation cost will be adjusted up or down going forward based on the value of any new grants and the true value of actual forfeitures to those that were estimated.

One other item I'd like to call your attention to in the first quarter balance sheet is the appearance of a long‑term liability, called deferred grant, of nearly $450, 000. It's important to note that this is a non‑cash item. As we reported in our 10‑Q yesterday, the company has entered into a lease agreement for a new headquarters facility at Jacksonville. As you might recall, our previous headquarters was a 33,000 sq.ft. industrial facility that housed our manufacturing operation.

With the termination of our manufacturing operations last year, we began looking for a smaller facility to house our Jacksonville employees. This new facility, which we will be moving into later this month, requires significant tenant improvements prior to occupancy. The majority of these tenant improvements are paid for by the landlord under a tenant improvement allowance in the lease agreement.

Generally accepted accounting principles require that this allowance be recorded as an increase in fixed assets of the company with a corresponding entry to deferred rent. Over the life of the lease this deferred rent will be amortized against lease expense, thereby reducing the deferred rent liability. The corresponding asset that was recorded will be depreciated over the life of the lease as well. These transactions will offset one another from an operating expense standpoint and none of these transactions will have any impact on cash.

I'm happy to address any questions you might have regarding the financial results at the end of the call today, and in the meantime I'd like to turn things over to our CEO Jeff Parker for an update on sales and other business activity.

Jeff Parker:  OK, thank you Cindy. Good afternoon everyone and thank you for joining us on this call this afternoon. It's been a short eight weeks since our last conference call and there's been a non‑stop flurry of productive activities for both business development and the design engineering teams alike.

When last I reported on ParkerVision, during our Q4 2005 conference call, I reviewed our milestones from 2005 and gave an overview of the specific progress we had made with our ongoing OEM discussions and negotiations, subsequent to receiving our first integrated chip and our attendance at our Barcelona 3G conference earlier this year.

As I noted in our news release we issued this morning, number one, the pace of our meetings with OEM has accelerated. The scope of the discussions have both progressed, and in many cases, expanded. And both the matter and the manner of these meetings are focused on specific details that are critical to the culmination of the proposals that are now pending with more than a half a dozen OEM's in the cellular handset space, each and every one of these firms being considered a tier one supplier.

In addition, the product development activities are progressing in concert with our business development activities. So let me share with you some more details. I, along with many of our senior team at ParkerVision, have been spending the last eight weeks traveling, presenting, reviewing proposals and generally in constant dialog with our potential business partners. These activities are taking place around the globe, in North America, in Asia and in Europe. Although it has been a physically exhausting period, it has also been very gratifying and productive for many reasons.

First of all, virtually all of our discussions have now progressed to potential business relationships and ParkerVision has been asked to provide business proposals, which we have, to literally every OEM we've engaged with. In my last update to you, we had progressed to that point with several, but not all, of our OEM prospects.

Several of the business discussions have progressed far enough that we have also now provided a significant amount of detail on the theories and implementations behind our D2P RF power transmitter technology and how this translates into the kind of product results the OEM's are looking for.

This is a big step for both us and OEM's. As you might imagine, many of these firms have their own R&D groups, which they don't want to unnecessarily contaminate. However, many of the OEM's saw enough significant advantages in our technology to want to take that next step. We consider this to be a key milestone. In literally every one of these theory and architecture discussions we receive feedback that both the underlying theory, as well as the apparatus that enables this, is novel and something that they had never seen before.

As a new technology supplier, you might imagine that there is a little apprehension when exposing this level of detail, especially to firms with very large R&D centers and who are steeped in wireless heritage. So it was very gratifying to hear multiple times that this is a very unique and novel approach.

Frankly, it is quite counterintuitive in terms of the technology and how it works, and as such, enables one to build quite an intellectual property position, which of course is a key element to our business strategy. OEM's have started to understand now at a deeper level the extensibility of our technology and that it's relevant to virtually all of their products going forward, which is good news.

But let me share with you how this also impacts deal making. Several OEM's have started to see that this is the kind of technology that they would standardize on. Meaning that they are looking at adopting this as a platform from which many products will be built. Our vision has been that our RF technology can become the next generation RF de facto standard. So, this is very encouraging for us to hear that d2p is being viewed in this context. The reality is that this also expands the technical and business due diligence and impacts the scope of agreement and time to get them in place accordingly.

