ParkerVision Roth Presentation

March 16, 2010

 

Jeff Parker

 

Brad: OK, I'm Brad. Reason for being here. We've got up next Parker Vision, and Jeff Parker the Chairman, Founder, and Chief Executive Officer is here with us today. A pleasure.

Jeff Parker:  Thank you, glad to be here. So since we have a limited time frame within to work, I am going to launch right into it. First of all, of course, thank you very much for taking the time to spend half an hour with us. Of course, now it's not working. There we go. So we did our year end and quarterly conference call yesterday. I don't know how many got an opportunity to actually hear it. Probably many of you were here, so perhaps you didn't. But I want to give you just a real quick highlight of what we discussed in the conference call yesterday. And then I want to walk you through something that you will find useful as an update on our company if you have been following us. If you haven't been following us, then perhaps this is still a good starting point.

What we talked about yesterday is that we are in the final process right now of completing an agreement with the manufacturing partner, who will actually be producing RF modules based on our D2P technology, that will be paired up with the baseband processor that our chip set licensee and we've been working on for 3G entry-level handsets.

We see a manufacturing ramp‑up that's going to start quite quickly thereafter. We'll see that starting latter part of the second quarter. And we are very close, we believe, to securing our first handset OEM design win. And we see that starting shortly. In fact, we’re already looking at putting some personnel at the site of the handset OEM who is going to be using the first modules, the D2P modules, on their handset. As I said, we paired up with our 3G baseband partners chip set.

We believe in the coming couple of months, hopefully sooner than later, we'll actually see based on all this activity, an official order to be placed for the D2P modules to our manufacturing partner buy the handset OEM, who in this third bullet I mentioned here.

What I thought you guys find interesting, we've been out with our if you follow our company, we deliver some sample handsets, 3G handsets, in late October of last year, to our baseband partner. They took those sample handsets which provide the extended battery life, which we've been talking about that our technology delivers. They took those to some of those handset OEMs and said, you incorporate the technology in your handset, in your 3G phones. We'll have longer battery life, better talk time, and even better data connectivity link because the D2P would enable that as well.

They've got great reaction with that. And that lead to a discussion between the baseband Company and Parker Vision, talking about bringing in a manufacturing partner who has the experience in ramping up RF modules, so that we can have smooth entry into the market. And so that we can have a launch that the handset OEMs are confident will go smoothly. And that they can count on this manufacturing partners, because they are a known name in the industry who do RF modules.

The RF Partner is still being selected, but our first choice would be LG Innotech, because we already had a relationship with them for a different module we are developing, which is a HEDGE module. And if you followed our company, you have heard us talking about that for the last year plus.

And so what happened is, the baseband company, which we have a confidential relationship and LG Innotech and Parker Vision, all got together, at the beginning of this year and decided to go out, back to the handset OEMs that our baseband partner has been showing the sample phones to, and who we got a good response from. And to make a joint presentation, all three of us, to the handset companies to say, "Here's what we're bringing to the market, and we are soliciting orders." And find our first handset OEM launch partner out of that activity.

What I'm going to walk you through the three presentations that the three companies together have put together, and have been out there demonstrating, that I think you'll find is where our company today. So we introduce ourselves as a RF Solutions Provider. We provide semi‑conductor solutions for mobile applications. Our focus today is on D2P, which is our transmit technology. It has extremely high performance in the signal transmitted. And it drives down the power consumption for these 3G devices, and I will give you more information on that shortly.

We have a large intellectual property position with over 100 patents issued already. 140 patents yet pending.

We are very customer driven. We are paired up with this baseband company to make sure their launch with their baseband and our product goes smoothly and successful. We have invited over $100 million to develop just this piece of our technology.

We are headquartered in Jacksonville, with some engineering laboratories additionally in Lake Mary.

Today, if you look at your handset, what you will find is baseband processor - our customer's baseband processor. It feeds into a linear analog RF transmitter, which then creates a signal that goes through a power amplifier, that goes through a filter it's called a duplexer. And ultimately goes to antenna. That's the flow today.

Problem is, these circuits, are the same old circuits that have been used for decades. And the materials have gotten better. But the problem is these analog circuits consume a lot of power and generate a lot of heat when it comes to the more advanced signals of 3G, 3½ G and certainly the coming 4G signals.

