ParkerVision Q2 2007 Earnings Call
August 8, 2007
Paul Henning, Cameron Associates
Cynthia L. Poehlman, Chief Financial Officer and Principal Accounting Officer
Jeffrey L. Parker, Chairman of the Board and Chief Executive Officer
Mike Boyland with McGinn Smith
Philip Anderson from Pinnacle Funds
Greg Lewin, Crossfire Capital
John Stanley of
Phillip Anderson, Pinnacle Fund
Wilson Jaeggli of Southwell Partners
Daniel Lewis of Gem Partners
Operator: Good day, everyone, and welcome to the ParkerVision Second Quarter Earnings Results Conference Call. Todayís call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Paul Henning. Please go ahead, sir.
Paul Henning: Thank you. 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 of our business - our businesses and the economy and other factors that may cause actual results to differ materially from our expected achievements and anticipated results. Included in these risks are factors such as the ability to maintain technology advantages in the marketplace, achieve timely market introduction and acceptance of our products, maintain product 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 within this conference call. Additional information concerning these and other risks can be found in the filing - in our filings with the SEC, the Securities and Exchange Commission.
Weíll begin todayís call with the Cindy Poehlman, CFO, whoíll review the quarterly financial results for the second quarter. Sheíll be followed by Jeff Parker, the CEO of ParkerVision, whoíll report on the companyís business activities. Cindy, would you like to go ahead, please?
Cynthia L. Poehlman: Thank you, Paul, and thank you to those of you who are joining us for our second quarter update. Our results this quarter reflect $90,000 in revenues with a net loss of $4.4 million or $0.18 per share. This compares to a second quarter 2006 net loss of $4.3 million or $0.18 on a per share basis with net revenue. Year-to-date, we reported a net loss of $8.9 million or $0.37 per share compared to a net loss of† 8.6 million or $0.38 per share for the same period last year. We ended the second quarter with $19.4 million in cash, which is an increase of approximately $400,000 from our cash position at the end of the first quarter.
I would like to spend a couple of minutes on the revenues and also on our cash position, which are the most notable items from a financial standpoint this quarter. Our revenue this quarter was from engineering design services. As you know, we announced the first licensee of our D2P technology in May with the signing of a license agreement and an engineering services agreement with ITT Corporation. Our second quarter revenues represent the start of activities with ITT, which occurred during the last six weeks or so of the second quarter. Our future service revenues will be impacted by the level of services provided under this contract, which may vary from time-to-time, but obviously will also be favorably impacted by having a full quarter of results versus the half a quarter results we see this time. In addition, we do anticipate that we will have additional customers of our engineering services in future periods, which will also favorably impact revenues.
In connection with this quarterís service revenue, we reported cost of sales of approximately $76,000. Cost of sales reflect not only the direct labor cost of the individuals providing services, but also an allocation of indirect engineering overhead. These indirect overhead costs are not incremental costs directly related to the ITT services, but rather our facility and other similar operating costs that would be incurred regardless of the services performed for ITT. With regard to the cash position, we saw a $400,000 overall increase in our cash balance this past quarter. This is the result of approximately $3.7 million received from the exercise of outstanding options and warrants during the quarter offset by $2.7 million of cash used for operations and an additional 600,000 of cash invested in capital equipment and patents. Year-to-date, weíve received a total of approximately $4.4 million from the exercise of options and warrants, primarily warrants priced in the $8.50 to $9 range. Our current cash position of† 19.4 million carries us well into 2008, without consideration of additional incoming cash from customers.
Iíll be happy to address any questions you may have regarding the financial statements during the Q&A session at the end of the call today. But for now, Iíd like to turn the call over to Jeff Parker for an update on business activities. Jeff ?
Jeff Parker: Okay. Thank you, Cindy, and thank you to those of you who are joining us this afternoon for our quarterly update. So, this quarter, Iíd like to focus on three areas that are representative of the progress we are making; first, our relationship with our first D2P customer, the ITT Corporation; secondly, the status of relationships with our commercial target customers; and third, the status of our technology. As you heard in our last call about 12 weeks ago, we welcomed ITT Corporation as the first licensee of our D2P technology. We began providing services under an engineering services agreement shortly thereafter and our team is very excited to be assisting ITTís technical team in designing products that incorporate our technology.
As I mentioned in our previous update to you, this relationship has helped credential where weíve proposed to commercial customers and itís certainly providing us positive reference point. While I wonít get into the specifics of ITTís applications, I feel very comfortable reporting that as we progress down the path of assisting ITT and applying D2P to their specific needs that the technology continues to demonstrate the strong benefits that weíve been discussing since the inception of D2P.
I also want to acknowledge our strong technical leaders and their teams and I am very pleased with the tremendous progress that weíve made in just a short ten weeks in working with and supporting ITT. And as we mentioned previously, ITTís product needs are extremely synergistic with the needs of the mobile handset market. This is important because it enables us to move forward with ITTís design goals without losing sight of our primary target market and its needs. So, that leads us to an update on business development activities in the mobile handset markets.
Each quarter, I wrestle with how to help investors understand the significant progress weíre making on this front, while at the same time not providing details that are confidential and inappropriate to disclose at this time. So Iíve decided to take a few steps back and address this from a 10,000-foot view rather than a 30-foot view, and the way Iíd like to do this is to talk about why our technology continues to be such a compelling fit for the cellular handset industry and why we remain so confident that we will successfully establish a leadership position in this industry.
