PRKR 2007 Q4 and Yearend Conference Call
March 17, 2008
Michael Donahue, Emerging Growth Equities
Ira Nathan, Nathan Financial
Daniel Lewis, Gem Partners
Jim Whitten, Laidlaw
Greg Lewin, LG Partners
Steve Springer, Target Capital Management
Operator: Good day, everyone and welcome to the ParkerVision Fourth Quarter and Yearend 2007 Earnings Results Conference Call. Today's 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.
Paul Henning: Thank you very much. But before we get started, I
want to remind listeners that this conference call will have certain forward‑looking
statements, which involve known and unknown risks and uncertainties of our
business and our businesses and the economy and other factors that may cause
actual results to differ materially from our expected achievements and
Included in these risk factors, such as the ability to maintain technology advantages in the marketplace, achieve timely market introductions and acceptance of our products, and maintain product copy protection and availability of capital among others. Given these uncertainties and other 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 our filings with the SEC, the Securities and Exchange Commission.
With us today on the call will be Cindy Poehlman, CFO, who will review the quarterly and yearly financial results. She will be followed by Jeff Parker, the CEO of ParkerVision, who will report on the company's business activities. Cindy, would you like to go ahead please?
Cynthia Poehlman: Thank you, Paul and thank you to those of you who
are joining us for our yearend update this afternoon. I would like to spend
just a few minutes discussing our financial results for the yearend and fourth
quarter and then I will turn the call over to Jeff Parker for his update.
For 2007, we have reported revenues of $284,000, all of which were recognized in the second and third quarters. This revenue represents fees for engineering design services provided to ITT Corporation. These services included architectural design analysis and recommendations based on various product specifications put forth by ITT. Over the last few months, ITT has utilized that information to evaluate and determine their internal product development plan. While notably this process has taken a bit longer than we anticipated, we are extremely pleased and excited about our opportunities with ITT.
Based on recent discussions, we anticipate that ITT will utilize our existing commercial prototype design and their own internal resources to design their initial products incorporating our technology. As a result, we do not expect to see any significant service revenue from ITT during this initial design cycle.
If you recall, one of the reasons we entertained a relationship with ITT, who was clearly outside our primary target market, is that we believed that ITT's product needs were very synergistic with our ongoing commercial development effort and therefore would not cause our design efforts tangent off in an unplanned direction. This is absolutely proving to be true.
As we stated previously, we continue to expect cumulative revenues from ITT of approximately 25 million over the term of this contract.
For the fourth quarter of 2007, we reported operating expenses of 4.9 million, which represented no increase from the preceding quarter ended September 30th, 2007. On a year‑to‑date basis, we reported operating expenses of 19.1 million compared to 16.9 million in 2006. As we indicated last quarter, the increases in operating expenses from 2006 from 2007 were largely a result of our ability to successfully sell certain budgeted RF engineering and IT design positions as well as ongoing prototype design and fabrication costs.
In 2007, we used 13.5 million in cash for operations and invested another 1.5 million in intellectual property and capital equipment. Our use of cash in 2007 was significantly offset by approximately 6.7 million in proceeds from the exercise of outstanding options and warrants. This included the exercise of approximately 640,000 warrants with exercise prices between 8.50 and $9 and approximately 160,000 options with an average exercise price just under $8. We ended 2007 with 13.4 million in cash.
We recently completed the sale of approximately 1.2 million of additional shares of our common stock for proceeds of about nine million. We believe this additional funding will bridge our working capital needs until such time that we begin generating royalty revenues from our existing licensees. And with that I would like to turn the call over to our CEO, Jeff Parker for an update.
Jeff Parker: Thank you Cindy and good afternoon and thank you for
attending our yearend conference call update. We have a great deal to be
enthusiastic about with regard to our future here at ParkerVision. And I am
pleased that we have this opportunity to provide with you an update and answer
a few of your questions. We made great progress last year in securing the first
two licensees of our wireless technology. What I want to discuss today is the
status of each of those accounts, an update on the technology itself which is
the foundation for our success, and the progress we are making towards securing
As many of you who have followed the company, you know that in May of last year, the ITT Corporation became the first licensee of our d2p technology. In the second and third quarters of last year, we recognized a couple of 100,000 in revenue from design services that we provided to ITT under the contract. In our fourth quarter we reported no service revenue from ITT.