The result of our progress is that we are more confident today than ever that our technology has a big role to play in next generation wireless products. The due diligence activity that this has created continues to accelerate, and frankly, at a whirl wind pace. A number of proposals have reached the level of detail specificity in both financial terms and technology deliverables.

We have received and expect an ongoing stream of feedback on the proposed terms. The feedback we've received thus far has been very encouraging in the sense that it appears that there is a good range of common ground that is a win‑win for what the OEM needs to move forward in embracing our technology and what the financial models for ParkerVision will be accordingly.

I can certainly appreciate that many of you are eagerly awaiting the completion of our first design win. Let me reassure you that the pace and scope of our negotiations and the measurable and accelerating progress we are making far outweighs the time it's taking to get our first win. It is also very encouraging that virtually all of the feedback we have received in terms of the first use of our technology is exactly along the lines of what our engineering team has been developing and whose engineering activities and progress have gone unabated during these OEM discussions.

The availability of our technology for mobile phones incorporating GSM, EDGE, wide‑band CDMA and HSUPA across the bands that OEMs want is right on target and our product design engineering activities continue to progress at a pace where we should have engineering samples of a complete d2p with those standards incorporated in the second half of this year.

Only six short months ago, we introduced our campaign of we are breaking the rules RF technology. Today, we are on the cusp of having that change introduced into a strong and vibrant marketplace. Eight weeks ago, I said I was encouraged by our progress. Today I'm even more encouraged. We are no longer an unknown entity within a good number of the largest tier one handsets in semiconductor OEM. We have a growing number of enthusiastic supporters who are actively engaged in helping us sort through how best to serve their needs and enable adoption into a wide range of their next products.

The business model and its relevance to building a financially healthy ParkerVision is coming more clearly into focus as we get feedback from our proposals. We are highly confident, we are enthusiastic, and we are more certain than ever before that our employees, our customers, and our shareholders will benefit in large measure from the efforts, the resources, and the time that ParkerVision has invested in this effort.

We thank you for your continued support and now, Sherry, I would like to open the call for questions.

Sherry:  OK, thank you. The question and answer session will be conducted electronically today. If you would like to ask a question, please do so by pressing the star key followed by the digit one on your touchtone telephone. If you are using a speakerphone, please make sure your mute function is turned off so your signals will reach our equipment. Once again, please press *1 on your touchtone telephone to ask a question. We'll pause for a moment to give everyone an opportunity to signal.

Our first question comes from Wilson Jaeggli with Southwell Partners.

Wilson Jaeggli:  Good afternoon.

Jeff Parker:  Hello, Wilson.

Wilson Jaeggli:  Gee, whiz, a lot of good points here, Jeff. First of all, let me ask you this. What kind of due diligence had been done by the OEMs on our IP and have you had any pushback whatsoever?

Jeff Parker:  Well, now that we are at a point where we've exposed them to the fundamental theory and some of the fundamental implementation, as I mentioned in my discussion, you are always a little apprehensive because you don't know exactly what the reaction is going to be. Every reaction we've gotten, without exception, has been, "Wow! I never saw anything like this before. That is quite unique."

Wilson Jaeggli:  That's on the technology?

Jeff Parker:  That's right. So, you're saying on the IP?

Wilson Jaeggli:  Yes, on the intellectual property, on those quality based patents. What kind of due diligence has been done? If it has been done, has there been any pushback by the OEMs?

Jeff Parker:  There hasn't been any pushback. I can tell you that I don't think we know all of the due diligence that may or may not have been done on that topic. I have received some feedback from one very large OEM, that they've done a lot of research into the firm we use to give us the guidance and to put this portfolio together, and that came back glowing.

Wilson Jaeggli:  OK.

Jeff Parker:  So they were happy with that. Of course, now I probably just caused an increase in my rate from that firm but that's all right.

[laughter]

Wilson Jaeggli:  You mentioned in here that these OEMs have asked you for proposals and you have responded. Can you talk about those in broad terms in here? What kind of proposals have you made?

Jeff Parker:  I am really not at liberty to go into the details of the terms of the proposals, but they are in general how these OEMs would access the technology and implementations of the technology for their product, pricing around that, and where they would be able to use the technology.

