Identiv Inc (INVE) 2002 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to this SCM Microsystems fourth quarter earnings conference call. During the presentation, all participants will be in a listen-only mode. After it, we'll conduct a question and answer session. At that time if you have a question, please press the one followed by the four on your telephone. As a reminder this conference is being recorded Friday, February 21st 2003. I would now like to turn the conference over to Darby [Dye], Director of Investor Relations, please go ahead Ma'am.

女士們、先生們，感謝您的耐心等待。歡迎參加SCM Microsystems第四季財報電話會議。在本次財報演示期間，所有與會者將處於僅收聽模式。演示結束後，我們將進行問答環節。屆時，如果您有任何問題，請按電話上的1和4。提醒各位，本次會議正在錄音，時間是2003年2月21日，星期五。現在我將會議交給投資人關係總監達比·戴女士，請她發言。

Thank you. Hello everyone and thank you for joining us today as we discuss the results of SCM's fourth quarter and fiscal year 2002. Speaking on today's call, our are Andrew Warner, Chief Financial Officer, who'll provide the financial announces of SCM's recent quarter and forward-looking financial guidance, and Robert Schneider, Chief Executive Officer who'll provide an overview of SCM's market environment and business strategy. As we begin today's call, let me remind you that during the course of this conference call, management will make certain forward-looking statements regarding future events or the future financial performance of the company. We caution you that such statements involve risks and that actual events or results may differ materially. We refer you to the company's 10-K and recent SEC filings which explains several important factors that could cause actual results to differ from those contained any projections of forward-looking statements. Any forward-looking statements made on this call or based on the information that is currently available and which is likely to change over time. Although our projections will likely change, we do not plan to update them. SCM will provide our analysts and investors with information and forward-looking guidance in our quarterly financial news releases and conference calls. We will not provide any further guidance during the quarter and less than two*unless done through a news release, conference calls or SEC filing in accordance with regulation fair disclosure. Now, I would like to introduce Andrew Warner.

謝謝。大家好，感謝各位今天參加我們的電話會議，我們將討論SCM公司2002財年第四季及全年業績。今天出席會議的有財務長Andrew Warner先生，他將公佈SCM公司最近一個季度的財務業績並展望未來財務前景；以及首席執行官Robert Schneider先生，他將概述SCM公司的市場環境和業務戰略。在會議開始之前，請允許我提醒各位，在本次電話會議中，管理層將就未來事件或公司未來的財務表現做出一些前瞻性陳述。我們提醒各位，此類陳述涉及風險，實際事件或結果可能與預期有重大差異。請參閱本公司提交的10-K表格和近期向美國證券交易委員會（SEC）提交的文件，其中解釋了可能導致實際結果與任何前瞻性陳述中的預測結果存在差異的若干重要因素。本次電話會議中所做的任何前瞻性陳述均基於當前可獲得的信息，這些信息可能會隨時間而變化。儘管我們的預測可能會發生變化，但我們目前沒有更新預測的計劃。 SCM將在季度財務新聞稿和電話會議中向我們的分析師和投資者提供資訊和前瞻性指引。除非透過新聞稿、電話會議或根據公平揭露規定向美國證券交易委員會提交的文件，否則我們不會在本季度及未來兩週內提供任何其他指引。現在，我謹介紹安德魯華納。

Thank you Darby. While the results of that fourth quarter and fiscal year reflected challenging operation environment, we believe they also demonstrate our ability to effectively deploy core technologies across diverse markets while preserving our cash resources. Revenue for the fourth quarter came in at $48.4m, which was above the range of guidance we have given for the quarter and reflected solid sales performance from both our security and our digital media and video division. For the fiscal year as a whole [Inaudible] revenue of $177.7m, also above the range of guidance we had given. Given that the present economic environment over the last year, we are very pleased with this revenue performance. In addition to maintaining our revenue momentum, we successfully preserved our strong balance sheet ending the year with over $56m cash and equivalents. Despite outlays of cash over $5m in the year for the acquisition of Towitoko and the buyback of stocks in the last quarter.

謝謝達比。儘管第四季和整個財年的業績反映了充滿挑戰的經營環境，但我們相信，這些業績也展現了我們在多元化市場有效部署核心技術並保持現金儲備的能力。第四季營收為4,840萬美元，高於我們先前給出的季度預期，反映了我們安防和數位媒體及視訊部門的穩健銷售業績。整個財年營收為1.777億美元，也高於我們先前給出的預期。鑑於過去一年的經濟環境，我們對此營收表現非常滿意。除了維持營收成長動能外，我們還成功維護了穩健的資產負債表，年底現金及等價物超過5,600萬美元。儘管今年為收購Towitoko和上季回購股票支出超過500萬美元，但我們依然取得了這樣的成績。

Now, I would like to give you some more detail on the numbers. The reported revenues of $48.4m in Q4 above the range of guidance we had [Inaudible]given for the quarter which was between $40m and $45m. Total revenues were up 4% from the $46.8m recorded in the fourth quarter of 2001, and up 18% sequentially from revenues of $40.1m in Q3 2002.

現在，我想更詳細地介紹一下這些數據。第四季報告的營收為4840萬美元，高於我們先前給出的4000萬美元至4500萬美元的預期範圍。總營收較2001年第四季的4,680萬美元成長了4%，較2002年第三季的4,010萬美元較上季成長了18%。

Gross margin for Q4 was 21% including a $4m inventory charge related to both our security and our digital media and video products. Excluding the inventory charge, underlying*on the line gross margin was 29% just under the 30% level we had targeted at the end of Q3. Underlying operating expenses came in at [$16.1]m above the range of 13.3m to 13.8m we had previously indicated and there are also a couple of extraordinary items in the quarter. The first was an impairment of goodwill of $15.4 m and the other was a charge of approximately $7.6m of infrequent charges. Excluding these two items as well as the amortization of intangibles, we had an operating loss of $5.1m in the quarter. Including all these items, as reported operating loss was $28.7m. I'll provide a more detailed analysis of the goodwill, impairment, infrequent charges and operating expenses in a moment.

第四季毛利率為21%，其中包括與安防產品和數位媒體及視訊產品相關的400萬美元存貨費用。剔除該存貨費用後，實際毛利率為29%，略低於我們在第三季末設定的30%的目標水準。實際營運費用為1,610萬美元，高於我們先前預估的1,330萬美元至1,380萬美元的區間，此外，本季還存在兩項非常規項目。第一項是1540萬美元的商譽減值，第二項是約760萬美元的非經常性費用。剔除這兩項項目以及無形資產攤銷後，本季營業虧損為510萬美元。計入所有這些項目後，報告的營業虧損為2870萬美元。稍後我將對商譽、減損、非經常性費用和營運費用進行更詳細的分析。

*If weFirst let’s take a look at our performance on a divisional basis, revenues from our digital media and video business were $28m exceeding the range of guidance we've set or between $25m and $27m. This represents an increase of 22% from sales of $22.9m in the fourth quarter of 2001 and an increase of 5% from the $26.6m recorded in Q3 2002. Revenues from this division come from sales of our digital media reader writers as well as sales of our video capture and editing products. Both product lines fell under the Dazzle brand retail channel as well as to OEM customers and the PC OEM and consumer electronic industries. In Q4, we benefited from continued strong consumer demand for our products that leveraged digital video, DVD, anti-still photography technologies.