For those of you who are worried that this is bad news, let me reassure it is not. We are absolutely still on track with ITT and they remain enthusiastic about the use of technology in their products. In fact, I would venture to say that little or no service revenue from ITT should be viewed as a positive not a negative. A company with as diverse a line of communication products as ITT, could easily consume 100% of a small company's engineering resources in developing custom designs for their specific use. And while that path might allow us to enjoy some short‑term design service revenue, it would absolutely take us off our chosen path of becoming an IT provider to the mobile handset industry with much more significant long‑term revenue opportunities.
When we entered the agreement with ITT, one of the things ITT itself had hoped was that their product needs could be synergistic with our commercial development goals. So the fact that ITT will be able to utilize their own internal resources to push and pull our commercial designs for their own use with just a little support from our engineering resources is something that we both quite frankly are very excited about.
As we move through the year, we will likely have more visibility into ITT's timeframes and I look forward to keeping you updated as best I can, which will be constrained by confidentiality that we must and will maintain, but which should still allow that we can keep you apprised at a high level.
Let's move now to a review of where we are at with the technologies since it is the foundation for our business success. We are making rapid progress towards having volume‑ready d2p silicon for our first commercial customer for use in handsets. We have stated in previous calls what the benefits are of d2p for mobile products.
Some of the claims about our technology have raised eyebrows from those who think about our technology from a traditional point of view. I can tell you with a 100% certainty that everything we have claimed about our benefits is coming out right on target. In fact, if anything, there are a few performance areas that are even better than my best expectations could have hoped for.
The ability to process all the cell phone standards use silicon not GaAs, provide high quality waveform fidelity simultaneously with small form factors and unparalleled efficiency, at minimum, we told you we will deliver and it is exactly what d2p is delivering from the get‑go. Every one of those benefits is a direct fit with what OEMs and their customers are looking for and it is the reason why both ITT and our first commercial customer chose to do business with us.
In just a matter of days from now, we will begin the process of updating our website by putting specific information that showcases the performance of our technology. We will show you how a single d2p RF chip processes all the relevant 2G to 4G standards providing both high‑fidelity RF waveforms, while under those same exact operating conditions, uses significantly less power for the complex cell phone waveforms.
We will also describe the supporting circuitry, so that you can understand the benefits of our technology in a complete d2p handset system. We will be setting up the information in a way that you will be able to understand our efficiency benefits against traditional devices, however for some of the waveform fidelity results, our solution is an entire system and really should not be compared apples to apples to individual traditional components that today only idealistically represent a piece of what a total system solution does.
Progress with our first mobile handset application is moving along exactly as we had hoped for. Our teams are actively working together and the relationship is very good. We have a target to deliver volume producible silicon to our first customer in early Q4 that they can then productize in volumes for their first applications, which are in 3G handsets.
Royalties in this relationship begins when they begin shipping chipsets that incorporate our technology to their customers, which are ODMs and OEMs who produce handsets. Their goal is to begin to ramp their first products as quickly as possible once we deliver volume ready silicon. I believe both companies are highly motivated to move the technology into volume production as quickly as possible and we expect this to result in our first commercial royalty revenue shortly thereafter.
What is also encouraging about the silicon development work we are doing is that it is undoubtedly a springboard to help us close our next commercial accounts in 2008 as well. By rapidly moving towards volume silicon, not only does this help us get to royalty revenues as quickly as possible with our existing accounts, it also makes the decision of adopting our technology even easier with the other target accounts that we are active with. We are taking the risk out of adopting a new and very compelling technology.
While I am not quite at the point that I am ready to draw the line in the sand and predict a special call before our next quarterly update, which is only in the six‑, seven‑, maybe eight‑week timeframe from now, based on the current progress we are making which is very good, I am very confident that we will secure more commercial accounts in 2008; that when we aggregate the handset market share of these accounts will account for a meaningful share of the total handset market space. I hope to be able to provide you more visibility into that progress in the near future. So in conclusion, number one, we are actively working with ITT and I believe they will be able to leverage off the excellent development work we are doing in the commercial handset space.
Secondly, we are making great progress with our first commercial chipset customer and we are working closely with them to get volume ready silicon early in Q4 and to work closely with them to achieve the fastest production ramp possible thereafter.
And lastly, I believe we will secure additional commercial OEM accounts in 2008 that will represent a meaningful market share, our development and delivery of volume ready silicon for our first commercial account being a significant influence on achieving that result. And so now, I'd like to open this call for your questions please.