As 3G phones become more prevalent in the marketplace, the issue of improved talk time has become more widely accepted as a known and significant barrier to consumer satisfaction with 3G networks. Here are just a couple of the many examples that I could site for you. Steve Jobs, the CEO of Apple, was quoted recently in an interview about why Appleís iPhone didnít adopt 3Gís wideband CDMA into their phone, and I quote, ďWhen we looked at 3G, the chipsets are not quite mature in the sense that they are not low enough power for what we were looking for.
They were not integrated enough, so they took up too much physical space. We cared a lot about battery life and we cared a lot about physical size. Down the road, Iím sure some of those trade-offs will become more favorable towards 3G, but as of now we think we made a pretty good doggone decision.Ē And Steveís comment is quite representative of what we are hearing from many others in this industry.
Thereís another example of the adverse impact that 3G has on battery life that can be found on a technology website called AnandTech where they ran a Samsung phone both in the 2.5G EDGE mode as well as in the 3G wideband CDMA mode, and basically their results show that 3G reduces the talk time by one half versus EDGE. In fact, the actual talk time that they calculate, which is based on 1,200 milliamp hour battery, which is a pretty large mobile phone battery, correlates exactly with the talk time that our calculations have predicted for legacy technologies and that weíve been providing to OEMs for sometime now.
My only other comment on the importance of increasing talk time is that the talk time calculations we provide for legacy technologies are assuming a relatively ideal condition, meaning that the phone performance in these tests usually isnít degraded as it would be in real life when itís held up to your head. Its not being operated over long periods of time in areas that are hard to reach such as the interiors of large buildings and such, which is why some of the network carriers that we work with now felt that our calculations on the legacy technology are oftentimes too generous than what a traditional solution for wideband CDMA actually provides and they get complaints all the time for phones with talk times that donít even achieve 2 hours.
My point is that because the 2G GSM networks can use power amplifiers that can operate over a large non-linear range, the talk times are not as adversely impacted in non-ideal real world conditions as 3G phones whose power amplifiers must be kept in the liner operating regions and its efficiency curves are far worse than what a 2G phone can achieve in non-ideal condition. Just to remind you from previous discussions weíve had, D2P significantly closes the gap by enabling talk time increases for wideband CDMA of about 70% over traditional linear power amplifier based solutions.
In terms of opportunity for d2p in 3G, this space is just beginning. In 2007, there are 240 million 3G handsets that are predicted to be shipped, but it is expected that this number will grow to 500 million per year by 2010, which will still only represent about 30% of the total handset shipments. Because 3G products are really in their infancy, OEMs will have their eye on how to find efficiencies in lots of areas for many years to come as well as the marketers of those handsets will be looking to add features to 3G, but OEMs will be looking to find space savings for the fundamental phone functions so that new features can be added. And remember, the average life of a cell phone handset is only about 18 months, so design-in opportunities in this space tend to be fairly frequent.
Another example to help you understand that this 3G market will have a lot of time opportunity in front of it, if you look at 2G by example. By the year 2010, itís predicted that 70% of the market will still be just for the fundamental 2 and 2.5G handsets. 2G started shipping in 1991 and 1992, over 15 years ago, yet some major chip companies are just this year introducing lower cost, more highly integrated 2G chips that theyíve made significant investments to bring to market, some 15 years after 2G started shipping. 3G wideband CDMA networks were just being made available in many of the major markets over the last year or two. So, wideband CDMA is in its infancy and there will be many years of opportunities for those that can bring significant benefits to products that serve that space with meaningful improvements. In our situation, weíve added the benefits that our technology is also highly beneficial to some of the extensions of† 3G such as the 3.9G HSUPA for high-speed data uplink that many carriers will want to provide to their customers assuming practical solutions that are power efficient can be fielded.
But some of you may ask why is it taking so long to get the target customers adopting such a beneficial advancement to their product. In reality, companies of this size and stature move at a pace that is comfortable for them and that has been proven to be successful when adopting new technologies into their products. Since the only real benchmark that the investment community can see is the announcement of a material agreement, you donít get to see all the other progress that we see before that occurs, and we continue to see plenty of signs that point towards adoption. We have OEMs that have moved into very specific implementation discussions with us that ties up some of their precious resources and that we donít believe itís just an exercise. We have OEMs that have indicated that they are sorting exactly how they intend to do business with us and that this is taking some time as this isnít a step that they do casually, and in addition to this progress that weíre seeing behind the scenes with OEMs that weíve been engaged with, we also have a few new dynamics that have occurred recently that we think may help us in creating a greater sense of urgency. First, weíve been approached more recently by other companies in this space that are seeking to create better solutions for their customers. Although, these companies may not represent the primary targets that we have been in dialog with, some of these are very large companies and still on the top tier and particularly to the extent that their adoption of our technology has a potential to create the sense of urgency weíre looking for, weíll certainly foster these relationships.
Secondly, as you are aware from previous conversations, we have initiated a program directed at network carriers about a year ago. We believe that this was an important segment of the marketplace to educate about D2P technology and the benefits. Well, one of the benefits from this program that weíre seeing from these efforts is that we are getting firsthand feedback about what wireless consumers do and do not like about their cell phones and this helps us validate and quantify our benefits. Itís very helpful and carriers confirm that the actual talk time their customers are experiencing in wideband CDMA is significantly shorter than what was predicted and printed on the box. In fact, several carriers have confirmed to us that their customers are not satisfied with handsets whose talk times have dropped from the 4 to 6 hour 2G talk time down into the 2 or 2.5 hour timeframe, in fact some are experiencing even less than 2 hours.