首先，讓我們按部門來看一下業績。數位媒體和視訊業務的收入為2800萬美元，超過了我們先前設定的2500萬美元至2700萬美元的預期範圍。這比2001年第四季的2,290萬美元成長了22%，比2002年第三季的2,660萬美元成長了5%。該部門的收入來自數位媒體讀寫器以及視訊擷取和編輯產品的銷售。這兩條產品線均透過Dazzle品牌零售通路銷售，同時也針對OEM客戶、PC OEM廠商和消費性電子產業。第四季度，我們受益於消費者對我們採用數位視訊、DVD和防手震攝影技術的產品的持續強勁需求。

We also benefited from the new hardware and software products that we had launched in the last half of the year. Gross margin for the digital media and media divisions was 18%, operating expenses were $7.6m, which resulted in an operating loss of $2.7m. This includes an inventory charge of approximately $2m resulting from a write-down of discontinued products and inventory. Excluding this charge, gross margin would have been 25% up from a 24% in Q3 and in line with guidance for the quarter. Revenues from our security business were $20.4m in the fourth quarter above the range of guidance we have indicated of between $15m to $18m. *Although this Polaris (ph) represents a decrease of 14%* to 10 from sales levels of $23.8m in a year-ago quarter. It reflects a sequential increase of 43% from Q3 2002 sales of $14.3m. Revenues in our security business consist of sales of digital TV conditional access modules as well as sales at our (ph) smart card reader products to the government, financial and enterprise markets worldwide.

我們也受惠於下半年推出的新硬體和軟體產品。數位媒體和媒體部門的毛利率為18%，營運費用為760萬美元，導致營運虧損270萬美元。這其中包括約200萬美元的庫存減損費用，該費用源自於已停產產品和庫存的減記。若不計入此項費用，毛利率將達到25%，高於第三季的24%，與本季預期相符。第四季度，我們的安全業務收入為2040萬美元，高於我們先前給出的1500萬美元至1800萬美元的預期範圍。 *儘管這一數字較去年同期的2380萬美元下降了14%，*但較2002年第三季度的1430萬美元環比增長了43%。我們安全業務的收入包括向全球政府、金融和企業市場銷售數位電視條件接收模組以及（ph）智慧卡讀卡機產品。

The year-ago*overall economic environment is dampening consumer demand for a digital TV's services in Europe, and many television operators are experiencing financial difficulty after years of subsidizing set-top boxes for their subscribers. This situation has led to lower demand for [Inaudible] digital TV decryption products *curreovenantly. The situation we believe will result overtime, at the same economic pressure, we will force operators to adopt most cost effective delivery systems, which our modules provide. Robert will provide further commentary on the dynamics of this market in a few moments. Sales of our smart card reader products, were again strong in Q4 driven by continued rollout accretive *of readers to the US armed* forces as fast *part of as the DODs common access card program, . tThe personal identification and network access. The *Our deployments to the US government are in conjunction with contract, we have won through partners such as [Inaudible] and North of [Inaudible] .

去年同期，歐洲整體經濟環境抑制了消費者對數位電視服務的需求，許多電視營運商在多年補貼用戶機上盒後，正面臨財務困境。這種情況導致目前對數位電視解密產品的需求下降。我們認為，在同樣的經濟壓力下，這種情況會持續下去，我們將迫使營運商採用最具成本效益的傳輸系統，而我們的模組恰好能滿足這一需求。羅伯特稍後將對該市場動態進行進一步評論。第四季度，我們的智慧卡讀卡機產品銷售再次強勁成長，這主要得益於我們持續向美國武裝部隊推廣讀卡器，作為國防部通用存取卡計畫的一部分，該計畫用於個人識別和網路存取。我們向美國政府的部署是與我們透過合作夥伴（例如[聽不清楚]和[聽不清楚]的North）贏得的合約相關的。

As we have said in the past, orders under these contracts tend to be large but variable in terms of timing, resulting in revenue variability on a quarterly basis. Based upon our current forecast considering,*concerning the timing of up coming orders, we expect that sales of our smart card readers will be lower in the near term. Gross margin in our security division came in at 24% for the fourth quarter. Operating expenses were $7.5m resulting in an operating loss of $2.4m. [Inaudible] that*This includes the charge to inventory reserves of approximately $2m for discontinued products and inventory. Excluding this charge, gross margin for the division would have been 34%, below our target of 40%, reflecting higher than expected trade costs, license fees and charges along with higher proportionate sales on [Inaudible] gross margin product in the quarter. On a combined basis total revenues for fiscal 2002, were $177.7m, exceeding the guidance we had indicated it’s* between $169m and $174m. This reflects a decline of 4% from $184.9m we recorded in 2001, but is a positive demonstration of the revenue momentum we had maintained throughout a tough year. Full year revenues multimedia (ph)*from our digital media and video division were $98.7m up 5% from fiscal 2001 level effecting continued strong consumer demand for digital media and video products, as well as the continued strength of the Dazzle brand and a tough competitive environment.

正如我們之前所述，這些合約項下的訂單金額通常較大，但交貨時間不固定，導致季度收入波動。根據我們目前的預測，考慮到即將到來的訂單的交貨時間，我們預計智慧卡讀卡機的銷售量在短期內將會下降。第四季度，我們安全部門的毛利率為24%。營運費用為750萬美元，導致營運虧損240萬美元。這其中包括對停產產品和庫存計提的約200萬美元的庫存準備金。若不計入此項費用，該部門的毛利率將為34%，低於我們40%的目標，這反映出貿易成本、許可費和相關費用高於預期，以及本季高毛利率產品的銷售額佔比更高。 2002財年，總收入為1.777億美元，超過了我們先前預測的1.69億美元至1.74億美元。這較2001年的1.849億美元下降了4%，但也積極地表明了我們在艱難的一年中保持了營收成長動能。全年多媒體（ph）*來自我們數位媒體和視訊部門的營收為9870萬美元，較2001財年增長5%，這得益於消費者對數位媒體和視頻產品的持續強勁需求，以及Dazzle品牌的持續優勢和激烈的市場競爭。

Full year revenues from the security division were $79m, down 13% from the $90.6m in 2001 and reflecting the impact of financial turmoil and the European digital TV market resulting in reduced sales of our conditional access module. Looking at the revenue on a geographic basis, the US represented 50%, Europe 38%, Asia-Pacific -12% of keyhole Q4* revenues. For fiscal 2002 as a whole, the US accounted for 61%, Europe 36% and Asia-Pacific 13% of revenue.

安防部門全年營收為7,900萬美元，較2001年的9,060萬美元下降13%，主要受金融動盪及歐洲數位電視市場的影響，導致條件接收模組銷售下滑。從地理分佈來看，美國佔第四季*營收的50%，歐洲佔38%，亞太地區佔12%。 2002財年整體而言，美國佔營收的61%，歐洲佔36%，亞太地區佔13%。

Now let us look at operating expenses in a bit more detail. Total operating expenses in 4Q, excluding the amortization of intangibles, stock based compensation expense and other infrequent charges of $15.1m, . aAbove the range we had given between $13.3-13.8m and up 2% from the $14.8m and expenses we recorded a year ago, quarter. Underlying*ining operating expenses represents 31% of revenues. And looking at main expense line items, research and development expenses were $3.2m, sales and marketing were $7.5m and general and administrative expenses stood at $4.3m. On an ongoing basis, we will continue to evaluate ways to lower our base line expenses across both divisions, in the view (ph) of increasing efficiencies in our business. AOur amortization of intangibles were was $462,000 in 4Q and we expect quarterly amortization expenses will remain at this level going forward.