Our technology, D2P, replaces those analog transmitters and PA components with high efficiency, all silicon, non‑linear switching amplifying technology. And we do it in a single package. So we convert this to that. The benefit is we consume a significantly lower amount of power. It generates a lot less heat. And the signals we generate are absolutely stellar, better than what you are currently generating out of your phones today.

In fact, let's talk about how good is good. This redline is the sample phone. Power consumption performance that was delivered to you by the Baseband Company. When you are at the edge of the Base station, you consume this much power on the right, on the redline and when you base station, you consume this much power on the left.

By merely replacing the transmit components with the Data B, you now go to the blue line. And what you can see, if we now drop the power significantly, I mean 100 to 150 milliamps of battery current. This is more power consumption savings than the rest of the phone consumes: The Baseband processor, the receiver consume that power consumption now of those two items have been made up in the amount of power we draw.

If you look at where a user typically operates, not at the edge of a base station, not underneath the base station, but kind of in between the two, that's where we get the longest battery life saving. That's intentional: that's how this technology was created.

In addition to that, we drop the heat. If you look at how much heat these amplifiers generate, the traditional ones when are at the edge of bay station, it's 110 degrees Celsius, over 200 degrees Fahrenheit. That's a big influence on how you handsets are designed, what components can go there, the thickness of the handset, et cetera. We drop that temperature literally in half.

So if you incorporate the D2P chip inside your phone, you will take your 2¼ talk time, up to 3½ hours, and have a lot less heat in your phone to deal with, which gives you a lot more design flexibility.

So today 3G networks are going up, to be used. The data applications on your phone is going up, the phone complexity is going up. And the battery life is going down. So Mr. Handset OEM, you can stand out in the crowd if you incorporate D2P, and have the longest talktime phone in the industry.

We then would walk the handset OEM through the fact that with our manufacturing partners, not only do you get all these benefits, but it's a complete module. It's easy to design in, it's tested, and it's calibrated.

Quick overview:  How does it work? I'm not going to spend a lot of time on this, other than to say, if you take a traditional solution today, this is the transmitter. So you take a signal from a baseband andyou  turn it into a small modulated radio carrier and you feed it into the power amplifier and keeps adding energy until you have enough power to the antenna. The problem is every time you add power to that signal it's inefficient. These stages are maybe 20 to 30 percent efficient. So do the math. If you give 60 to 70 percent of your efficiency every time you amplify the signal, by the time it gets out to the antenna, it's only at about eight to ten percent efficient signal. We do it in the opposite mode. We take the same signal. And we process it in a way that we create signal gain before you have a modeled and a radio carrier. And only at the very end of the process, is there a radio signal.

So we are able to create a much more efficient signal by using switching amplifiers for our architecture, which ultimately results in a very efficient signal. The challenge with switching amplifiers is that nobody is going to be able to do switching amplifier that doesn't create a lot of unwanted signals besides the wanted signal.

The way we developed our technique, and with a lot of our intellectual property encapsulated was how do to that and still get a stellar signal without the unwanted extra signals. This is simply showing some of the performance results from the sample phones that were delivered. And what you see here is that we far exceed the specs required for the signal generated and the unwanted signals that you don't want. The data purity that's transmitted from your phone, this transmitter, this percentage say how much error is in that signal. A spec of 17 percent error are acceptable, we are way below three percent. Stellar. Any handset would check the box and say that's fabulous.

Then, there is the silicon. It's a small CMOS chip that gets fed in from the baseband. It goes to a SiGe chip, that gives you RF output. That gets packaged up into a complete module, and that's your complete solution. So you have the highest level of integration, the least heat, the lowest power of consumption. Fabulously high yield. Fully calibrated, nothing to do but put it in the phone. And away you go.

By the way, we have already created reference designs with our baseband partner. Little bit of more information that you guys need, but we walk through that. If you watch the bloc diagram of the RF, which is very simple now. Walk diagram of the RF walk bloc diagram of an entire phone, pretty straight forward. Then manufacturing partner gets up, walks through the spec sheets and says, here is the spec sheet for the module.

It's a manufacturing partnership that deals with the test, the sales and inventory management, the customer service and global sales and support. They give their own presentation here, they walk through the whole thing about themselves. And LG Innotech today satisfies component sales to, it's published, Nokia, LG electronics, RIM, Apple, Sony Ericson Sharp. Pretty nice list of handset customers.