And some of our carrier relationships have now evolved to result in carriers who are willing to proactively encourage OEMs to move forward with our technology and who have even said they will participate in network tests with D2P and have even shared a willingness to shoulder some of the product development costs for an OEM to incorporate D2P into their products.
Lastly, I would like to discuss the progress weíve made with technology and our processes for integrating this into products. Since weíre confident that commercial handset adoption is when, not if, we continue to advance the tools and processes that will assist OEMs in moving as quickly as possible through the design engineering all the way into volume production. Weíve created a great deal of Silicon-verified intellectual property. At this point, weíve been able to develop and evolve our own design tools and processes that will help speed OEMs to market. Weíve also started to work with a Tier One RF chip manufacturing test equipment company that will help OEMs move to volume production more quickly.
What these ParkerVision tools, processes, silicon-verified IP, and manufacturing test readiness all mean is that D2P is being readied and in my opinion will rival the way legacy technologies are designed and ready for production by being more streamlined in time-to-market and providing the support that enables OEMs to move to successful implementation with a very high level of confidence. So, ParkerVision hasnít just created the technology and the silicon that verifies that it performs as built, but itís creating many tools and processes to enable design, development, and volume manufacturing support to ensure success for OEMs that adopt D2P technology.
So, what I hope you takeaway from todayís call is that we remain highly confident that we will successfully bring some of these OEM relationships that weíre building to the close of successful business relationships. Our technology is truly in the right place at the right time, it provides advances for handsets that are spot-on, and there is nothing an ultimate technology that weíve seen or even heard about, that challenges what we are offering. 3G networks are just now deploying, and the growth projected for 3G over the foreseeable future is tremendous. And what is so very compelling about our technology is that an OEM who adopts D2P is adopting a radio platform solution that will carry them well beyond the 3G markets into 3.9G and even 4G, in fact even into other applications they may want to evolve into later, a single radio platform that will allow them to design mobile handsets well into the future without an architectural redesign that leverages the most use of low-cost CMOS and CMOS silicon germanium of any architecture available.
So, to recap, we are very pleased with the launch of our formal design processes with ITT and how our technology is delivering the benefits that we believe it would. We are making excellent progress on advancing into solid relationships with target cellular OEMs. Weíll continue to spend substantial time and energy on our offering and how it fits into their future product needs, and weíve had the good fortune recently of expanded interest coming our way from other OEMs that we didnít target and perhaps who will move into relationships with us relatively quickly. Weíve started to see growing support from several network carriers that we started dialog with last year. And lastly, we continue to advance the technology offerings to include the science and tools that will enable our customers to get into product - production with a certainty and at a pace that rivals anything that weíre aware of in this segment of the industry. Our foundation is solid, and as the year progresses I believe weíll be able to report that this foundation continues to grow and be reinforced in very meaningful ways. So, with that operator, why donít we go ahead and open up this call for questions that we may have.
Operator: Thank you. [inaudible] Weíll take Mike Boyland with McGinn Smith.
Mike Boyland: Good afternoon. Are there any models regarding - that you could disclose regarding signing up any OEMs? Would it be like some dollar figure per handset or something like that?
Jeffrey Parker: This business model that weíve been in discussions with, of course you never know until youíve actually got something signed and done, but look a lot - looks a like what weíve done with ITT in the sense that there is an engineering services agreement that people have been very interested because the parties, we and their engineering team, worked together to define the process of getting this thing done and then we assist them in various ways in helping their own team get the designs done. And then, there is as I mentioned at the end of the call, tools that we can also provide that can be very helpful in using this technology and starting it from what they can see they might want to be into, exactly how they want to partition it and embrace it. And then, there is also in all the dialogs we are talking to, a royalty, and of course itís based on application and volume.
Mike Boyland: Okay, thanks very much.
Jeffrey Parker: Thank you.
Operator: Weíll go next to [inaudible]. Weíll go next to Philip Anderson from Pinnacle Funds.
Philip Anderson: Hi, Jeff, how are you?
Jeffrey Parker: Hi, [inaudilbe]. Thanks, fine.
Philip Anderson: Good. Jeff, in the three months or so since ITT has signed up and whatever advancements have been made on the technology improving to a customer that your chipset can do what you profess it can do, can you talk to us about - can you elaborate, become more specific, you mentioned the word tools and processes, how those have been advanced and can they be used to shrink the sales cycle with both the OEMs that the company is being going after for a year or longer now and also you mentioned some new prospects, which have come in, I guess this is a multi-part question as usual from me, can those tools and processes be used to condense the sales cycle for those prospects, which have come over the transom recently?
Jeffrey Parker: Okay, good question. So, yeah, for the work with ITT, I mean itís been very encouraging from a couple of fronts beyond just ITT. I mean one of the reasons Iím so pleased with whatís happened is Iíve watched our technical team support their needs in a way that we are able to get them information in a very timely basis, satisfy their questions. I think theyíve become - they were obviously encouraged and enthusiastic about the technology to start with or they wouldnít have taken up a business relationship with us, but I think that thatís - I canít speak for them, but I think thatís even grown further since theyíve been able to start to apply their actual application and see that, yes, the technology does what they need it to do.