現在讓我們更詳細地看一下營運費用。第四季總營運費用（不包括無形資產攤銷、股權激勵費用和其他不經常性支出）為1510萬美元。這一數字高於我們先前預測的1,330萬至1,380萬美元的預期，也比去年同期的1,480萬美元成長了2%。基本營運費用佔收入的31%。從主要費用項目來看，研發費用為320萬美元，銷售及行銷費用為750萬美元，一般及行政費用為430萬美元。我們將繼續評估降低兩大部門基本費用的方法，以提高業務效率。第四季無形資產攤銷為46.2萬美元，我們預計未來季度攤提費用將維持在這一水準。

And turning to the impairment of goodwill and intangibles under Financial Accounting Standard 142, all US public companies are required on an annual basis to evaluate the goodwill and other intangible assets on there *their balance sheet, vis-a-visvis-à-vis their* fair market value. During the fourth quarter, SFCM reviewed, goodwill and intangible assets and based on our market capitalization, we took normal [a non] cash impairment charge to goodwill and other intangible cost $15.4m. This means, we no longer carry any good will on our balance sheet. Incurring And turning now tooften (ph) the infrequent charges; during Q4, we incurred infrequent charges of $1.6m for penalty, legal settlements, and other costs, which relates to separation of activities on media and vVideo division. We recorded charges of $3.3m related to tax receivables that were no longer considered collectable and the charge of $2.7m related to facility restructuring and several *severance costs. This gave us a total of $7.6m in infrequent charges for the fourth quarter. Q4 incurred [interest and other]*stood at a loss of $741,000 resulting from interest income, which is more than offset by a loss from on* foreign exchange and we recorded tax provision of $290,000 in the fourth quarter.

接下來談談根據財務會計準則第142號對商譽和無形資產的減損。所有美國上市公司都必須每年評估其資產負債表上的商譽和其他無形資產，並將其公允市價進行比較。第四季度，SFCM對商譽和無形資產進行了審查，並根據我們的市值計提了1540萬美元的正常（非）現金減值準備。這意味著，我們的資產負債表上不再包含任何商譽。接下來談談不經常性費用；第四季度，我們提列了160萬美元的不經常性費用，用於支付罰款、法律和解費用及其他成本，這些費用與媒體和視訊部門的業務分離有關。我們也提列了330萬美元與不再被視為可收回的應收稅款相關的費用，以及270萬美元與設施重組和若干遣散費相關的費用。這使得我們第四季非經常性費用總額達到760萬美元。第四季發生的[利息及其他]虧損為74.1萬美元，主要原因是利息收入，但該虧損被外匯損失所抵銷。此外，我們在第四季提列了29萬美元的所得稅準備。

SCM's reported net loss for the fourth quarter 2002 was $29.7m or $1.90 per share. This compares with the reported loss of $42.7m or $2.78 per share in a year-ago quarter. On a pro forma basis, net loss for the fourth quarter was $6.2m or $0.39 per share excluding amortization of intangibles and payment as goodwill and intangible and other infrequent charges. This compares to pro forma net income of $645,000 or $0.04 a share for the fourth quarter of 2001. For the full year 2002, SCM reported a net loss of $49.1m or $3.15 per share and this was compared to reported net loss of $68.3m or $4.46 per share in fiscal 2001. On a pro forma basis, net loss was $5.3m or $0.34 per share excluding amortization of intangibles impairment of goodwill and intangibles and other infrequent charges.

SCM公司公佈的2002年第四季淨虧損為2,970萬美元，即每股虧損1.90美元。相較之下，去年同期淨虧損為4,270萬美元，即每股虧損2.78美元。若不計入無形資產攤銷、商譽及無形資產支出及其他不經常性費用，則第四季淨虧損為620萬美元，即每股虧損0.39美元。相較之下，2001年第四季的備考淨利潤為64.5萬美元，即每股0.04美元。 2002年全年，SCM報告淨虧損4,910萬美元，即每股虧損3.15美元，而2001財年報告的淨虧損為6,830萬美元，即每股虧損4.46美元。若不計入無形資產攤銷、商譽及無形資產減損以及其他非經常性費用，則備考淨虧損為530萬美元，即每股虧損0.34美元。

Turning to guidance for the first quarter of 2003, we expect our revenues from our security business to be in a range of $15m to $17m. This reflects continued near-term pressure on several air*sales of our conditional access modules into the digital TV market, as well as expected lower sales for our Smartcard readers due to the variability of [Inaudible] activities related to the US Government Common Access Card Program. We expect gross margin for the security division to be around 40%. We expect revenues from the Digital Media and video business will be in the range of $16m to $19m for the first quarter reflecting seasonally lower demand and a challenging economic conflicts [unaudible] with increased competition. We expect gross margin for the Digital Media and Video division to be around 25%. Therefore, on a combined basis we expect total company revenue will be in a range of $31m to $36m for the first quarter and blended gross margins to be around 30%. We also expect an operating loss for the first quarter to be in a range of $4m to $6m. And to wrap up, let’s* take a look at the balance sheet. Cash and investments were $56.2m at the end of 2002 compared with $59.4m at the end of 2001. The decrease in our cash position was actually less than our total cash outlays for the year, which included $4.5m for the acquisition of Towitoko and may be*nearly $700,000 for the repurchase of stock in the fourth quarter. Preserving our cash position continues to be a key area of focus. Accounts receivable with $31.4m at the end of Q4 compared to $33.5m at the end of Q3. And inventory levels were at $39.1m compared with $44.1m at the end of previous quarter. Day sales outstanding at the end of Q4 was 58 days compared with 75 days at the end of Q3, 85 days at the end of Q4, 2001. With that I would now like to turn the call Robert.

展望2003年第一季度，我們預期安防業務的營收將在1,500萬美元至1,700萬美元之間。這反映了近期內，我們面向數位電視市場的條件接收模組的銷售持續承壓，以及由於美國政府通用訪問卡計劃相關活動的波動，我們智能卡讀卡器的銷量預計也會下降。我們預計安防部門的毛利率約為40%。我們預計第一季數位媒體和視訊業務的收入將在1,600萬美元至1,900萬美元之間，這反映了季節性需求下降以及日益激烈的經濟競爭帶來的挑戰。我們預計數位媒體和視訊部門的毛利率約為25%。因此，綜合來看，我們預期公司第一季的總營收將在3,100萬美元至3,600萬美元之間，綜合毛利率約為30%。我們預計第一季的營業虧損將在400萬美元至600萬美元之間。最後，讓我們來看看資產負債表。截至2002年底，現金及投資為5,620萬美元，而2001年底為5,940萬美元。現金餘額的減少實際上小於全年的現金支出總額，其中包括收購Towitoko的450萬美元，以及第四季回購股票的近70萬美元。保持現金狀況仍然是我們的重點工作。第四季末的應收帳款為3,140萬美元，而第三季末為3,350萬美元。庫存水準為3,910萬美元，而上一季末為4,410萬美元。 2001年第四季末的應收帳款週轉天數為58天，而第三季末為75天，第四季末為85天。接下來，我想把電話轉給羅伯特。

Thank you Andrew. 2002 was indeed a challenging year for many companies especially in the technology sector. And in spite of difficult economic environment SCM maintained revenue momentum and pushed up all [preserved our] cash. We made progress in several keys for each of areas including new customer relationships, partnerships and market share gains, which reinforce some [Inaudible] SCM's leadership positioning in each of all the target markets. We enhanced both our management team and our board with the addition of new members to who* bring deep industry expertise as well as solid business experience. And we saw positive developments within each of target markets *that improve [Inaudible] the outlook for future growth and expansion as our keyIT* budgets will become available. Government [Inaudible] would expand on financial budgets in digital TV market push up, [led]t us to lower the cost structures. Today I would like to give you an update on SCM's market opportunities and share with you the reasons why we remained very positive about the future of these markets and confident of SCM's ability to capitalize on each of them over the long-term.