Wilson Jaeggli:  If you've got so many‑‑you said a handful of tier ones looking here‑‑it seems like the first to sign up would have some benefit for that OEM. Do you sense competition between these OEMs yet or is that yet to develop?

Jeff Parker:  I think it's developing. It's a small industry and I don't know that everybody knows what everybody else is doing, but it is a small industry. Everybody goes to the same conferences and such. I get a sense that we are rapidly becoming a well known name with a number of these. I would not be surprised if there is a growing awareness that...the competitors are aware that they are all looking at this at this point.

Wilson Jaeggli:  OK. You mentioned that there is a broadening of the potential use of the technology, standardizing on a mini platforms. I guess we're talking outside just the pure cell phone arena?

Jeff Parker:  Well, right now, it really is mostly focused within the cell phone arena. But you have to realize that these firms that we're working with are very big and have enormous product lines of cell phones and a lot of different kinds of cell phones. So the conversations have turned from earlier where they were trying to figure out where would you use this to where wouldn't I use this. That is what led to the deepening of the due diligence because they asked us to run more tests over more conditions of which we've done many of those and will continue to do so.

Some of the OEMs have engaged other groups in their firm beyond just the mobile handset groups to look at the technology. We're very encouraged to hear that they continue to hear that there is a lot of relevance to this technology no matter where they look within their company.

Wilson Jaeggli:  OK. You mentioned that you will be incorporating the other four technologies in the second half. Is that going to hold up this process for someone that comes forth with a contract here?

Jeff Parker:  I'm sorry. I didn't mean to come across that way. What I'm saying is we started out with a core piece of the technology which we proved in the first quarter of this year. We are taping out generations where we keep expanding that core to become more of a complete product. We tape out about every eight weeks. We are actually barreling down here to our fourth tape out now.

Wilson Jaeggli:  When you say tape out, what do you mean?

Jeff Parker:  That means we've taken the design and we've taken it to the next steps of adding whatever features, interfaces, etc. are required.

Wilson Jaeggli:  On the chip.

Jeff Parker:  On the chip. Then we send it off to the FAB, IBM.

Wilson Jaeggli:  Right.

Jeff Parker:  We call it our tape out. Then they build the chip for us.

Wilson Jaeggli:  OK. So they keep building a more expansive...

Jeff Parker:  That is correct.

Wilson Jaeggli:  ...in relation to your chip.

Jeff Parker:  Correct.

Wilson Jaeggli:  OK. And you said you would have all four other technologies incorporated.

Jeff Parker:  Meaning the standard that this particular product that we are developing is to work with GSM, which also includes GPRS, the data scanners for GSM by the fall, hedge, wide band CDMA and HS UPA. HS UPA is emerging high speed uplink for three and a half G network that are UMCS, the European standard base.

Wilson Jaeggli:  Right. But, putting these standards, if you have all this done in the second half I guess the question is, do you need to get this done before you can get a contract signed with the OEMs.

Jeff Parker:  We have always contemplated from when we announced that we were going to have an engineering sample the second half of this year. Those standards were already contemplated. That's what I was trying to explain in my update was just what we launch in our product development activity has been right on the bulls eye of what the OEMs say they want. So that's a good thing.

Wilson Jaeggli:  OK.

Jeff Parker:  What I hope people will understand is that our product development activities and our business activities are moving down parallel paths and are very synergistic in our getting things done.

Wilson Jaeggli:  I like the term you used, "contaminated R&D".

Jeff Parker:  Yes.

Wilson Jaeggli:  Tell me do you have the sense that it takes a new mindset? Are you getting an initial push back from these R&D departments at the OEMs, or what?

Jeff Parker:  No, not at all. In fact, what was highly encouraging is the number of meetings we had. We actually start to see members of these teams beginning to answer questions of their colleagues before we can answer them. They'll say, how do you think this technology, now that we understand it better, will work under this condition? So before we can give an answer one of the colleagues would go, well, they explain that it does this, so therefore it's going to be very good in this situation and here's the reason why. So, we're actually very encouraged. I think I see a lot of collegial team building coming out of these dialogs. I have not seen any push back at all.

Wilson Jaeggli:  OK. Keep up the good work.

Jeff Parker:  Thanks for your support.