And then, in terms of the tools, there are many different, very exciting tools that our team has developed that will help because we unify the entire process from a base stand input signal all the way to the RF output and power, because we control that whole function. We have been able to develop some very unique I think very exciting tools that this industry will look upon some day as not being a trivial part of our technology. It allows them to stimulate how itís going to function, test the performance of their waveforms under various operating conditions, automate a lot of the processes of determining various aspects of the performance and how it will work under different system partitioning options. I mean still itís just almost too numerous to mention, but itís kind of how products with time-to-market being a primary consideration and with the end result being highly predictable within the RF world, lots and lots of engineers will tell you it is hard to predict, and I think what our team is doing is at least with our technology making that much more predictable and much more - giving people a much higher level of comfort that this has been reduced to a science.
And so, thatís a lot of what weíve been showing and working with ITT on and I think it will definitely help commercial OEMs. It will help anybody who uses our technology get to market faster just because as I said, it automates a lot of the design process and frankly it consolidates what you have to do in a traditional approach using many, many, many people down to many fewer people, which again helps time-to-market, also helps keep your cost under control. So, I hope that answers your question. Itís kind of a complicated topic, but itís - I am very pleased with what I see is happening with ITT and how thatís going to translate into our commercial customers.
Philip Anderson: When your engineers are using these tools, which - model out the performance and so on, is it - would an engineer at a prospective customerís shop have - how much confidence could they have that this modeling would in fact be accurate in the real world? Can they get enough confidence that they would theyíd be confident to give you a purchase order?
Jeffrey Parker: Yeah, well, the beauty is that our simulations for these tools match up with real silicon. So, I think thereís a very high level confidence. In terms of does this translate into sales, one would certainly think so. I mean everything we can do to help people understand that this isnít your grandparentsí RF, this is tomorrowís RF, I think we will help us get more and more traction.
Philip Anderson: Jeff, what is - and then Iíll hop back in the queue, but what is your sense as to how these tools may have reduced the time-to-market if some were to sign a contract with you today, can they get their phones into the marketplace in 9 months, in a year, or longer?
Jeffrey Parker: Well, thatís a little bit of a complicated answer only because it depends on things like, are they going to take our silicon-verified IP on some of the fabs that weíve developed and go run with fab, take it and advance it to the next steps to get it into production, volume readied, and characterized, and they are going to partition it the way weíve partitioned it, and if they do all those things theyíll get to market much quicker. If they decide, hey, we are going to start from our own process and start from the ground up, it will obviously take longer.
But I hesitate to give you an exact timeframe other than to tell you that in the RF world, if they were to take the work weíve done and take it to the next steps and use our tools, I think youíd find it gets to market much faster than with any legacy technology they are working with, and I think thatís - what is exciting to me is because now we donít just have a great technology with the benefits of size and costs and efficiency, we also have a time-to-market story. But I want you to be clear, the time-to-market in the RF world and RF components definitely takes longer than your digital - pure digital components and things like that, but we are comparing applesto-apples starting from - where we are starting from, versus starting with legacy technologies. I think we would be found to be extremely attractive. I think thatís very exciting.
Philip Anderson: Okay. Thanks very much, Jeff.
Jeffrey Parker: Thanks, Phil
Operator: Weíll go next to Greg Lewin, Crossfire Capital.
Greg Lewin: Hey, Jeff, how are you? Itís [inaudible].
Jeffrey Parker: Hey, [inaudible]. Fine, thank you.
Greg Lewin: Listen, I want to ask you a question. I donít want to put you in a difficult position, so Iím just - itís just all about facts and you decide how you best can answer it, but if you donít mind. One of the do you support a team of engineers who are trying to take nanotechnology and drive it into statements youíve made repeatedly whether in print or verbally is that you are in contact with OEMs that represent 75%, say, of phones manufactured or something like that?
Jeffrey Parker: Thatís right, yeah.
Greg Lewin: And by definition that means the only one that one can add - that speak to clarity with that statement is that means you have said indirectly that you are in contact with Nokia because thatís the only way to get to 75. Everyone else can slip through the cracks. With that statement, and I know you are not making it directly, but its an analysis fair, Nokia came out with an enormous set of announcements today, and if you donít mind I just want to read a couple of thoughts and then I just want to see where or if you can reflect on them, because they came up with a chipset development strategy today in which Nokia will discontinue parts of its own chipset development and expand its use of commercially available chipsets. However, they will continue to develop its leading modem technology. Nokia will then license this technology to the chipset manufacturers who will use it in chipsets they develop and produce for Nokia, and if they decide to produce for the open market. The definition of a modem is a modem converts the digital language of a chip to the analog language of a radio. Therefore, it sounds somewhat into our area of expertise. Is there anything that you can offer to discuss how Nokiaís changes still make us relevant, irrelevant, more relevant, I donít even know how to ask the question.
Jeffrey Parker: Yeah, I understand. Hereís about all I can say. All I can say is that the trends that I see in the market both from starting with the consumer who uses the handsets all the way back through the guys who are responsible for creating and making the handsets, one of who you just mentioned, all those trends in my opinion are largely in our favor, and that I believe will benefit any company than can show up with silicon-verified intellectual property that truly drives the kind of benefits that we can provide and can demonstrate and can prove 100 times over. So, I will consider announcements like that to be favorable and thatís all I can say.
Greg Lewin: And just to work with the language that you just used, can you then give us some sense of how - in your working with these OEMs how they have come to, I donít know if the word is to appreciate your IP and the value and the protection that you have generated for your IP?