Operator: Thank you. The question‑and‑answer session will be
conducted electronically. 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
to allow your signal to reach our equipment. Once again, it is star one if you
do have a question or comment and we will pause for a brief moment.
Our first question comes from Michael Donahue with Emerging Growth.
Michael Donahue: Hi guys.
Jeff Parker: Hi Michael.
Michael Donahue: Did you say that you except royalty revenue in 4Q '08, is that still the timeframe?
Jeff Parker: Our goal, Michael, is giving them their silicon at the beginning of the quarter and what we are going to do is work with them as closely as we can to ramp that thing as quickly as possible. And some of that ramp is a little bit controlled, but I don't think it will be long after we get them producible, our volume ready silicon you will see that ramp occur.
Michael Donahue: And is that with both customers?
Jeff Parker: ITT, I think about ITT, their application is a little different even though they can leverage from the products they are looking at off of what we are doing in the commercial space. I have always said that it is about 12‑ to 24‑month timeframe from the time someone signs up until they start to be able to incorporate the technology into their products. So I would expect in their case, late this year or possibly into late first quarter, early second quarter next year, somewhere in that timeframe. Somewhat depends on exactly how they incorporate it.
Michael Donahue: OK. How many deals you have now in the pipeline that you expect to close in 2008?
Jeff Parker: Well, I'm not going to share that only because, Michael, it doesn't really make a difference how many we've got in the pipeline. We've got a number of them that we're working actively. I'm very confident that we will close multiple accounts this year. And frankly, more than the number of accounts that we close, I think what will be important is what market share those accounts represent. And I believe the market share of those accounts represent will be meaningful and significant.
Michael Donahue: OK. So, can we talk about these potential customers that are going to close in '08? Are they tier one chip makers that are going to supply product for tier one mobile phone customers?
Jeff Parker: I believe they will definitely be tier one or very high tier customers. They will have multiple handset OEMs or ODMs that they support. They, in my opinion, support worldwide customers. And all the ones that we're really in serious dialog with have been in the business for awhile. These aren't recent startups or things like that.
Michael Donahue: So, tier one mobile phone customers?
Jeff Parker: That's who they support. But they also support the other customers as well. They support a variety of customers.
Michael Donahue: OK. Are we going to be able to find out who your next customers are, or how is that going to work going forward?
Jeff Parker: Well, I would hope so. That would be nice. That would
be one of our hopes. But I can tell you, we'll have to wait until we get that
signed. That's always one of the last items on the negotiating checklist that
With ITT, we were able to convince them that it was important to be able to share their name. With the first commercial customer, we weren't quite able to get that done, although frankly for I think good reasons on their part. But with the next one, I just don't know Michael. I'd love to be able to share it, I hope we'll be able to share it, but we'll know when we get there.
Michael Donahue: But they didn't express the same type of concern about that as the first customer that that was a big issue?
Jeff Parker: From my view, that point is always one of the very last things that you talk about. It's kind of the thing that nobody really talks about.
Michael Donahue: [laughs]
Jeff Parker: That's not a negotiating point that we want to put in the critical path of getting all the other things negotiated. We tend to put that to the very end.
Michael Donahue: I got yeah. I'm just, you know....
Jeff Parker: Although from this conversation that may have moved up now, but let's hope not.
Michael Donahue: All right. That's all I got, guys. Thanks.
Jeff Parker: OK, thanks Michael.
Woman: As a reminder, it is "star‑one" if you do have a question or comment. And we'll move to Ira Nathan with Nathan Financial.
Ira Nathan: Ah, yes Jeffrey.
Jeff Parker: Hi Ira.
Ira Nathan: How are you? I was thinking, really, of the same questions as the previous gentleman ‑ mainly would the new accounts be subject to the same confidentiality agreements as, I'll just say, Company X.
Jeff Parker: Honestly, it's really customer by customer dependent.
It just depends. Even when you look today at mature companies that have been
providing products to many of the customers that we're targeting, some of them,
frankly, just have almost a ground rule that they don't want their name used.
Others, frankly, are much more laissez fair in that area.
I've seen announcements, frankly, in the last couple months from large chip set providers who are providing chip sets to customers where they say, "We just got an order from a large OEM", and they won't identify the name. And I know why they won't identify the name ‑ because those particular OEMs don't want their name used.