謝謝安德魯。 2002年對許多公司來說確實是充滿挑戰的一年，尤其是在科技業。儘管經濟環境艱難，SCM依然保持了營收成長勢頭，並成功保留了所有現金。我們在各個領域都取得了顯著進展，包括拓展新的客戶關係、建立合作夥伴關係以及提升市場份額，這些都鞏固了SCM在所有目標市場的領導地位。我們透過新增成員增強了管理團隊和董事會實力，這些新成員不僅帶來了深厚的產業專業知識，也擁有豐富的商業經驗。我們看到各個目標市場都出現了積極的發展，隨著關鍵IT預算的到位，這些發展改善了我們未來成長和擴張的前景。政府在數位電視市場增加財政預算，促使我們降低了成本結構。今天，我想向大家介紹SCM的市場機遇，並分享我們為何對這些市場的未來保持樂觀，以及我們為何對SCM長期掌握這些市場機會的能力充滿信心。

First the digital TV market, for nearly a decade SCM has participated in the development of the digital pay-TV industry in Europe and in the US. Most of those activities have been helping to large specifications on open platforms. As we have discussed with you in the last several quarters, that the digital TV market in Europe currently is in a state of profound transition moving from a closed* business model and the technology--—closed* technology to an open system that dramatically reduces the capital costs for operators. SCM offers digital TV operators a more cost effective to delivery* the model with our conditional excess *access modules, which slot in turn open systems set-top box, or an integrated digital TV set to get the broadcast content. We believe that we'll be in*European digital TV operators will adopt an open systems about over time, as financial pressures on them increase.

首先是數位電視市場。近十年來，SCM一直參與歐洲和美國數位付費電視產業的發展。我們大部分的工作都集中在開放平台的大型規範制定。正如我們在過去幾個季度與您討論的那樣，歐洲數位電視市場目前正處於深刻的轉型期，從封閉的商業模式和技術轉向開放系統，這將大幅降低營運商的資本成本。 SCM透過我們的條件超額接取模組，為數位電視業者提供了更具成本效益的交付模式。這些模組可以插入開放系統的機上盒或整合數位電視機，從而接收廣播內容。我們相信，隨著歐洲數位電視營運商面臨的財務壓力不斷增加，他們最終會採用開放式系統。

When they do, SCM intends to be the company supplying them this with* conditional access modules with supplied over 4m modules to-date the smaller operators to all Europe and in the last several months have signed one of the largest operators in Europe as a customer. We are the unchallenged market leader in this technology. We have achieved a major breakthrough* in October this year when we signed the agreement to provide the conditional access modules for digital television broadcast decryption to Premiere, the largest and actually the only pay-TV operator in Germany and the third largest pay-TV operator in Europe. We shipped the initial volumes of modules to Premiere in the fourth quarter for inventory stocking purposes. And in the last two months, major set-top box manufactures have begun to offer and promote open system set-top boxes with a common interface slot that accepts and is qualified for SCM's module technology. These manufactures include household *lines names like Phillips, Panasonic, Nokia and Gondic (ph) . The fact that these consumer electronics companies are so quickly bringing these common interface set top boxes to the market is a very positive sign for the adoption of this approach by the Digital TV industry as a whole. Realistically we do not expect the transition-taking place in this market to accelerate in the near-term. We're still at the beginning of the adoption curve of common interface technology. We of course know that the regulators standardization bodies are boarding *putting a lot of pressure on operators to adopt those. And we're confident that *SCM [Inaudible] will be part of the solution for European Digital TV operators as they increasingly* adopt an *open system set top box model with a conditional access module. That in fact allows as mentioned earlier to lower the costs for operators to stay in the business. Long-term market potential for digital pay TV in Europe remains huge.

屆時，SCM計劃成為這些小型營運商的條件接收模組供應商。迄今為止，SCM已向歐洲各地的小型營運商供應了超過400萬個條件接收模組，並在過去幾個月中與歐洲最大的營運商之一簽署了合作協議。我們是該技術領域無可爭議的市場領導者。今年10月，我們取得了重大突破，與德國最大的付費電視營運商、歐洲第三大付費電視營運商Premiere簽署了協議，為其提供用於數位電視廣播解密的條件接收模組。我們已於第四季度向Premiere交付了首批模組，用於庫存管理。在過去的兩個月中，主要的機上盒製造商也開始提供並推廣具有通用介面插槽的開放式機上盒，這些插槽可與SCM相容的模組技術。這些製造商包括飛利浦、松下、諾基亞和Gondic等知名品牌。這些消費性電子公司如此迅速地將通用介面機上盒推向市場，對於整個數位電視行業採用這種方法來說是一個非常積極的信號。但實際上，我們預期短期內市場轉型不會加速。通用介面技術的普及仍處於初期階段。當然，我們也知道監管機構和標準化組織正在向營運商施加巨大壓力，敦促他們採用這些技術。我們相信，隨著歐洲數位電視業者越來越多地採用帶有條件接收模組的開放式機上盒模式，SCM（聽不清楚）將成為他們解決方案的一部分。如前文所述，這實際上可以降低營運商的營運成本。歐洲數位付費電視的長期市場潛力依然巨大。

Digital TV is expected to expand from 24m subscribers in 2001 to reach 18m European households by the end of 2007, that's data from market research from data monitor (ph) . For SCM this is extremely promising as we expect that operators *throughout Europe[Inaudible] will follow *Premiere’s [Inaudible] lead in adoption of our technology. Outside Europe, market opportunities for SCM are expanding rapidly as countries in Asia are opting for digital cable TV systems based on open platforms. For example, in Korea the Government plans to create a cost effective system for delivering and protecting digital cable television broadcasts to between 5m and 8m Korean households over the next five years. This system will be based on the US open cable specification, which is the US equivalent to the European DDT's, common interface, which, in fact SCM helps to develop two years ago. As we have reported before, SCM has been selected by the Telecommunications Technology Association in Korea, which is the Standards Organization, which will enforce the adoption of open systems. And we have provided first shipments of test tools from the * abilitycompatibility (ph) equipment and all the expertise to certify the Digital TV equipment used in such an open system.

根據市場研究公司Data Monitor (ph) 的數據，預計到2007年底，歐洲數位電視用戶數將從2001年的2,400萬人增加到1,800萬戶家庭。對於SCM而言，這無疑是一個極具前景的趨勢，因為我們預計歐洲各地的營運商將效仿Premiere (Inaudible) 的做法，採用我們的技術。在歐洲以外，隨著亞洲各國紛紛選擇基於開放平台的數位有線電視系統，SCM的市場機會也迅速擴大。例如，韓國政府計劃在未來五年內建立一個經濟高效的系統，為500萬至800萬韓國家庭提供和保護數位有線電視廣播。該系統將基於美國開放有線電視規範，相當於歐洲數位電視終端（DDT）的通用接口，而SCM兩年前就參與了該規範的開發。正如我們之前所報導的那樣，SCM已被韓國電信技術協會（韓國電信技術協會）選中，該協會是負責推動開放系統應用的行業標準制定機構。我們已經提供了首批來自 * abilitycompatibility (ph) 設備的測試工具，以及所有專業知識，以認證在這種開放系統中使用的數位電視設備。

In this context we also formed a strategic partnership with NDS, the largest global supplier of conditional access technology worldwide to combine our conditional access modules with their open video guard security software to create and to end cable TV systems for Korea's *emerging [Inaudible] digital cable television industry. And last we've signed an agreement with local Korean conditional access provider [InaudibleATRI] to provide common interface technology from their development of conditional access modules in the Korean markets. China also is rapidly setting up an open system space digital cable TV infrastructure. In 2002, we had formed an agreement with the Digital TV Industryial Alliance, a Chinese conditional access provider to provide our secure [Inaudible] technology for [high]ead-end applications, that would enable secured digital cable broadcast from several thousand operator's’ sites. So, this is not for the end-user, but it's for the distribution system of the Chinese Digital TV adoption. Over the next five to eight years, we believe the inevitable switch from analog to digital as well as the interface [open] broken (ph) business model will force a more rapid transition to open standard space delivery model which will provide significant opportunity for SCM.