Wilson Jaeggli:  Thanks,

Jeff Parker:  Sherry?

Sherry:  Yes, once again. If you have a question, it's *1 on your touchtone telephone. We'll take our next question from Scott Robertson of Halpern Capital.

Scott Robertson:  Good afternoon Jeff.

Jeff Parker:  Hi, Scott.

Scott Robertson:  I was curious if you could give us an update on the network operator front, more in terms of, are you starting to see inquiries from people in that side of the business as one of what your products do on the component side and the infrastructure side seeps out in they realize, wow, this will really help our network. Or have you just been focused so much on seeing OEMs that you have pushed that off?

Jeff Parker:  No, we have really kept our focus on the OEM and you might imagine what I have described in terms of our activities. We are 100 +% time committed. We have had the good fortune of having an initial first presentation and dialog with one of the network carriers. We were convenient, one of our trips to one of them and had a friend of the company willing to reach out and get us into some of the people at the carrier who looks at radio access and where radio access components and technology is going.

It was a very interesting meeting and it gave us some good feedback that without going into all the details, largely told us we're on the right track. Frankly, in our longer term marketing plans, we will be spending more time with the network carriers because we can certainly bring them solutions to existing problems they are trying to hurtle as well as open their eyes to considering things that are networks that we can help them with that they may not realize.

So it was very encouraging for a first visit. I'm sure this particular first visit won't be the last visit. We were invited to come back and continue the dialog. But right now our focus really is 99% on those OEMs.

Scott Robertson:  In terms of the OEMs, right now how much, in the discussion, are you getting from them? Look ahead are saying, what's good today is great. We really want a single ship wholly integrated solution... or are they initially looking at this is a great stop gap to help us today. Obviously we want to go to that place someday, but how's the balance there against...we want it all versus we like what you have right now as long as it's going to that all solution.

Jeff Parker:  Yeah, well OEM, there's kind of two tracks; one track is, they are going to ask in theory what you could do, but then there's the pragmatic side that says, "What do we want to do that's a balance between what you can do and what can we get done in a reasonable period of time and all take advantage of."

So, today they look at how we can use the same device for many different standards, and that we have a very nice bandwidth on our output of our device to cover many different bands. You could look at that and think about dreaming about how could re‑architect the whole front end ‑ that could take a long time to think through all that, or you could say, "Gee, I can reduce many components down to many fewer components right now and let's go get that out first and we'll get it right from there." And that's what they are thinking of; you can't swallow the sandwich in one bite; let's take it bites at a time.

But to my earlier comment about their understanding the extensibility of the technology, that does bring some due diligence where they ask us, "Hey, can you run this kind of waveform, or that kind of waveform; what happens when you do this, what happens when you do that?" And yet, it does get us into running more tests and examples and ‑‑ but that's fine, I mean, that's what we are here for.

Scott Robertson:  OK, and then final question, are you getting more leaning towards the licensing model or the 'Build the actual component' model?

Jeff Parker:  Yeah; although there are conversations for both, I would suggest to you that the licensing outweighs significantly the Chip model.

Scott Robertson:  OK. Thank you.

Jeff Parker:  Thank you.

Sherry:  Again *1 if you have a question ‑ that's "*" if one of you would like to ask a question. We'll move to Daniel Lewis, Gem Asset Management.

Daniel Lewis:  Hi Jeff.

Jeff Parker:  Hi Dan.

Daniel Lewis:  OK, couple of questions. You mentioned earlier in your comments that there's a natural apprehension that comes along with sharing details about the technology.

Jeff Parker:  Sure.

Daniel Lewis:  So, in exchange for you overcoming that apprehension, what have the OEM's provided you...

Jeff Parker:  Well let me clarify when I say apprehension; the apprehension is, you hope when you disclose something like this; so you take a step forward, not a step back, right? You would hate to say, "Great, it's kind of the 'No act of kindness goes unpunished concern'". You don't want to say, "I am going to give you guys more detailed information, so you understand what's inside the black box and can get more comfortable with it", and have the actual result be: Oh. That's what you are doing? Well, we don't think that that really can work; well, we don't think that that's going to work under all the operating conditions, or we don't think this or we don't think that ‑ or we don't think that's unique.

We didn't get any of that. We got, "Wow, this is really novel, never saw anybody do anything like that before; Gee, that's very clever" and it really has helped move the dialogues forward quite a bit.