Then, they are on time on it. Their timeline says, well you have sample phones in the fourth quarter. In the first quarter, you've now gotten now complete reference designs to build your phone with the DTOP in them. And we can have if we get orders shortly, we can initial quantities of these modules to you before the end of the second quarter, with a volume production ramp thereafter. And we see you introducing an additional follow on product, based on this technology, by the end of the year 2010.

So hey Mr. Handset OEM, you and the baseband company, obviously who's name I can't share with you today, and we all work together, we can have a fabulous launch to helping you have the best mobile phones in the 3G space.

So one of the significant differences of this business relationship that we are working with today. If you might have heard of our relationship with the baseband company a year ago, is that we start off on a licensing basis, where we develop the chips, and the baseband company makes the chips, and they pay us a royalty.

What has occurred recently is the baseband company, given the feedback they've gotten from their handset customers, and given the fact that they can see a fast ramp here, came to us and said look, if we can get an RF partner to do production, we think we secure handset OEMs quickly. Give you a fast launch: it helps us as a baseband company because we can get more revenue growth out of this. Put the flag on the top of the technology mountain and claim to be the first to do this.

We said to the baseband company, this is great, tell you what: we'll bring in the manufacturing partner under the condition that we change the royalty base relationship, to we prefer to sell the silicon to manufacturing partner and make a margin on the silicon sale. That has been agreed to. And that was said on the conference call yesterday.

And so now we are in a known good die relationship with whoever the manufacturing partner is. Like I said earlier, we hope the manufacturing partner will be LG Innotech. Like I said it would be presumptuous to say that's a done deal. Because it is a work in progress. But I say is, there is a pretty high probability that's who it will be. Stay tuned for more.

When we saw known good dies, this takes what would have been our royalty to a different business model and a more sustainable business model for Parker Visions to focus on this customer, this launch than we would have been forced to remain with the royalty model. Our top line on this business model goes up by about 4X. And our bottom line can go up by 2½, to maybe 3x.

So people ask in the past how much are you going to make in a royalty basis. I told people, on a low end entry level entry phone, it's a quarter. On a higher end phone, maybe it's 50 or 60 cents. So now what we see the sale of known good die to the manufacturing partner will be between greater than a dollar and up to two dollars, depends on the features that go with us. We see a margin in the 40 percent range, starting with perhaps growing to up to 60 percent as we get our yields better and we refine some of the features.

So this has made this viable for ParkerVision to focus on. If LGI does become our manufacturing partner, likely to push the HEDGE program that we've been working on with them, which is a different module back a little bit.

Focus on launching this, because we see customers for this immediately. And this will be a great launch place for all of our companies, because this will be a very synergistic activity to then follow with the hedge modules. The production line, the testing calibration, much of the module orientation for HEDGE, will get LGI ready for that just by doing a 3D module.

In terms of size for this opportunity for the company, this 3G only market is about 200‑250 million units market right now, growing. The baseband partner and their market share and based on what they told the manufacturing partner we are talking to, they believe we can get as a market share, would give us about a 40 to 45 million unit per year market opportunity.

Obviously we are not going to get that on day one. It will take time to grow. In my opinion, I think this company, ParkerVision, could achieve these kinds of potential market volumes, probably greater than a 12 month period, and maybe shorter than a 24 month, 12‑24 month, would be the kind of ramp we are using.

No question in our mind a successful launch on this 3G product will create pull and demand for our technology in other spaces as well.

One of the handset OEMs that we are talking to, who I think will probably end up being the launch handset OEM, looked at our technology, looked at this presentation, and said 3G battery life is their single biggest problem they're trying to solve on their handsets today.

Love this. Is already working with our baseband partner on which model or models that one of the designs goes into. And said to the baseband company, who doesn't do some of these other standards, "What other standards does ParkerVision do?"

And the baseband company was very gratuitous and said, "Oh, they're working on HEDGE with LG Innotek. They've got LTE on their road map down the line. Jeff, please explain to the handset OEM, what else you guys can do?"

That really opened my eyes to the fact that an initial success in the 3G space, with the important handset OEM that we are talking to, no question in my mind will lead to additional business for ParkerVision.

Instead of us having to push the technology in the market, we'll create a pull, and a demand for it. So today we have a relationship with LG Innotek. It started out as a HEDGE relationship. As I said, we are hoping they are going to come in and be the manufacturing partner for this 3G product. But stay tuned. It's still a work in process.

We have a chip set customer whose focus is on baseband processors for mobile handsets, and he's now been very gracious in taking us to their top customers, taking the sample phones that we've offered them.