Jeffrey Parker: Yeah. Well, thatís a process and some of it is - some of that is by the way a little time consuming, right? Weíll sit down and weíll talk about where the unique intellectual property is, why ours does something that others have been unable to do. We have the good fortune of having a pretty strong foundation for having prepared for this moment by putting in place intellectual property programs years ago that has a very strong discipline of how often we file, when we file, how we file, the nature of our filings, how we track them, how we work with the patent office, the expertise thatís been developed right from our CTOís office on through the [inaudible], and so the benefit of that it allows us to sit down with these OEMs and to say, by the way, hereís some intellectual property thatís been filed, and depending on the OEM and where we are in discussion and what kind of agreements in terms of non-disclosures weíve got with them, we can provide them with a little or a lot.
The other thing that we have is quite a nice track right now of patents that are issuing, so our first D2P patents issued I donít know some number of months ago covers a very key portion of the technology, not all of it, but a nice key portion of it, and weíve been able to now openly talk with people about that, and by the way, I havenít had had a single OEM look at that and go, why in the world did you guys get a patent on that. I think people look at that and they go, wow, thatís really cool, thatís a good one. And there are others, and I canít talk about specifically what they cover, but there are others that will be in my opinion issuing in the new future that will continue to build that level of confidence with OEMs that we have got this thing covered and weíve got to cover very adequately. So, we have a very sophisticated program for that we can get OEMs on the right page of understanding that they are not going to look silly if they agree to pay us for this IP that someday others arenít going to have to do that. I am very comfortable with our position in that.
Greg Lewin: Thanks, Jeff.
Jeffrey Parker: Thank you. Operator: And weíll go next to John Stanley of Stanley Partners.
John Stanley: Good afternoon. Couple of questions, if I may.
Jeffrey Parker: Yes.
John Stanley: Jeff, how do you compare to legacy power amp companies such as ANADIGICS that announced selling into the 3G space who are claiming similar benefits to what the D2P offers?
Jeffrey Parker: Thatís a good question. Okay, so when you look at doing an analysis on a 3G and you say, I want to see what does it take to really get meaningful increases in talk time, recognize first of all, youíve got to increase the efficiency of the entire transmit chain like 100s of percent, because recognize that transmitter power amplifier are only a piece of a phone, right. Youíve got a receiver in there, youíve got a baseband processor, for small periods of time while you are talking the display is on, and other things are going. So, in order to give the kind of talk time increases that we described, youíve got to do something that really significantly increases the efficiency like 100s of percent. What we see in the market today from companies who deliver power amplifiers is, first of all, thatís just a key to the puzzle, thatís not the whole solution, but you canít just look at power amplifier and come to a conclusion, you can get a sense and you can get a little bit of an understanding, but youíve got to also add the other components that create a transmitted radio signal, the modulators, frequency synthesizers, etc.
In addition to that, you canít just look - a lot of the power amplifiers spec sheet, [inaudible], that I see out there will pick one or two output powers that might be used in the phone and give examples and say, well, from that you can derive a conclusion, thatís not true, okay. If I just look at full-power and a miss-power, which is typically with a spec, and I say, well, a full-power X% on efficient and a mid-power on Y% efficient, and therefore you can calculate the talk time, thatís not true. You have to look whatís the entire efficiency curve, from full power all the way through the curve of power control, because these power amplifiers for 3G are being controlled over a wide range of power output, and you have to plot the efficiency of that curve on top of whatís the network curve in terms of power usage of the power output towers, and itís a pretty complicated affair.
And frankly, we have the good fortune of having some folks in our organization who have a long history and a lot of knowledge on how to do those calculations and itís not trivial. And so, when we sit with carriers and we walk them through that, weíve had feedback from some of the carriers that, wow, you guys are pretty unique. We typically donít have people from the component companies coming in here who understand this as a system. They tend to pitch a component, they take a couple of points on the curve, and they tell us that from that we can give you longer talk time. Well, Iíve done those calculations based on some of the works - the math work of our technical leaders, and when you look at some of the new power amplifiers out there thatís for multiple optimized power amplifiers in the same package, maybe itís got a big power amplifier for full power image switched to a smaller power amplifier from the power, the net result, [inaudible], the increase of talk time for 3G handsets, literally some small single-digit percentage. And if we had a lot of time, I could walk you through why that is, weíve walked other people through that. Does it increase talk time? Yes. Does it increase talk time significantly? No. So, what we see out there today are linear power amplifiers that people are trying to control a little more smartly. Some of them are using switching mode power supplies by the way where theyíll actually control the voltage going to the main portion of the power amplifier and kind of scale it as the power level output of the power amplifier goes down, and by the way when I suggested in this conference call that we see a 70% increase in talk time for wideband CDMA applications, thatís comparing it to a highly controlled, very high quality wideband CDMA power amplifier. Iím not comparing us to the worse thing thatís out there. Iím comparing us to the state-of-the-art thatís out there. So, yes, over the traditional legacy, these new linear power amplifiers will increase your talk time a few percent and thatís pretty necessary.
John Stanley: Okay. And then, also Jeff, is there any sort of push-pull from the carriers, and is that creating any incentive or sense of urgency for the OEMs?