在此背景下，我們與全球最大的條件接收技術供應商NDS建立了策略合作夥伴關係，將我們的條件接收模組與其開放式視訊安防軟體相結合，為韓國新興的數位有線電視產業打造並完善有線電視系統。此外，我們也與韓國本土條件接收供應商ATRI簽署了協議，為其在韓國市場開發的條件接收模組提供通用介面技術。中國也在快速建構開放系統空間的數位有線電視基礎設施。 2002年，我們與中國條件接收供應商數位電視產業聯盟達成協議，為其高階應用提供安全的技術，從而支持數千家營運商站點進行安全的數位有線電視廣播。因此，這並非面向終端用戶，而是針對中國數位電視普及的分送系統。在未來五到八年內，我們相信從類比到數位的必然轉變以及介面[開放]破碎（ph）商業模式將迫使更快地過渡到開放標準空間交付模式，這將為供應鏈管理提供重大機會。

Turning out *now to our second market opportunity, PC Security Systems based on smart cards and smart card readers. Over the last year, SCM has been a significant supplier of smart card readers and reader technology to the US government, working with government [Inaudible] system indicators*, it sounds like the system indicators and other strategic partners including Schlumberger, Northop Grumman, and active card, we’ve was supplied over 1m smart card readers for the Department of Defense, Common Access Card program. Under this program, the DOD intendts* to provide a personnel id card for secured network and physical access to more than 4m hectares due to military personnel. This program is well underway and the DOD may expand the deployment up to 13m (ph) non-active personnel contractors and dependence.

現在我們來談談第二個市場機會：基於智慧卡和智慧卡讀卡機的PC安全系統。過去一年，SCM一直是美國政府智慧卡讀卡機及讀卡機技術的重要供應商，與政府系統指標（聽起來像是系統指標）以及其他戰略合作夥伴（包括斯倫貝謝、諾斯羅普·格魯曼和Active Card）合作，為美國國防部的通用存取卡（Common Access Card）專案提供了超過100萬台智慧卡讀器。根據該項目，國防部計劃為軍事人員提供人員識別卡，用於安全存取超過400萬公頃的軍事網路和物理區域。該工程進展順利，國防部可能將部署範圍擴大到多達1,300萬名非現役人員、承包商和相關人員。

To date, only about 2m cops cards* have yet been deployed, even so, this is the largest deployment of any TKI program in history. Based on our strong participation in the Common Access Card program and on our involvement in the smart card reader deployment on the global basis, SCM gained market share in the last year and *unseating [Inaudible] as the number one supplier of in the world of leaders for smart card based security applications. We expect this internal assessment of our market position to be verified by the market research from [InaudibleFoss and Sullivan] in the next several weeks, when they publish their*ed annual rankings. In the near term, we expect to ship, as Andrew already indicated that fewer smart card readers for the Common Access Card program as forecast provided by our partners indicate that the next six months will have fewer *project [Inaudible] deployments, than in previous periods. It is expected when dealing with government customers that there will be fluctuations in the business and so this is not a surprise. SCM business relies not on one customer, but on diverse*d end markets to provide balance and favorable revenue streams.

迄今為止，僅部署了約200萬張警用卡*，即便如此，這仍然是TKI專案史上規模最大的部署。憑藉我們在通用存取卡專案中的積極參與以及在全球範圍內智慧卡讀卡機部署方面所做的努力，SCM在過去一年中獲得了市場份額，並*取代[Inaudible]成為全球領先的智慧卡安全應用供應商。我們預計，[InaudibleFoss and Sullivan]將在未來幾週內發布年度市場排名，屆時將驗證我們對自身市場地位的這種內部評估。短期內，我們預計發貨量將有所下降，正如Andrew已經指出的那樣，根據我們合作夥伴提供的預測，通用訪問卡項目的智能讀卡器數量將減少，這意味著未來六個月*項目[Inaudible]的部署量將低於以往水平。與政府客戶合作時，業務波動在所難免，因此這種情況並不令人意外。供應鏈管理業務不依賴單一客戶，而是依賴多元化的終端市場來提供平衡和有利的收入來源。

Within the government sector, there are additional smart card initiatives on the horizon that could further expand our opportunities in the US. For example, the transportation work ID card or [Inaudible] initiative of the US transportation security administration to secure all transportation areas, and this is [Inaudibleprogram] already]l other decided and over the next three years, 15m workers at airports and sea ports, railways and bus lines will be issued identification cards to provide authentication and automized (ph) access to sensitive areas and data. Smart card and pilot programs for the [Inaudible] beginning and SCM is actively engaged in this pilots in *pursuit [Inaudible] of this business. Beyond the government sector smart card programs have been deployed in less dramatic numbers, but they continue to go forward. In the enterprise, there is *grlowing (ph) recognition that network access must be made secured to protect data and businesses. SCM is working closely with companies like Hewlett Packard, Sun and Microsoft not only to incorporate support for smart cards in their products, but also to implement smart card based systems for the internal security in these as well. These internal programs are expected to remain in pilot phase until budget constraints lighten on security issues increase. For SCM, the expansion of IT purchase will signal a significant opportunity to capitalize on the relationships that are all right in place.

在政府部門，還有一些智慧卡計畫正在醞釀中，預計將進一步拓展我們在美國的業務機會。例如，美國運輸安全管理局（TSA）的交通運輸工作身分證（或稱[聽不清楚]計畫）旨在保障所有交通運輸區域的安全。該計畫已獲批准，未來三年內，將為機場、港口、鐵路和公車路線的1500萬名工作人員發放身分證，用於身份驗證和自動訪問敏感區域和數據。智慧卡試點計畫已啟動，SCM正積極參與這些試點項目，以期獲得該領域的業務發展。在政府部門之外，智慧卡計畫的部署規模雖然不如政府部門那麼迅猛，但也持續進行中。在企業領域，人們越來越認識到，必須確保網路存取安全，才能保護資料和業務。 SCM正與惠普、Sun和微軟等公司緊密合作，不僅致力於在其產品中整合智慧卡支持，還致力於在這些公司內部部署基於智慧卡的安全系統。這些內部專案預計將繼續處於試點階段，直到預算限制有所緩解，安全問題增加。對於供應鏈管理而言，IT採購的擴張將帶來一個重要機會，可以充分利用現有的良好關係。

Finally, in the financial sector, we continue to work both directly with customers and also *through partners, such as Schlumberger to supply banks with smart card readers for their emerging electronic service offerings. The costly applications in infrastructure for smart cards, they are still are lagging the volumes we have shipped to institutions such as American Express and Citibank, are still quite small. To ensure our ability to address these opportunities as they take shape, we continue to work on next generation technologies such as Compact Chlip (ph) and the Biometric *rleaders. So, whether we are talking about opportunity in the government sector, which is happening now, or in the enterprise and financial sectors which are more long-term opportunities,. SCM is extremely well positioned to capitalize on increasing demands for smart card reader technology. Our Power Action*products and technology, our experience in market share leadership and our strong partnerships engrossed to smart card industry prepare (ph) us to win smart-card reader business as these market opportunities develop.

最後，在金融領域，我們繼續直接與客戶合作，並透過斯倫貝謝等合作夥伴，為銀行提供智慧卡讀卡器，以支援其新興的電子服務產品。智慧卡基礎設施應用成本高昂，目前我們向美國運通和花旗銀行等機構的交付量仍然很小。為了確保我們能夠抓住這些正在形成的機遇，我們將繼續致力於下一代技術，例如緊湊型晶片（Compact Chlip）和生物識別技術。因此，無論我們談論的是政府部門的當前機遇，還是企業和金融領域的長期機遇，SCM 都擁有得天獨厚的優勢，能夠充分利用對智慧卡讀卡器技術日益增長的需求。我們的 Power Action 產品和技術、我們在市場份額領先方面的經驗以及我們與智慧卡產業建立的牢固合作夥伴關係，都使我們能夠在這些市場機會發展之際贏得智慧卡讀卡機業務。

Finally, let's take a look at the digital media and media business, the products we sell under the Dazzle brand. We experience an increasing competition in this consumer durable market over the last year, which was intensified, but difficult economic environment, in spite of this, the performance of our digital media and video division was strong *by any measure. International *Rrevenues increased by 5% for the year and by 22% in the fourth quarter. At the same time, we took significant costs out of the business, and aligned our market activities to support one brand, Dazzle. We also introduced several new next-generation hardware and software products for both digital photo and media applications during the 2002.