And there are other OEMs who, frankly, don't care. They're happy to have their name used. For us, it just depends on who we end up getting next and what their attitude is toward that. Again, I honestly look at that as the last thing on the negotiation that occurs. Those are generally saved just before signing.
Ira Nathan: OK, one other question. I gather from what you have said that we really can not expect any revenues throughout fiscal year '08.
Jeff Parker: I don't believe you'll see any engineering design services throughout '08. And I think that the royalty ramp will start either very late in the year or more likely at the beginning of the following year.
Ira Nathan: Mm hmm. And the...
Jeff Parker: One other point Ira. I think what is really important for ParkerVision this year isn't, does the royalty ramp start in the middle or late Q4 or shortly thereafter, I think it is going to be measured more by how many products is this technology chipset being designed into, what is the pipeline it is filling up, is the design wins is, what they call in the industry, the sockets that are being won with this technology by the companies that are adopting it.
Ira Nathan: All right. I just did not want myself or anybody else to say at the end of each quarter, "Gee, that was no [cross talk]."
Jeff Parker: No, no, I appreciate it.
Ira Nathan: We shouldn't expect it.
Jeff Parker: No, no, Ira, that's a great question, I appreciate your asking it.
Ira Nathan: OK, thank you. And that's it from me.
Jeff Parker: Thanks Ira.
Operator: And we will move to Daniel Lewis with Gem Partners.
Daniel Lewis: Hi, good afternoon Jeff, Cindy.
Jeff Parker: Hi Dan.
Cindy: Hi Dan.
Daniel Lewis: Couple of questions. Assuming you were to get some other customers on board around middle of the year, how quickly could those customers move into volume production themselves, given that you have already made a lot of efforts with chip development with your first commercial customer and what implication does that have for timeliness of royalty introductions for those new prospective customers?
Jeff Parker: Yeah Dan, that is a great question. If the customers
who come on next are targeting the same basic application, meaning 2G, 3G, 4G
handsets, they will be able to use the designs of the silicon that we are
already working on. One of the attributes of our relationship is we own those
designs and so their ramp will be largely dependent on how aggressive and how
quick they want to get into production.
I mean there is obviously a minimum timeframe it takes just to logistically get something designed in. Could it be done in less than 12 months? Probably, maybe 9. I don't think you could do too much less than that. It depends on what interface they are looking for and exactly how they want to fit it into their product line, but if the interface is relatively straightforward and they want to fit it into their product line similarly the way it is currently being partitioned and designed, I would think they could do it in the 9‑ to 12‑month timeframe, something like that.
Daniel Lewis: Now, what do you mean by a basic design and then you refer to 2G, 3G or 4G, did you mean not multimode?
Jeff Parker: No, the silicon we are designing is capable of
multimode, what I mean is if they are not looking to ‑ everybody has
different ideas on how they want to partition things, where they want the
silicon from one part of our system to reside versus others. So if they adopt
the chipset in the way our silicon is being readied right now, which is very
attractive and very compelling, at least we think so and so does our first
customer, then I think they will be able to move very quickly into a volume
If they decide they want to incorporate some of the silicon and some of their own chips or they want to change partitioning or things like that, then that will take a little bit longer.
Daniel Lewis: So it is quite possible to use your existing designs for higher end phones or probably not like...?
Jeff Parker: No, it is. It is definitely possible to use it for higher end phones. The multimode capability is inherent in the silicon we are designing.
Daniel Lewis: OK. And is the first phones that your silicon is going into, is it the low end phones or high end phones?
Jeff Parker: The first phones that the current silicon is going into are more of the entry level 3G phones.
Daniel Lewis: So they are lower end phones?
Jeff Parker: That is correct.
Daniel Lewis: And what kind of lag period will you expect from the time that those initial shipments happen to when your same initial commercial customer starts to ship from the higher end phones?
Jeff Parker: They could evolve that very rapidly Dan, because the
output of our technology really can be switched. When you think about lower end
versus higher end phones, let's change it maybe to single‑mode 3G type
phones versus multimode to 2, 3, maybe even 4G phones. A lot of what you are
thinking about there is, how do you switch the output of the d2p between half
duplex type applications like 2G and 2.5G and full duplex applications like 3G
or even 3.9G HSUPA.
So a lot of that architecting is really beyond our chipset, it is really into the frontend that it attaches to between our chipset and the antenna. And that could be done relatively quickly. I hesitate to give you, is that a quarter, two quarters kind of timeframe, but you know, it is probably somewhere along the lines of something like that.