Jeffrey Parker: Itís more recent, I mean this type of activity therefore - as I mentioned, we started talking now about a year ago, but just like the OEMs, they did their due diligence, theyíve been to our laboratory, theyíve seen how the technology works, theyíve read our patents, and they looked at the whole process, and so itís now culminated in the next step with some of them saying, hey, we really like this. We like the fact that you can do so many different modes of cell phone standards to the same power amplifier or to the same chain. We like the efficiency, we like the fact that it frees up some space. And so, they see enough of an advantage so that yeah, theyíve just recently said, hey, how can we help you, and we said, well, you could start to ask your OEMs to put the technology in their handsets and weíve actually provided some of them with who are the OEMs we are talking to and they are starting to try to help us get that done and I was very pleased to hear when some of them said, hey, we - it wouldnít be the first time, but weíve actually been wanting to put some money toward helping design this in. If thatís an objection by somebody we can help you ease that objection if thatís what it takes to get it going. So, thatís more recent and I canít say that itís helped yet, but I think it will, it certainly canít hurt.
John Stanley: Okay, thank you.
Jeffrey Parker: Thank you.
Operator: And weíll go back to [inaudible] Mike Boyland, McGinn, Smith for a follow-up.
Mike Boyland: Hi, Jeff. To follow up on the questions brought up regarding Nokia, I missed that story today, but I have been reading it as weíre on this call. And there seems to be a lot - I mean they refer to it as musical chairs with a lot of people changing. They mentioned the technology to run on second generation phones called EDGE.
Jeffrey Parker: Right.
Mike Boyland: Unless I missed it, I didnít hear you comment that you guys...
Jeffrey Parker: We do EDGE, our focus has been on doing the combination of GSM/EDGE and wideband CDMA, or what people kind of call WEDGE. We also show people pure CDMA, but we actually have some interesting efficiency curves and weíve shown recently on EDGE that was actually data that was taken from an OEM themselves and plotted on a chart and it was plotted against the best EDGE efficiencies that are in the market today, and our efficiency curve is quite high and flat across the power range and the traditional depth curves are sharply dropping over power. So, I mean itís a very nice picture of our technology frankly. But the reason Iím here spending whole lot of time talking about EDGE is people, they are not really having a big issue with top lines in EDGE, EDGE just like GSM is a bursted signal, it doesnít transmit all the time, it transmits maybe an eighth of the time. So, itís on and then itís off for seven-eighths of the period and then itís on and itís off again. It depends how much data you are trying to move through and it could be on for a longer period. But generally speaking, itís not on very long.
In fact, I believe the iPhone, which is using EDGE, shows the lowest data rate EDGE thatís available. So, itís on very little periods of time. Now, it doesnít move much of data, I mean thatís the penalty, but because it also doesnít run very long, itís not using up much power. So, the battery life on EDGE phones is pretty good, five hours - four to five years to maybe six hours with a [inaudible] battery. So, thatís not where people are kind of motivated to do something different. We have to do EDGE and be backwards compatible, just like we had to do GSM and be backwards compatible, but itís the 3G networks and beyond that people are struggling with, and thatís why we focus a lot of our efficiency discussions on that.
Mike Boyland: Probably, this announcement today by Nokia is really...
Jeffrey Parker: Well, I think the announcement by Nokia is not uncommon as a trend that you see, which is people moving toward more sharply focused activities on, what is it that they do well, can be real efficient at, can be highly profitable at, and then turning to experts in other areas and asking them to focus on their area of expertise. Certainly, one of the things Nokia over the years have shown that they are wonderful integrator of all kinds of technologies and components and probably one of the best, if not the best, supply chain management companies in the States and the whole world. So, I think - thatís why I said earlier when this topic was brought up, that whole trend in my opinion is a very good bellwether for ParkerVision, because we are highly focused on a best-in-class solution for a very important, but frankly very difficult space and RF power amplification is not for the faint of heart, and I can tell you, lots of people have tried over the years and even decades and we certainly fight this on our prior arch - on our patents, and have failed. And so, the fact that large Tier 1 leadership companies like Nokia have chosen to focus and enable other people to kind of pick up the ball and run with it on their area of expertise, I think is a great bellwether for ParkerVision.
Mike Boyland: I mean they did mention that Texas Instruments is working with them on software tools for third generation 3G.
Jeffrey Parker: Yeah.
Mike Boyland: Chips.
Jeffrey Parker: Yeah, and that would be consistent. I mean theyíve had a longstanding relationships with TI in that area.
Mike Boyland: I mean would you see that as a competitor to you or possibly a complement?
Jeffrey Parker: No, I think more of a complement. I mean my view is Texas Instrumentsí real focus as themselves is really on the baseband and modem side, not so much on the RFs as they donít do somewhere else, but I look at a lot of telephone tear down reports where you can buy reports of phones that have been torn down and I look at them every week. We have a service, we subscribe to they providers of those tools, and if things get ever in the last several years of looking, we call every single TI component in the radio. I know they make them, I know they do them, but I havenít seen them, no theyíre certainly not - I havenít seen them in the mainstream in the Tier 1.
Mike Boyland: An interesting thing that you look at, to see and look at the phones being torn down to see whatís in them.
Jeffrey Parker: Oh, yes. We study how much silicon was used for each function, what the cost is, look around the whole bit.
Mike Boyland: Thanks very much.
Jeffrey Parker: Thank you.
Operator: And weíll go next to [inaudible] Phillip Anderson, Pinnacle Fund.
Jeffrey Parker: [inaudible], hello?
Operator: [inaudible], please go ahead.