Daniel Lewis:  And to the extent that, you know, we all hear stories about technology companies, specifically large ones, taking advantage of small innovators in terms of not honoring terms or taking technology and not paying for it. Now, is it possible for them to do that or is it impossible?

Jeff Parker:  Let me say it this way; we work very closely with our patent council to determine how much we can share and not devalue our IP position. We are very comfortable with what we disclosed, but recognize that just because we have disclosed some theory and some of the workings doesn't necessarily mean that we have enabled someone to go off and build it.

Daniel Lewis:  So you have been very careful about what you have disclosed relative to someone's ability...

Jeff Parker:  Yeah, we have struck what I consider to be a very good balance there.

Daniel Lewis:  OK, so you have disclosed enough for them to believe that it's possible, but not so much as they could go and do it themselves.

Jeff Parker:  That's correct.

Daniel Lewis:  So there's a lot in your IP, but there's also know‑how, not just...

Jeff Parker:  There's a lot in the theory, but there's a lot in the implementation of the theory.

Daniel Lewis:  OK; now, you talked earlier about common ground that you are finding between you and some of the prospective customers. Could you discuss what things that tends to be, on more than one occasion, is taking place? What the things are and where that's difficult to get around at this point?

Jeff Parker:  Well, what I meant by common ground ‑ I can't go into specific details, but there are different key features of an agreement that deal with financial terms as an example. And what we're finding is that the financial terms, in terms of our proposal, the reflections back we're giving, seem to be within a reasonable range of what they can get adoption and feel like they're giving good value, and that what we can get, and feel that we can build a healthy financial company. That's what I meant by common ground. I see a lot of common ground there.

Daniel Lewis:  OK.

Jeff Parker:  We've given them some terms, and they came back and went, "Oh, my God, we're in a whole different universe" then I don't think we have common ground; I haven't seen that.

Daniel Lewis:  Do the financial terms, and I know you don't want to get into specifics, but do they relate to the value that you are providing them? I remember at one point there was some talk about some percentage of...

Jeff Parker:  We base it off of our value proposition. We basically arrived at our terms by looking at what we're doing to help them, and then seeing if that is at the intersection of what also makes sense for their goals to get... they have certain goals of product cost reduction, etc. And those do intersect and we're... that's why I think we're finding common ground.

Daniel Lewis:  So they're not saying, "Oh well, you're just an IP licensing company, you don't deserve that much." They're content to look at it like, the value that they are receiving, rather than what you are getting?

Jeff Parker:  Well, actually the response that we've gotten so far, actually, gives us examples of other technologies that they've licensed, and suggest that we're bringing certain values in relationship to other technologies that they've licensed. And when we go off and look at those other technologies, we're, again, in the ballpark of where we want to be. So, no, I think there's precedents that have been set that are actually favorable for us there.

Daniel Lewis:  OK. And in terms of the sticking point, historically there was the sticking point about exclusivity. Are there any other sticking points? And does the exclusivity point still remain as a significant one?

Jeff Parker:  Well, let me just say look, every OEM dialogue is unique, every customer has their own desires. I'd really rather not get into the details of that, because it starts to sound a little bit more like I'm almost naming customers without naming them. I don't think that'd be healthy for us in this kind of a call.

Daniel Lewis:  OK. Well, good luck, Jeff.

Jeff Parker:  Thanks, thanks for your support.

Sherry:  And John Fisher from Harris Nesbitt has our next question.

John Buker:  John Buker here, but thank you. Jeff, I'm sure that the companies that you're talking with are doing due diligence as I think it was alluded to in the call on the intellectual property portfolio, as well as the solution. I'm just wondering as anybody that does anything more than a cursory review of your intellectual property can see that there's more than the direct power RF‑centric solution. I'm just wondering whether the discussions with the OEMs have moved over to some of the other areas of intellectual property that you've got and some of the potential applications...

Jeff Parker:  Yes...

John Buker:  ...for mobile devices. Thanks.

Jeff Parker:  Yes, John, that's actually a good question. That actually stimulates two thoughts. A question I was asked earlier about have they reflected back any comments on our portfolio, and how far they have looked at it. I know a comment that we got back about a firm that we use and the quality of that firm. I also think was a function of them having looked at the extensive D2D portfolio that is issued now around the world. I think that was influenced by that.