Daniel Lewis: OK. When you referenced your first commercial design win as you are predicting that it will be between five and 10 million in the first year of shipment. Is 10 million the upper band of what is possible or is there, I mean depending on the ramp, could it be better than that and can you give us a band of what it might be in 24 months?
Jeff Parker: Yes, it can definitely be higher than that. That ramp
was based on what we think is realistic in terms of production ramping and all
the kinds of logistics that you go through to get something into a production
environment, which deals with more than just production of chips, that deals
with reference designs, test and setup. And there are a lot of things that go
into getting these chipsets into products.
If the production ramp goes better than expected, it could definitely be higher than the $10 million. We hope and don't think it will be lower than the 5. I mean that's why we gave that range. If you were to turn the clock forward beyond that first 12 months and think to kind of ramp into running, I hesitate, I'd rather sit down with Cindy frankly and kind of go back through the numbers again and get to see kind of this off of the hip, but it could be significantly higher than the $10 million.
And don't forget, they are also incorporating the receiver technology into their products, the D2D receiver, that's not anticipated to start until about six months after the transit technology. So that itself will also start to contribute 12 months beyond that additional royalty revenues as well. So, there are a couple of different factors that play into that, that can significantly increase the revenue beyond the first year.
Daniel Lewis: I mean I think investors feel that there is no frame of reference of what it could be and they have no sense of whether it would be 15 million in year two or they just have no sense of it other than substantially more.
Jeff Parker: Well, let me do this, it is a good question. Let me work with Cindy for our next call and see if we can give you some more guidance on that, but honestly I don't have that off the top of my head and I don't want to shoot from the hip on that.
Daniel Lewis: Fair enough and good luck.
Jeff Parker: Thanks Dan.
Operator: We will move to Jim Whitten with Laidlaw.
Jim Whitten: Hi Jeff.
Jeff Parker: Hi Jim.
Jim Whitten: With reference to Dan's question.
Jeff Parker: Yes.
Jim Whitten: The first line where you were talking about five to 10 million.
Jeff Parker: Right.
Jim Whitten: You are contracted, you are signed on December 20th to this OEM, that OEM is not an OEM of handsets, is it?
Jeff Parker: No, they are a chipset provider and they provide chipsets, that's right.
Jim Whitten: So therefore, the determinant in this equation is the handset OEM?
Jeff Parker: That's right. The determinant is how their customers view the chipsets that incorporate our technology. That is exactly right.
Jim Whitten: And that handset OEM you implied is a fairly large OEM.
Jeff Parker: Well, they have a range. They have a whole range of customers from large handset OEMs down to some of the more emerging market OEMs.
Jim Whitten: And I would have to assume that is the first OEM for the chips and obviously they'd probably be in competition with other people in that space?
Jeff Parker: Absolutely.
Jim Whitten: Therefore, it would make sense for them to keep their name private.
Jeff Parker: That's correct. There is a good strategic reason why they have asked us not to share their name.
Jim Whitten: And that would also assume that after a period of time, the other people in that space would wake up to what is going on, they would want to sign a deal with you obviously to get in business?
Jeff Parker: We are trying to utilize that to the best of our ability to get other people to join this.
Jim Whitten: So I mean that to me would be a foregone conclusion that it is incumbent upon them to sign up to get part of that pie.
Jeff Parker: And that's why I think as we move rapidly toward volume silicon this year, it will continue to put incentives towards other companies who want to sign up and start to use the technology as well.
Jim Whitten: So I have two questions out of Dan's particular thing, is it quite possible that as the OEM handset producers going along that he likes what he sees and starts considering other parallel lines in his equation.
Jeff Parker: Most of the handset OEMs, today the trend is toward multiple suppliers, so absolutely to the extent that they like what they see, they would want to source it from more than one supplier.
Jim Whitten: Yeah, but I am talking about also the OEM, the handset OEM, I mean the handset guy, if he likes your technology, isn't that quite possible that he would consider putting it to some parallel lines for November or October [cross talk].
Jeff Parker: I would say the handset OEMs who are interested in this technology are definitely interested in more applications than just the 3G application for this technology. There is no question they are interested in other module operations for this technology, which means other product lines.
Jim Whitten: And along with that rational, when you are talking about signing up people, are we going to be signing up anymore handset OEM people?