最後，讓我們來看看數位媒體和媒體業務，也就是我們以Dazzle品牌銷售的產品。過去一年，我們在這個耐用消費品市場面臨日益激烈的競爭，經濟環境也因此變得更加艱難。儘管如此，我們的數位媒體和視訊部門的業績依然強勁，*無論從哪個角度來看都是如此。 *全年國際營收成長了5%，第四季更是成長了22%。同時，我們大幅削減了業務成本，並調整了市場活動，以支持Dazzle這個品牌。此外，我們在2002年也推出了幾款用於數位照片和媒體應用的新一代硬體和軟體產品。

The Dazzle brand continued to hold and finding key categories and we ended the year as the market-share leader in video capture and digital media readers and secured the number-two spot into emerging category of DVD creation software. As you know, at the beginning of 2002, we announced our intention to separate the digital media and video division [towards] sale, [more] spin-off in order to fully focus in our security business for digital DV and PC platforms in the first half of the year, we legally separated the business and haves successfully separated it internally for management and day-to-day business perspective as well. The state of the capital markets has made it difficult. We accomplished a lot phase of this separation to actually divestiture (ph) . We will continue to monitor the receptivity of the markets, and intend to retain this business until we can divest it in such a way that maximizes shareholder value.

Dazzle品牌持續保持領先地位，並在關鍵品類中佔據領先地位。年底，我們在視訊擷取和數位媒體讀取器領域保持市場佔有率領先，並在新興的DVD製作軟體領域穩居第二。如您所知，2002年初，我們宣布計劃將數位媒體和視訊部門分拆出售，以便全力專注於數位DV和PC平台的安全業務。上半年，我們已完成法律上的業務分拆，並在內部管理和日常業務方面也成功完成了分拆。資本市場的狀況給分拆帶來了困難。我們已完成分拆的大部分工作，即將正式剝離。我們將繼續關注市場反應，並計劃保留該業務，直到找到能夠最大限度提升股東價值的剝離方式。

To summarize, and as a final note it is important not to forget that unlike many companies in today's environment get someSCM* benefits from a strong financial position. In spite of the challenging economy, we are pursuing *preserving our cash and today have a cash position of over $56m. We have noted that, *we have the the after-means to sustain our operations in support investments in opportunities that kind of,can* realize significant shareholder value in the future. We are focused on significant opportunities across all markets. Smart card based [legal] security for digital TV and PC platforms and virtual media and video added in products for the consumer markets. These are [Inaudible] accessed*opportunities exist both now and over the long-term. And we are committed to profitably capturing these opportunities with illustrative filing*industry defining technologies, strong partnerships, and market-share leadership. Given our strong market position and balance sheet, we believe the company's stock remain significantly on the*under valued. We continue to evaluate stock re-purchase efforts and we'll remain focused on improving shareholder value while balancing our desire to [preserveInaudible] cash assets. Now I would like to turn the call over to the operator for questions and answers.

總而言之，最後需要強調的是，與當今環境下許多公司不同，我們憑藉著穩健的財務狀況，在供應鏈管理（SCM）方面獲益匪淺。儘管經濟情勢嚴峻，我們仍致力於保留現金，目前現金儲備超過5,600萬美元。我們注意到，我們擁有足夠的資金來維持運營，並支持對未來可能為股東創造顯著價值的投資機會。我們專注於所有市場的重要機遇，包括數位電視和PC平台的智慧卡安全解決方案，以及面向消費市場的虛擬媒體和視訊附加產品。這些機會現在和未來都存在。我們致力於透過具有示範意義的業界領先技術、強大的合作夥伴關係和市場份額優勢，實現這些機會的獲利成長。鑑於我們強大的市場地位和穩健的資產負債表，我們認為公司股票目前仍被嚴重低估。我們將繼續評估股票回購計劃，並將繼續專注於提升股東價值，同時兼顧保留現金資產的需求。現在，我將把電話交給接線員，供大家提問。

Thank you. Ladies and gentlemen, if you would like to register a question please press the one followed by the four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. If you are using a speakerphone, please lift your handset before entering your request. One moment please for the first question. Our first question will come from the line of Robert Stone with SG Cowen. Please go ahead.

謝謝。女士們、先生們，如果您想登記提問，請按電話上的1，再按4。您會聽到三聲提示音，表示已收到您的要求。如果您的問題已得到解答，並且您想取消登記，請按1，再按3。如果您正在使用免持通話，請在提問前拿起聽筒。請稍等片刻，我們開始第一個問題。第一個問題來自SG Cowen的Robert Stone先生。請開始。

Good morning gentlemen. Andrew, I wonder if you would go into a little more detail on the inventory write-off? If revenues for the year essentially tracked above expectations, what caused you to end up with inventory that needed write-off?

各位先生早安。安德魯，我想請你詳細解釋一下存貨減損的情況？如果全年的收入基本上超出預期，是什麼原因導致最終出現了需要減損的存貨？

Hi Rob. Couple of reasons behind that. First of all, looking at the DMV division, we [Inaudible] evaluating various products in that division [Inaudible] and during the fourth quarter, we again exited out of certain areas of the business that were low gross margin to us and took some charges of associated with that. We also, based upon our sales forecast moving forward, took a look at the inventory holdings that we had and because our sales forecasts moving forward particularly in Q1 are at the lower end, we decided [Inaudible] to take some increased charges to reflect the fact that inventory overhang was going to be little bit hard than we have initially anticipated. The most of the stuff relates to exiting from lower gross margin products that we no longer wish to focus on that forward-looking view of inventory holdings, vis-a-vis sales forecasts.

嗨，羅布。這背後有兩個原因。首先，就車輛管理部門而言，我們（聽不清楚）評估了該部門的各種產品（聽不清楚），並在第四季度再次退出了部分毛利率較低的業務領域，併提了一些相關費用。此外，根據我們對未來銷售的預測，我們審視了庫存狀況。由於我們對未來銷售的預測，特別是第一季的預測，較為保守，因此我們決定（聽不清楚）增加一些費用，以反映庫存積壓問題比我們最初預期的要嚴重一些。大部分原因都與我們退出低毛利率產品有關，我們不再希望繼續關注這些產品的銷售預測，而是著眼於未來的庫存狀況。

And with respect to the Digital TV, I guess the write-off was about half and half between each division?

至於數位電視方面，我猜想各部門的損失大概各佔一半吧？

Yeah, that is $2m each, correct.

是的，每人200萬美元，沒錯。

Was the exercise similar in Digital TV or is there any color you can add there?

數位電視的練習是否類似？或者說，這方面還有什麼可以補充的嗎？

Similar exercise but with some inventory holdings we have for products, which there was no longer demand for those products in the marketplace. So, we took a write down associated with those products on the security side and then again taking a look at our total holdings, vis-a-vis, the sales forecast, we took an increase of reserves associated with that.

類似的操作也適用於我們持有的部分庫存產品，這些產品在市場上已不再有需求。因此，我們在證券方面對這些產品進行了減值，然後再次結合銷售預測，審視了我們的總庫存，並據此增加了相關準備金。

Okay. You know that expenses were above your plan. I think it was a couple of million dollars or something like that $1m to $2m. Can you provide some color there as to and this was regular operating expenses, not the unusual charges? So, what lead to the higher than expected expense levels?