Phillip Anderson: Hi, Jeff. I had the mute button pressed. With the advances that you have made on the tools on the modeling ability and how accurate it is, do you think that that would help a new customer come to a purchasing decision quicker, and let me just add on to that, the company has been kind of proving itself to its prospective to serve your OEM customer for sometime now, perhaps even for a year or longer, would a smaller prospective customer do you think perhaps be able to make a decision faster now that they are coming in with the benefit of these new very accurate modeling tools?
Jeffrey Parker: I think that - yes. I do. As I said earlier, anything we can do to help our customers automate, process, reduce the number of people necessary to do the implementation, increase the certainty of the design success, and keep them to market I think opens up the opportunities of who we can do business with successfully.
Phillip Anderson: And on an engineering and R&D bandwidth perspective, would you be able to service a large and the small customer simultaneously, or would have to do them one after the other?
Jeffrey Parker: [inaudible], honestly, the only reason I donít want to answer that is because it totally depends on the - what they need. If the customer is looking to do various implementations or various system partitioning and they - well, weíre going to put this on multiple platforms, there are so many things that get into, Iíll put it to you this way. I can see legitimate circumstances where we could only support one of the customer right now who is engaged with us in a way that we really - kind of tie us up for a bit of time until we could expand our resources and expanding resources takes sometime doing it, right, or I can see a very nice relationship where they do a lot of the heavy lifting, we do support them, but itís a very narrow focus, and that could definitely enable us to have more than one additional commercial customer to standby. It really depends on the customer and what they expect and what we really do. So, I donít want to skirt it, but the answer is really you even go either direction depending on the customer.
Phillip Anderson: Okay. Thanks again, Jeff.
Jeffrey Parker: Thank you.
Operator: Weíll go next to [inaudible] Wilson Jaeggli of Southwell Partners.
Wilson Jaeggli: Hello, Jeff.
Jeffrey Parker: Hi,
Wilson Jaeggli: A two-part question here, but bumped with ITT and their military phone. First of all, can you give us a little more granular information, if you would, where you stand on that project, how you work with them, when do you think they get to market, are you on their timeframe, have you missed any benchmarks here along the way, are you ahead of schedule? Secondly, to kind of follow-up with what [inaudible] has questioned here a couple of times trying to speed up your sales cycle, your results here with ITT, are they enough to convince potential other commercial customers to maybe speed up their decision process? In other words is, I guess the question Iím asking, is the technology similar enough for military radio compared to the commercial radio components here within cell phone, are they translational enough here that one - success in one area could lead to convincing people to act in the other?
Jeffrey Parker: Okay, so thatís a lot. Thanks for the questions. Let me see if I can chip away at it. So, in terms of their application helping us with commercial OEMs, I canít go into the specifics of this, but I will tell you their application is very challenging and I do believe helps us in a lot dimensions convince commercial customers that the technology has the legs it need to be used in cell phone handsets. That said, cell phone handset companies are going to do their own due diligence, they are going to come to their own conclusions, but, yes, itís helpful, thereís no question, itís helpful. And I frankly think the agreements and the way we have structured the engineering services and the license and the whole bit, thatís very helpful. I mean those templates I think are very useful, they may not be executed exactly the same, but it wouldnít surprise me if a lot of it is reused.
In terms of our results thus far, obviously, I canít give you specific timeframes for ITT because thatís confidential and they would need more than that for doing so, but I can tell you that I believe when you pick up the phone and got the person who could give you information on the relationship that they would tell you, we are very enthused to enter into it 12 weeks ago and weíre even happier today than we did than we were then. And so, thatís important to us because frankly we view them as probably a very good reference point for our next customers, and they are not an undemanding customer in either their application or their timeframe and youíll see that.
Wilson Jaeggli: Are you on schedule with them?
Jeffrey Parker: Oh, yes.
Wilson Jaeggli: Okay, nothingís really slipped here?
Jeffrey Parker: No, in fact Iím sure some of the folks from my company who are listening to this are rolling their eyes right now because no matter how fast you go to the customer, they always want it faster. I know I asked for it today, but you should have delivered it yesterday, but honestly they have been a pleasure to work with. But they have their own very aggressive goals and we are jumping to that in, and I think that youíd find they are very happy with what weíve been able to do in the timeframe weíve been working with them.
Wilson Jaeggli: Is this product they are working on, is this a product theyíve already sold to the military or there are developing for future bids to the military?
Jeffrey Parker: That I canít share with you. I wish I could.
Wilson Jaeggli: Okay. All right, keep it up.
Jeffrey Parker: Thanks,
Wilson Jaeggli: Thanks.
Operator: And weíll go next to Daniel Lewis of Gem Partners.
Daniel Lewis: Good afternoon, Jeff, Cindy. How are you?
Jeffrey Parker: Hi, Dan.
Cynthia Poehlman: Good, Dan. Thanks.
Daniel Lewis: You alluded earlier to carriers getting involved in the discussions.
Jeffrey Parker: Right.
Daniel Lewis: And firstly, is it really one carrier who is mostly involved in this?
Jeffrey Parker: No, thereís several. We are trying to kind of get awareness stand built more globally, so we work with carriers that are literally around the world.
Daniel Lewis: And you alluded to carriers providing incentives of being willing to spend some money, is that one carrier who made that offer or more than one carrier?
Jeffrey Parker: There are several carriers that actually have a history of doing that. And Iím not going to obviously mention who they are, but who have a history of with more emerging technologies that they find interesting kind of stepping up and saying, hey, let us help nurture this into the marketplace.
Daniel Lewis: So, did more than one make that offer?