Jeff Parker: Our focus I truly believe it is on the chipset providers because if you look at the handset OEMs today, they have really become more influencers now than they have become chipset developers internally. Most if not all of the handset OEMs who had their own internal chipset development teams, have pretty much either pushed those teams out to other companies, closed those teams down, some of them have taken divisions and spun them off as separate public companies or private companies, but pretty much universally handset OEMs are going the direction of being integrated with chipsets rather than developers of chipsets.
Jim Whitten: Yeah, but the chipsets don't move the donkey here, the handset OEMs move the donkey, right?
Jeff Parker: Well, the handset OEM definitely is a powerful influencer and we continue to be in dialog and keep handset OEMs updated on our progress and what we are doing because they definitely do influence the chipset providers in the direction that they would like to see them move and they have been very helpful for ParkerVision and I think will continue to be.
Jim Whitten: So probably, my final hypothetical situation is that since we are in March and if we got to July and if you had good ongoing situation with the OEM handset people, it is quite possible that we would be talking about other lines.
Jeff Parker: I think Jim as we show people that we are able to deliver the volume producible silicon that that will stimulate them to look at additional lines. Right now, I think they are rightfully staying focused on let's get the first thing done that has value and merit and that we could get our arms around quickly and they get to the market as quickly as possible and not to expand until people feel we are clearly on that path. And I think that's the right approach; eating the sandwich one bite at a time instead of trying to swallow the whole thing and not getting it done in a timely fashion.
Jim Whitten: And I guess what we all, all of us...
Jeff Parker: But I want to point out, what we have developed is
that I said earlier to another question is inherently multimode already. This
is what you will see on the website. The little digital engine that runs this
thing will deliver any of the cell phone waveforms, so it really becomes an
interface to the baseband processor concern and it becomes an interface to the
antenna concern, but what fits between those two, which is our chipset, is
inherently capable of doing any of those cell phone standards.
That's why I say, as we deliver that volume producible silicon, they will automatically [indecipherable]. There are other applications that we can do with this. They are hitting stride in delivering what they said they would and I believe that will automatically stimulate additional applications.
Jim Whitten: Yeah, because I think listening to Dan and other people and listening to the critics, we use as a financial sanity here that this is going to open up the door to hopefully when [indecipherable] hundreds and millions of potential units.
Jeff Parker: That's right.
Jim Whitten: And that is what the gain is I guess.
Jeff Parker: That's right.
Jim Whitten: Plus our speculators here.
Jeff Parker: Well, that is because you have developed a platform technology, not as a technology that is just very specific to one specific standard.
Jim Whitten: So this is what we are hoping for which...
Jeff Parker: Your hope is well founded.
Jim Whitten: OK, thank you.
Jeff Parker: Thanks Jim.
Operator: At this time, we will move next to Greg Lewin with LG Partners.
Greg Lewin: Hi, a straightforward question.
Jeff Parker: Sure.
Greg Lewin: You have stated that you will have revenues from ITT
in 2009. You have stated that you will have revenues from your first chipset
manufacturer in 2009. You have stated that you expect to have additional
meaningful OEM signings in 2008, which will have a faster ramp, therefore
leading to revenues in 2009.
You or you and your CFO have consulted with the analysts from Emerging Growth in the past is using estimates of earnings that are well over $1, I do not know exactly what they are, could you please comment on the logic, the likelihood, the believability, anything of those estimates?
Jeff Parker: So Greg, I am going to ask Cindy, the CFO, to handle this question.
Cindy: Yeah, Greg [indecipherable] of that question. First of all, I
think it is important to note that the information that Michael Donahue at
Emerging Growth obtained from us is the same information that all of you
obtained from us. We don't give direct earnings guidance to the analysts. I
mean those models are Emerging Growth's models, they are not ParkerVision's
models. So they have access to the same information that you guys have access
to in terms of being able to build them.
Obviously, it is difficult to build a model for this company at this stage when we don't have ‑‑ commercial terms of our agreements are not publicly disclosed. I know Jeff at the Roth conference tried to give a little bit of generic guidance to kind of help provide some information that would allow any of you to go out and build the revenue model from that, but I don't know how to respond to that beyond just to say that that has to go back to the same information that you do.
Greg Lewin: So there would be no judgment on it whether those numbers have any basis in reality that you could offer?
Jeff Parker: Yeah. We actually have a corporate policy not to provide commentary on analyst reports.
Greg Lewin: How would you begin to share with us any information that would determine the worth of your company since that is obviously a question that the market is addressing right now?