And yes, there has been dialogue about our receiver technology. We're frankly trying to keep that dialogue as a secondary step, and to try to get agreements done, and use those agreements as kind of a template to then do follow on with the D2D. But there are numerous conversations going on about the receiver technology.

And, frankly, we've gotten far enough in discussions about how they would incorporate our D2P technology for us to give them a high level, kind of a cursory suggestion at where the D2D will bring a lot of value to them in either integration or... well, there's a variety of places that D2D brings value, but we clearly now see where D2D in a handset application, specifically, can bring them some value.

And yeah, that's definitely something they want to talk about. We're right now being successful in keeping that as hopefully a second step because we'd like to keep... get these design ones done as quickly as we can.

John Buker:  Thank you very much.

Jeff Parker:  Thank you.

Sherry:  Once again, ladies and gentlemen, if any one of you would like to ask a question, "*1" to ask a question. We'll move to Joe Graves, Lehman Brothers.

Joe Graves:  Hey Jeff.

Jeff Parker:  Hi Joe.

Joe Graves:  My question, and you don't need to be too specific, but I would like you to refresh the minds of everyone on the call the value‑added proposition, as it relates to the cost savings perform, and/or the performance and what that addressable market really is.

Jeff Parker:  OK. Well at a quick, high level the... First of all, the product that we're working toward having engineering samples for in the second half is a quad‑band GSM edge tri‑band wide band CDMA with HSUPA. There are no products in the market today that can do all that. And it's just not practical when you see all of the chains of transmitters and supporting power amplifiers and supporting filters you've got to have to do that.

But if you look at what is in the market today that is as close to that as you can get, which is more of a tri or quad‑band GSM with maybe one band of wide band CDMA. Those are the kind of ten dollar bill of materials range. And you can make an argument, some people will say, "Well, it's closer to 12", and some people say it's closer to nine or 8.50. But that's kind of the range, depending on how you implement them.

They also take up about 10 to 12 centimeters squared in circuit area, circuit‑board area on your phone. So where people see the value of what they're looking at with us right now is, we take that down five dollars, sub‑five dollars, which is where they're hoping to get to in the next couple of years. So they see a clear road map now of doing that. And the size of the implementation is three centimeters squared or better.

So they now see that there's room in their product to put other features that they'd like to put in their phone, without making the phone bigger. So that's kind of the value proposition. From size, from cost and from features. Obviously they just want to be able to offer the carriers all these bands and standards without making a phone that's too unwieldy.

Joe Graves:  And then from a unit volume standpoint? Do you have any kind of feel what you're thinking of? I mean...

Jeff Parker:  Well, everybody we're talking to is building phones in the tens and tens of millions. Some of them are building phones in the hundreds of millions. Our initial focus, and where I believe we will find initial adoption, is in the 3G, 3.5G, and now it's being called 3.9G, handset space.

And Joe, I honestly don't have those numbers in front of me right now, but...

Joe Graves:  What I'm driving here at, right?

Jeff Parker:  Yeah.

Joe Graves:  What I'm trying to get to is understanding that coming to a common ground with a large company with such robust technology. I mean, there's a ton of value for everyone here.

Jeff Parker:  There's a lot of value, and their due diligence is around the fact that they're not going to use us in small quantities. So they've got to make sure that it's going to hold up under all the operating conditions that it needs to, and that it's mass‑producible.

And that's, frankly, what led us to a discussion about the theory of the technology. To show them that it's very robust, and that we're not pushing anything to the edge. That in fact there's an enormous amount of cushion in how our technology works that gives them a very large operating envelope, and it's very robust within that envelope.

Joe Graves:  Terrific, thank you.

Jeff Parker:  Thanks, Joe.

Sherry:  Have a final reminder, it is "*1" if you would like to ask a question. That's "*1" on your touch‑tone telephone to ask a question.

Jeff Parker:  Well, Sherry, I'm going to thank our audience, our participants, to thank them for their time. And, again, thank you guys for your continuous support. And we see busy weeks ahead of Parker Vision and I look forward to our next conference call update. Have a good evening. Thanks. Bye bye.

Sherry:  And this does conclude today's conference. We thank you for your participation. You may disconnect at this time.