好的。您知道支出超出了您的計劃。我記得大概是幾百萬美元，或差不多100萬到200萬美元。能詳細說明一下嗎？這些是常規營運支出，而不是特殊費用。那麼，是什麼原因導致了高於預期的支出水準？

A couple of main buckets (ph) expenses, Rob. First one is we took -- we had an underlying increase level of spend in those revenue level, which is particularly [Inaudible] side where a proposition of the expenses that are variable in nature and fluctuate directly with the revenue levels. So, the fact that we recorded higher revenues will not mean that we had higher revenues -- higher expenses for time in to support that. We also -- again across our customer base took a look at accounts receivable balances and also took some incremental charges associated with provisions for bad debt.

羅布，主要有兩方面的支出。首先，我們考慮了收入水準的提升，支出水準也隨之成長，尤其是在那些性質可變、與收入水準直接相關的支出方面。因此，收入增加並不意味著我們投入更多時間來支持收入成長所需的支出也相應增加。此外，我們也查看了所有客戶的應收帳款餘額，並提列了一些與壞帳準備相關的額外費用。

Okay.

好的。

That's kind of two areas, which accounted for that increased [Inaudible] expenses coming [Inaudible] over the 13.8m expectation.

這主要體現在兩個方面，導致支出增加，超過了預期的 1380 萬。

Okay, in terms of the additional progress with Premiere Rob, roughly how much did that contribute in 2002?

好的，就 Premiere Rob 的額外進展而言，這在 2002 年大約貢獻了多少？

Yeah, as of we have announced earlier, we signed an agreement on September with Premiere and we have shipped roughly around a million dollar worth of products in 2002.

是的，正如我們之前宣布的那樣，我們在9月份與Premiere簽署了一項協議，並且在2002年我們已經交付了價值約100萬美元的產品。

Okay. Given your understanding of the -- and I recognize that you have given guidance so far only for Q1. I assume you are not prepared the guide for the full-year overall but just to get a sense of what a large operator might contribute as the Digital TV platforms go to an open system. What do you estimate is the annual market opportunity for customer like Premiere for your access modules?

好的。鑑於您對…的理解—我知道您目前只提供了第一季的業績指引。我假設您還沒有準備好全年的業績指引，但我想了解一下，隨著數位電視平台向開放系統轉型，大型營運商可能會做出怎樣的貢獻。您估計像Premiere這樣的客戶，使用您的接入模組，其年度市場機會有多大？

Any forecasts, I mean, we are not giving any specific forecasts but even if you look in the markets itself, it is very difficult to forecast. The fact is that companies like Premiere, it's the German pay-TV operator, would like to target about roughly half a million new subscribers per year. So, that's the range, now of course we have it, -- we are still in a transaction phase, so they have, of course still some of the old, so called embedded box concepts, while they are opening up for the consumer brands like, I mentioned before Nokia, Panasonic and the consumer brands can only enter this market with our modules. So, this is a transition, so to how much of that new subscribers who will get for 2003, it's difficult to say.

任何預測，我的意思是，我們不會給出任何具體的預測，即使你觀察市場本身，也很難做出預測。事實上，像德國付費電視業者Premiere這樣的公司，希望每年新增約50萬用戶。所以，這就是目前的預期範圍。當然，我們目前仍處於交易階段，所以他們仍然保留著一些舊的、所謂的嵌入式機上盒概念，同時也在向消費品牌開放，例如我之前提到的諾基亞、松下，這些消費品牌只能透過我們的模組進入這個市場。所以，這是一個過渡階段，在2003年能新增多少用戶，很難說。

So, is it, limited to new subscribers or does the fact that several well-known brands are entering the market suggest that they see some opportunity to move the units to consumer electronics channels. It is, some of that opportunity to convert existing customers or does it depend entirely on new subscriber growth?

那麼，這種成長僅限於新用戶嗎？還是說，幾個知名品牌進軍市場顯示他們看到了將產品推向消費性電子通路的機會？這種成長的部分機會是來自現有客戶的轉化，還是完全取決於新用戶的成長？

It's clearly new subscribers, because the installed base of subscribers, which in fact have boxes as our platforms, which are more or less owned by the, which are owned by the operator, the pay-TV operator they will not be replaced. In fact the pay-TV operator could not even afford to replace them. The consumer [Inaudible] to do this, but without any charge. So, the new open Set-Top-Box (ph) business model is always for new subscribers.

顯然，這主要面向新用戶，因為現有用戶群（他們使用的機上盒實際上是我們的平台）或多或少歸運營商（付費電視運營商）所有，這些機上盒不會被更換。事實上，付費電視業者甚至無力負擔更換這些機上盒的費用。消費者可以免費更換機上盒。因此，新的開放式機上盒（ph）商業模式始終面向新用戶。

Okay. Thanks very much.

好的，非常感謝。

Thanks.

謝謝。

Your next question will come from the line of Thomas Becker with HSBC Trinkaus & Burkhardt, please go ahead.

您的下一個問題將來自 HSBC Trinkaus & Burkhardt 的 Thomas Becker，請繼續。

Yes, good morning guys, good morning Robert, good morning Andrew. Just to elaborate a little more on the cost side, we saw that G&A costs rose around 50% in Q4, is this due to, you just said provision for bad debt? That's first question. Second question is that, the outlook for Q1 is really muted and when we look into the full-year 2003, is it possible that we end up there with decline in sales compared to 2002? Third question is, do you expect any more charges on the separation of businesses for legal fees or something like that and overall to get back to the costs, just wondering what will be the cost run rate something like that, will it be in the range of $30m to $50m for each quarter for 2003?

是的，各位早安，羅伯特早上好，安德魯早安。關於成本方面，我想再詳細解釋一下。我們看到第四季的一般及行政費用增加了約50%，這是因為您剛才提到的壞帳準備金嗎？這是第一個問題。第二個問題是，第一季的前景非常黯淡，展望2003年全年，銷售額是否有可能比2002年下降？第三個問題是，您是否預期在業務分拆過程中會產生更多費用，例如法律費用或其他類似費用？回到成本方面，我想知道2003年每季的成本運行率是多少，是否會在3000萬美元到5000萬美元之間？

Hi Thomas, it's Andrew.

嗨，湯瑪斯，我是安德魯。

Hi Andrew.

你好，安德魯。

It is (ph) one by one.

它是（ph）一個接一個地。

Yeah.

是的。

In terms of the G&A, yeah the bulk of the increase quarter-on-quarter is down to the increases in [Inaudible] as through bad debt. In terms of 2003, the year [Inaudible] of indicated with, because of visibility, at this point we are not prepared to give guidance for the full year, we are giving guidance for the first quarter, at this point. In terms of the separation related costs, we do expect to see some small legal charges coming through on the separation costs, but we don't see it as a significant item moving forward and then in terms of the underlying expense base, yeah, we see it kind of the expense base moving forward in the kind the $13.5m to $14.5m range.

就一般及行政費用而言，是的，季度環比增長主要歸因於壞帳增加。至於2003年，由於目前情況不明朗，我們暫時不提供全年業績指引，目前僅提供第一季業績指引。關於分離相關成本，我們預計會產生一些小額法律費用，但我們認為這並非未來影響較大的項目。至於基本支出基數，我們預期未來支出基數將在1,350萬美元至1,450萬美元之間。

Okay. Probably just one follow-up, is it your target to breakeven on a full-year perspective for 2003 on operating income level?

好的。可能還有一個後續問題，你們2003年全年的營業收入目標是達到損益兩平嗎？

Again, at this point, we are not offering guidance for full year.

再次重申，目前我們不提供全年業績指引。

Okay. Thank you guys.

好的，謝謝大家。

Thanks.

謝謝。

Have a nice day.

祝你今天過得愉快。

Ladies and gentlemen, if there are any additional question, please press the one followed by the four at this time. Your next question will come from the line of Adrian Hopkinson with West LB Panmure. Please go ahead.