Jeff Parker: Well, Greg, well, let me take that one. I think that
turns back to the Roth conference and some of the information we started to
provide which is to give a range of what we believe the royalty revenue earning
opportunities for the targeted applications we are going after can be, and to
try to distill that down into a market share and how that market share can
relate to revenue and then ultimately earnings for the company.
So I tried to do at the Roth conference was to explain look, we don't want to give our royalty formula out because frankly that disadvantages us and we are negotiating with OEMs. I don't think that the shareholder base wants us to disadvantage ourselves. On the flip side, people want to get a range of what is the possibility. So we took the lower end handset applications and said look, here is the value we bring, we believe that OEMs will not share with us perhaps half of the value we bring and we disclosed what that was and maybe they want us to take only 10%, but we believe we can do better than that.
We kind of gave what we kind of love to put a range around that and then we went to the higher end and then we said, if it is a fully featured phone it looks like this other end. And then we took a blend of those and said, if it was weighted equal between low end and fully featured phones, here is the range of what this market space, the way it is currently predicted to grow over the next couple of years, can look to ParkerVision. So that becomes an issue of what kind of market share do you think we can achieve, are we a 2% market share company, a 5%...
Greg Lewin: Now, here is the question for you Jeff. I don't care what I think, what do you think you can achieve?
Jeff Parker: I said at the conference and I am comfortable saying to you guys now that if in the next ‑ when we get to our first full year of run rate, I believe will be somewhere beyond the high single digit market share and depending upon which accounts we get signed up this year, somewhere in the probably low double‑digit market share, which will put this company into profitability and potentially into a very significant evaluation based on those metrics.
Greg Lewin: And what is the first full year of your run rate?
Jeff Parker: Starting in the beginning of next year and running through the end of that year.
Greg Lewin: So for 2009, you expect your market share...
Jeff Parker: I think by the end of the year, the run rate, what I said, will be in the high single digits to the low double digits based on the customers we capture.
Greg Lewin: So for the year would be in the mid‑to‑high single digits.
Jeff Parker: Yeah, probably by the time it gets blended, I think that's probably reasonable.
Greg Lewin: And you are claiming the market to be a subset of the markets that you are dealing with 600 million phones?
Jeff Parker: I am dealing with three and 4G handsets, that's right.
Greg Lewin: So you are dealing with 600 million phones roughly?
Jeff Parker: That's right and there are different forecasts up there for that grade. I mean there are more aggressive forecasts than that and I don't think I have seen anything that's lower than that.
Greg Lewin: So, OK, very good.
Jeff Parker: Thank you.
Operator: And we will take our last question from Steve Springer with Target Capital Management.
Steve Springer: Yes, good afternoon.
Jeff Parker: Hi Steve.
Steve Springer: Hi. Couple of comments and then I would like to ask a question with a follow‑up perhaps. First of all, I would like to say I was glad to see Jeff that you bought stock on this latest deal.
Jeff Parker: Well, thank you. I was happy to do it and I believe in my heart that it will have been a great investment.
Steve Springer: All right, well it certainly sends a signal into the market. The second thing is, I think this updating the website is a very good move. I am glad to see that, it will give more information and help to continue to debunk the vitriolic criticisms about the company's technology. So I think that is a good thing.
Jeff Parker: Thank you and frankly, we have got people here who have been working diligently to do that and we just want to make sure we get it up there that it is crisp and clear and you guys get a got of good guidance from it.
Steve Springer: Right. And my question relates to again, follow‑up for previous questions that have been asked on these calls and that were asked previously on this call, and that is this: I assume that the reason that companies are negotiating with you to adopt your technology is because they believe that your technology is going to significantly improve their products and represents a substantial step forward in gaining market share.
Jeff Parker: That's right. I mean that is the only reason people engage us in dialogs.
Steve Springer: Right, so that is the premise. That you do not sign an exclusive supply agreement with these companies you are negotiating with, do you?
Jeff Parker: We do not. That's correct. We want to leave the market space open for us to gain as wide adoption as possible.
Steve Springer: Right. So you get someone like ITT and you are
negotiating with these others and you are indicating that you are going to sign
these contracts, new supply agreements with couple of others this year, perhaps
earlier in the year rather than later, so presumably these companies are not
stupid. So they see that you got this technology, they see it is a good
technology, they want to incorporate it in their products and they see that you
have not signed a non‑compete agreement or an exclusive supply agreement
with them, so they must assume that you are negotiating with other parties as
So let's assume that the other parties are not stupid either, so the other parties that are looking at the same technology that the people that you are negotiating with see this technology and presumably they are interested too. So what I am ‑ this is a longwinded way of saying that the people that you are talking to recognize that other people are going to validate your technology in the same way.