I believe it's very much on target for getting both of our companies the first orders for D2P.

And we also have a licensing agreement with ITT, who has been working on some military applications.We just finished a first contract with them. Per some samples for a government application, a military application. That will be complete this quarter.

Based on what the government is looking for we exceeded their expectation in performance. Where that goes from here is a little early to say. But that's up to the government's to handle further funding that program to turn into a production item.

Candidly our focus really is the commercial market. The military space, is interesting to us, but I think the commercial market is going to take us away, and that's going to really be where all of our resources are focused.

Not a lot of commentary on this other than to say, I think we have an extraordinarily impressive group of directors. Just to hit on a couple of them, John Metcalf has been a semiconductor CFO his whole career for companies like AMD, TSMC. He's very talented. We are real lucky to have him.

Dr. Suh is one of the most respected leaders in Korea today. He heads up a university called KAIST, which is the MIT of Korea. You go over there, and you stay there for a week, and you'll see him on the news, two or three times. He's completely turning Korea's university system into a leading worldwide system. He had many years at MIT. His goal is to have KAIST supplant MIT in world stature for a technology university. I hope he doesn't make his goal, but he may very likely do that.

Papken Torossian, down here, used to be the CEO of Silicon Valley Group which produced many of the semiconductor production equipment for people like Intel and IBM. Still used today. He sold his company to a big dutch company called [inaudible] .

Well, I won't spend a lot of time on our side of the management team other than to tell you running engineering is a guy named Domingo Figueredo. Domingo has a lot of experience in bringing to market volume cellphone components.

The last one he did was for a company which was a division of HP. Which became know as Avago, which is now privately held by Bain. Not Bain, but by Golden Gate Capital. They produced their one billionth cell phone component about a year or two ago. I credit him for leading that charge. So we are very lucky to have him as running our engineering group because we believe we have the same opportunity as he had when he was at Avago.

Results of operations are published. Feel free to take a look at them. We won't spend a lot of time other than to tell you that we have a very large tax loss to carry forward.

Hopefully it will come in handy as we start to generate revenue this year and profitability. We have no long term debt. A significant patent portfolio. We just put out our 10K yesterday. Our auditors are Price Waterhouse.

Feel free to pick that up, and take a look at it.

So what do you watch for from a company like ParkerVision in the coming months?

I think you watch for the final stages of the manufacturing partner to happen, and for that to be announced.

I think you watch for a rapid ramp up from that partner. I think you look for a design in with a handset OEM to start shortly. And an order to be placed by that handset OEM. And we are already looking at putting personnel on site at the handset company so we can make sure that the design in goes smoothly.

So that's my quick update. It's about as much as I can do in 20 minutes. And I think we have a few minutes for questions.

Brad: You've got about two minutes.

Jeff:  OK there you go. Yes, sir.

Audience Member: Is there any exclusivity or period of time for the first handset OEM?

Jeff:  No.

Audience Member: How long of a lead time do the handset manufacturing need as far as design of your chip sets into to the devices.

Jeff:  The strategy of the baseband partner was that the sample handsets that we did last year, are attached to the baseband processor already that these handsets that we are targeting are built around. The second strategy is that we don't go into a new handset, but we go into a volume produced handset to start with, so that our manufacturing partner can ramp up our module while they ramp out the traditional RF.

So given that scenario, they think that they can actually start to see something in the third quarter out of the handset. I mean these guys are so fast in terms of design. These handset OEM and ODMs now, it's really stunning.

But given that it's already using the same baseband processors, the software is done. The interface, and the drivers are all finished. They think they can do it in a quarter. A little bit more than a quarter. And start the ramp.

Audience Member: And the handset provider, the company in talks with, they've already gone through the trial process?

Jeff:  They've already tested the sample handsets. They are satisfied, or where they want to start with it is fine. And they are relying on the representation of the baseband company, and saying hey you know, maybe you are our largest customer, so we assume you guys have also done enough testing, that we are not going to get burned here. As I said, their real concern was let's get a manufacturing partner who specializes in RF modules because if you talk to any handset OEM and say what's the biggest problem just generically you have in your handsets, they will tell you, the RF is a pain in the rear to design in. And it's the piece of the puzzle that gives them the most grief. So that's the area they want to see the most expertise supplied to.

Brad: Jeff I think this is a good place to stop.

Jeff:  OK folks. I appreciate your time.

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