女士們、先生們，如果還有其他問題，請按1和4。下一個問題將來自西線潘穆爾隊的阿德里安·霍普金森。請開始提問。

Hi, good morning guys. Can I return with a question on the balance sheet on the liability side, the accrued expenses and other liabilities, which increased over the year from 15 to 37. Could you give us some details on what is happening there and perhaps you could also -- you mentioned the $700,000 for the repurchase of stock, and I notice that the number of shares outstanding increased to 15.6m, I mean, generally speaking is there more scope to repurchase stock given your cash situation and the current level of the share price?

大家好，早安。我還有一個關於資產負債表負債方的問題，其中應計費用和其他負債從15增加到37。能否詳細解釋一下這部分的情況？另外，您提到了70萬美元用於股票回購，我注意到流通股數量增加到了1560萬股。我的意思是，考慮到貴公司的現金狀況和目前的股價水平，是否還有回購股票的空間？

Hi Adrian, it's Andrew. In terms of the increase in accrued on the balance sheet, most of those are flat and that increases were flat. The increases and charges are taken in terms of inventory, in terms of the charges that we have taken on things like reserves of bad debt and also some of these in frequent charges. They haven't [Inaudible] cash; they had basically been accrued for expenses coming up over the next few months. So, that's why, and [Inaudible] , which is widely accrued number itself has gone up. In terms of the share buyback, we did enter the market during the fourth quarters. You have indicated, we did spend approximately $700,000 on buying back shares. This all are indicated in this comments, we are going to continue that program given the current evaluation of the company and the price of the shares.

嗨，Adrian，我是Andrew。關於資產負債表上應計項目的增加，大部分項目持平，增幅也基本持平。這些增加和費用主要來自存貨、壞帳準備金等項目，以及一些經常性費用。這些費用並非現金，而是為了應對未來幾個月即將發生的費用而提列的。因此，應計項目本身有所增加。關於股票回購，我們在第四季確實進行了回購。正如您所提到的，我們花費了大約70萬美元用於股票回購。以上資訊均已在評論中提及，鑑於公司目前的估值和股價，我們將繼續執行該計劃。

Is there, I mean do you have any particular target amount, which you would consider spending for the buyback, I mean 700,000 is not very significant against the cash mentioned, which you have?

我的意思是，你們有沒有一個具體的目標金額，打算花多少錢來回購？我的意思是，70萬相對於你們擁有的現金來說並不算多。

That's true. I think they are all pretty strict rules, [Inaudible] places to have a company in the US markets in particular to have a company can buyback shares and there are limitations to what the company can buy. Given that, we will stay aggressive in that marketplace subject to those rules and will, once the evaluation is attractive for us, we will go and we will actively repurchase shares.

沒錯。我認為這些規定都相當嚴格，尤其是在美國市場，公司回購股票有許多限制，回購範圍也受到限制。有鑑於此，我們將在遵守這些規定的前提下，繼續積極參與該市場。一旦估值對我們有利，我們就會主動回購股票。

Just as a general followup, could you give us a brief run through on what your appreciation is of the shareholders structure of [Inaudible] at the moment? Do you keep records of the level of share holdings by in [Inaudible] and management overall?

作為後續問題，能否簡單介紹一下您對[聽不清楚]目前股東結構的看法？您是否記錄了[聽不清楚]及其管理階層的整體持股比例？

Yeah, we have records of that.

是的，我們有相關記錄。

Is it a significant share, which is owned by employees and management?

這是員工和管理階層持有的相當大一部分股份嗎？

No.

不。

As far as Q1 is concerned, which is a question of the European conditional access modules, do you think that Q1 is a temporary low or is it some; I mean you refer to the cash problems of the cable operators and I noticed that there are mergers going through in Italy and Spain at the moment. Is that a significant factor as far as the Q1 level of business?

就第一季而言，也就是歐洲條件接收模組的問題，您認為第一季的低迷是暫時的，還是另有隱情？我的意思是，您提到了有線電視營運商的現金流問題，我注意到目前義大利和西班牙正在進行一些併購。這對第一季的業務水準有顯著影響嗎？

No. It is not, we are not directly affected by the large operators because the large operators have not deployed except the Premiere (ph) and Germany, but the other operators have not agreed to deploy open systems yet. So, we are not [Inaudible] , I think that's of cost, the overall scenario as I mentioned before in the European operator and [Inaudible] of the industry is not good. So, the financial, there is no financial strength and hence there is consolidation going on and that have of course has an impact also in our market sequence, which is the smaller businesses and subscriber business models. So, you know, we do not see, -- the major breakthrough happening of short-term. So, the changes in the industry don't affect the short-term, but it is the general economic climate, which is causing you the slow down and a temporary law in business with the US ministry of defense. Got the [Inaudible] correct.

不，並非如此。我們並未直接受到大型業者的影響，因為除了Premiere（音譯）和德國之外，其他大型業者尚未部署開放系統，而其他業者也尚未同意部署開放系統。所以，我們不會[聽不清楚]，我認為這與成本有關，正如我之前提到的，歐洲營運商和整個產業的整體情況並不樂觀。因此，在財務方面，缺乏財務實力，所以正在進行整合，這當然也會對我們的市場格局產生影響，也就是影響小型企業和用戶業務模式。所以，你知道，我們看不到短期內會出現重大突破。因此，產業的變化不會影響短期，但導致業務放緩的是整體經濟環境以及與美國國防部相關的臨時性商業法規。 [聽不清楚]說得對。

Correct. Can I just ask, I am sorry to ask a lot of questions in a row, but perhaps I could just ask about the tax charge, which for this year was 13.8m, which seems quite a large charge given the operating performance and I know you referred to a 3m or so number, which you reckoned that you would never tax receivable which you wouldn't get. Is that included in that 13.8 or can you perhaps give us some reason why the tax charge is so high?

好的。請問我能否問一下，很抱歉一口氣問這麼多問題，但我只想問一下關於稅費的問題。今年的稅費是1380萬，考慮到經營業績，這筆費用似乎相當高。我知道您之前提到過大約300萬的應收帳款，您認為這部分款項永遠無法徵稅，因為您也收不到這部分款項。這部分款項是否包含在1380萬的稅金裡了？或者您能否解釋一下為什麼稅費這麼高？

I can answer them. The main reason for the tax charge things are high is the impairment of the deferred tax affect (ph) that we took in the third quarter.

我可以回答這些問題。稅負較高的主要原因是我們在第三季提列的遞延所得稅影響（ph）的減損。

I see.

我懂了。

And consequently because we took the impairment with them, therefore booking a tax provision for Q4 as well and you are going to see that moving forward. The tax receivables that are doing well on the collectible are shown through the other infrequent charges line, not the tax line.

因此，由於我們承擔了這些減損損失，所以也在第四季度提列了稅項準備，您將在未來看到這種情況。收款情況良好的應收稅款列示在其他非經常性費用項下，而非稅項下。

Okay. Thank you very much.

好的，非常感謝。

Thank you Adrian.

謝謝你，艾德里安。

There are no additional questions at this time. Mr. Schneider I will turn the call back over to you.

目前沒有其他問題了。施耐德先生，我把電話轉回給您。

Okay, thank you operator. In summary, we are confident in our ability to leverage our strong financial and strong market position to take advantage of the market opportunities on the long-term. Thank you for joining us today.

好的，謝謝接線生。總而言之，我們有信心憑藉自身雄厚的財力和強大的市場地位，長期掌握市場機會。感謝您今天收聽我們的節目。

Ladies and gentlemen that does conclude you conference call for [Inaudible] . CONFERENCE CALL ENDS AT THIS POINT.

女士們、先生們，本次電話會議到此結束。 [聽不清楚]。電話會議到此結束。