Jeffrey Parker: We have more than one carrier who is making offers, both that go to OEMs with us and to help sponsor some of the financial costs to get something like this into a product.
Daniel Lewis: When you say financial costs, are you talking about the...
Jeffrey Parker: This is design-in cost.
Daniel Lewis: And not talking about supporting the ongoing royalty?
Jeffrey Parker: No. Anybody who is going to design similar product is going to sit down and say, well, itís going to take me X number of man-hours and time to get this design done and costs an X amount of dollars.
Daniel Lewis: Now, you talked about the carriers providing incentives. As big as they are, you think that they have the ability to not just offer incentives, but - not just the carrot, but the stick?
Jeffrey Parker: Well, different carriers are more aggressive versus others who are little bit more passive, Dan. I mean I will say that universally all carriers have an appreciation of putting together a handset is not a trivial business. They have a lot of respect to the OEMs who do it, and so itís a balance. I mean definitely I think handset OEMs recognize that ultimately the companies that we all are working for are the carriers because they own the networks, if you want to be in the handset business anyway. But on the flip side, itís a big investment to be in the handset business and the carriers only have so much leverage as to what a handset company or their OEM chip suppliers are going to do, but itís very - we think itís very useful to have carriers who are willing to go with us in one fashion or another and try to encourage OEMs that, hey, if you put this technology into your products, Iíll be more proactive in promoting on my network because I want my network to be used. Iíve invested a lot of money in 3G. I want it to be used to the fullest extent.
Daniel Lewis: So, the incentive is not so much that they would subsidize the NREs as it is I will give you favorable marketing placement?
Jeffrey Parker: No, it is subsidizing NREs.
Daniel Lewis: Okay. Shifting gears a little, to what extent are you providing a solution to the OEMs directly versus to what extent are you working with other manufacturers of technologies and chipsets to be a part of a chipset solution?
Jeffrey Parker: Well, Iím not sure, I think I understand your questions. Are you asking say that again.
Daniel Lewis: In other words, letís say you are talking to X particular OEM, and - I mean would you be a standalone solution for your offering?
Jeffrey Parker: Well, weíre a piece of the solution, right, because I mean to make a whole transceiver baseband solution is a modem that transmits PA solution, a receiver, other supporting components. Etc. So, we are going to be working - it depends on what company weíre talking about. But some companies take a very proactive role in how all of the pieces of the puzzle are designed and what technologies they use. Other companies push that responsibility more to their chipset suppliers, but influence - they have a strong, strong influence on what goes in there.
Daniel Lewis: So, you might be collaborating with the ANADIGICS of the world in one instance, which - I mean is...
Jeffrey Parker: We could be collaborating with IT suppliers and the handset companies or we could be working directly with them or a combination of both.
Daniel Lewis: Okay. And in your judgment, are the handset OEMs evaluating one set of solutions for the future and then at the same time they are working with an alternative solution, which does not include you or - could you just elaborate on their decision tree and how they are thinking about this?
Jeffrey Parker: Well, I mean they are always looking at what are the traditional solutions evolving to. They are expecting the traditional solutions to continue to evolve to some extent, but they are also on the lookout and they have organizations that are on the lookout for things to kind of take a leap in some performance metric or multiple metrics, and typically thatís how weíve gotten engaged in dialogs with these guys, and - I mean they are always making those comparative analyses I imagine.
Daniel Lewis: So, are you aware of any alternative solutions that are being considered and what the OEMs are saying back at you like, well, listen...
Jeffrey Parker: There isnít anything that Iím aware of that competes with us either thatís in the market or that Iíve been told is coming that gets to the kind of benefits that weíve described.
Daniel Lewis: Okay. What do you view as the risk to the OEMs of not being first?
Jeffrey Parker: Well, I mean to the extent that we finally get a deal done with a major player, they are going to have the best wideband CDMA or whatever 3G standard they use talk time in the industry and I think thatís going to become very attractive to the carriers that they sell to, and gosh, I would certainly hope that that gives them a nice share of market, competitive advantage, and maybe margin advantage on their competition.
Daniel Lewis: So, do you believe that the distinction for that sense of manufacturing would be that they would curry favor with the carriers primarily or mostly would be that the consumers would appreciate it?
Jeffrey Parker: I think yes and yes - no, I think both, and I think that hopefully the carriers will push the - hey, we have the longest talk time handsets and you donít have to take much of a talk time hit to use our 3G network. And by the way, itís still a cost effective phone and all the good things that I think our technology can help people support and I think it will be supported both by the carrier and by the OEM.
Daniel Lewis: Okay. The language that you had in the press release used the word finalizing agreements, what - I mean that implies that - one might infer from that that your - finalizing means that youíve completed most of an agreement and one might infer that. What should we, or what should we not infer from that language?
Jeffrey Parker: [inaudible] you canít build a bridge, so look at when there is a material event because weíve signed, I promise you will all be the first to hear it all simultaneously.
Daniel Lewis: Okay.
Jeffrey Parker: Okay.
Daniel Lewis: All right, good luck...
Jeffrey Parker: Thanks for your support.
Operator: And that concludes the question-and-answer session. Iíd like to turn the conference back over to Jeff Parker for any additional or closing remarks.
Jeff Parker: Well folks, thanks again for your support and for following our progress and we look forward to future calls yet this year. And you know what weíre working toward. I donít think there is any mystery there. Weíre working toward our first commercial design win, thatís our doughnut, everything else is a hole, and I appreciate your support. Have a great evening. Bye-bye.