Jeff Parker: That's right.
Steve Springer: So let me ask you this question Jeff, this is a
longwinded way of getting to an actual question, who do they think they are
kidding when they say, we are going to sign a supply agreement with you, but we
don't want you to disclose who we are. First of all, people in this business,
in this cell phone business, everybody knows what everybody else is doing.
They know that you have this technology and they know you are negotiating with all these other people, but they refuse to allow you to use their name, OK, but all I am telling you is that this is increasing your cost of capital. This sale of stock at $7.5 would not be taking place at $7.5 if there were greater transparency about who you have contracts with and what they really mean.
And so what I am saying is, is you are signing contracts with people who are using ‑‑ for whatever reasons they refuse to allow you to use their name or hinted their name, which you guys don't do and it is raising your cost of capital costing your shareholders' money and then the whole thing is in a sense illogical.
Jeff Parker: Well, let me comment, there are good strategic
reasons for this customer's request. And I believe the day will come when we
will be able to explain that and you will go "ha‑ha that makes
complete sense." I mean it does make complete sense; I just can't share it
with you at this time. As far as its cost of capital, look, if we would talk
with shareholders a year ago, a lot of what we care is, do whatever you have to
get your foot in the handset space, it is so vast, it is so valuable for your
company, do whatever it takes, even enter into agreements just to give it to
someone to get started which we haven't done.
I think that comment comes from people realizing the handset space is a very challenging space to get invited into. You have to have something that isn't like incremental benefit, but is significantly better than what is being used. And some of the hurdles to adoption deal with the chicken and the egg of how you convince someone you can produce something in very high volumes when it hasn't been produced yet in high volumes and it take a very special culture that is willing to take that step forward and work with a company like us to do that.
There have been plenty of people who have tried advanced RF architectures that frankly have not been able to make it through all of the landmines between concept and high volume production. And this particular company is willing to not just make an adoption, but to do it in the rate that will ramp pretty quickly to millions of units per month. So when I look at the value of that type of customer and they have a good strategic reason for not wanting us to discuss who they are right now, I am perfectly happy to accommodate that.
And frankly, in some kind of perverse weird way, I think it is actually helping us with the discussions with other customers, because if you think other companies are a little worried about who else is going to show up with this technology in handsets in the not too distant future, I think they are. And I think that's going to result in the next accounts.
So yeah, is that ideal? No, but I have been doing business now for 30 years and I have still never seen the absolute ideal in any business situation. It is always a give and take and it is working with customers in a way that you can get a win for yourself and a win for them as well.
Steve Springer: Well, Jeff, just one last thing, I agree with that, but I have been an investor in defense intelligence companies and defense companies and people that are dealing with the CIA and DARPA and the Defense Intelligence Agency, blah, blah, blah and they are not permitted to disclose their contracts either.
Jeff Parker: Sure.
Steve Springer: But they find a way to tell you who they are doing business with in a general sense, so that you can figure it out for yourself and that has to do with can‑do lawyers and can't‑do lawyers.
Jeff Parker: Well, in this case, it honestly just has to do with the customer's request.
Steve Springer: OK.
Jeff Parker: And I wish I could tell you more right now, but what will be ‑‑ I think the telltale will be when people can get their arms around actual handsets that incorporate the technology in the not too distant future. They will then be able to see exactly where this came from and exactly who has adopted it. And hopefully at that point, I will also be able to talk more freely about why the request was what it was and I think you will understand at that point why we honored it.
Steve Springer: OK, thanks very much Jeff.
Jeff Parker: Thanks Steve.
Operator: That does conclude our question and answer session. At this time, I will turn the call back over to our speakers for any final or additional comments.
Jeff Parker: So folks, thanks for your attendance for today's call. I know these are challenging times for reasons that are beyond any of our control, but we do appreciate greatly your support. And as I said at the beginning of the call, I am very bullish on how the company is positioned to execute this year and what that will lead to in ramping revenue and real earnings per share and we look forward to the next call update with you, so have a good evening. Thanks, bye‑bye.
Operator: That does conclude our conference call for today. We do thank
you for your participation.