Kopin Corp (KOPN) 2002 Q4 法說會逐字稿

Good day, everyone, and welcome to the Kopin Corporation fourth quarter 2002 financial results conference call. Today's call is being recorded. Please let me remind everyone that a replay of this conference will be available from 8:00 pm eastern through Wednesday, February 19th, by dialing 719-457-0820 and entering the confirmation code 431274. That number again is 719-457-0820 and enter the confirmation code 431274. You may also access an archived version of the call on Kopin's website at www.kopin.com. With this, from the company is the president and Chief Executive Officer, Dr. John C.C. Fan, and the Chief Financial officer, Mr. Richard A. Sneider. At this time, I would like to turn the call over to Mr. Sneider. Please go ahead, sir.

Good afternoon everyone, and thank you for joining us for Kopin's fourth quarter 2002 conference call. During today's call taking place on Thursday, February 13, 2003, we will make forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on the company's current expectations, projections, beliefs, and estimates, and are subject to a number of risks and uncertainties. Potential risks include, but are not limited to, demands for our CyberDisplay and HBT and CyberLite products, market conditions, the company's ability to wrap up production in its manufacturing facilities, and other factors discussed in the company's 10-K for the year ended December 31, 2001, and other documents on file with the Securities and Exchange Commission. The company does not undertake any duty to update any statements made during today's call. If you have not received a copy of today's news release, it is available on our website, www.kopin.com, or you can contact Sharon Merrill Associates at 617-542-5300 and a copy will be sent to you.

Turning to our financial results, fourth quarter revenue was $16.5 million, up 7.15 year-over-year and down 24.7% sequentially, essentially in line with guidance we provided in our third quarter news release and conference call on October 24th. This reflected historical seasonality in the wireless and similar track markets, inventory adjustments at some of our customers' facilities, and the unsettled supply agreement we had with one of our HBT customers, Skyworks Solutions. III-V revenues in the fourth quarter of 2002 were $5.6 million, down 29.8% from Q4 of 2001, and nearly 42.8% from 2002 third quarter revenue of $9.9 million. CyberDisplay revenue for the fourth quarter was 10.9 million, up 47.3% year-over-year and down 9.7% sequentially. This frightful decline is due to normal seasonality in consumer electronics markets. In the fourth quarter we continued to invest aggressively in new generation HBT and CyberLite products and prepare our CyberLite blue LED for volume production. For the full year, total revenues were 76.8 million compared with 51.9 million in 2001, an increase of 48%. III-V revenues in 2002 were 32.7 million compared with 28.3 million in 2001, an increase of 15.4%. CyberDisplay revenues were 44.1 million in 2002 versus 23.6 million a year ago, an increase of 87.2%. Net loss under Generally Accepted Accounting Principles, or GAAP, were for the fourth quarter 15.1 million, or $0.22 per share. This compares with a net loss of 7.1 million, or $0.10 per share a year ago, a net income of .6 million, or $0.01 per share in the third quarter of this year. During the fourth quarter Kobin sold 150 thousand shares of Micrel stock, generating 1.9 million in proceeds and a loss of 2.5 million based on a carrying cost of $29.31 per share. In December -- on December 31, 2002, Micrel shares were trading at $8.98. Based upon the company's review, Kopin believes the price Micrel shares is other than temporarily impaired and accordingly recorded a write down in the fourth quarter of 10.2 million in the statement of operations. Excluding these items, Kopin's fourth quarter 2002 adjusted net loss was 2.4 million, or $0.03 per share compared with 6.5 million, or $0.09 per share in Q4 of 2001. For 2002, Kopin's GAAP net loss was $31.9 million, or $0.46 per share compared with the GAAP net loss of 22.7 million, or $0.34 per share in 2001. Excluding the 12.6 million representing the accumulative effect or change in accounting required by the adoption, Statements of Financial Accounting Standards Number 142, goodwill, and other intangible assets, the loss of 12.8 million related to our investment in Micrel, Kopin's adjusted net loss was 6.5 million, or $0.09 per share. This compares with an adjusted net loss of 40.6 million, or $0.61 per share in 2001 excluding the Micrel related items and impairment charge and the effect of the accounting change. At December 31, 2002, Kopin still owned approximately 500 thousand shares of Micrel valued at approximately 4.5 million. In total, Kopin has received approximately 12 million in proceeds from the sale in Micrel stock. Cost-of-goods-sold in the fourth quarter of 2002 represented 75.2% of product revenue verses 101

and 72% in Q3. The decrease is related to -- the increase as a percent of sales is related to

absorption from reduced HBT lines. Research and Development expense was 31% of the revenue in the fourth quarter. The increase in R&D is related to higher spending for the development of Kopin CyberLite LED and GAIN-HBTs. We expect R&D expense to turn down slightly in the fourth quarter as we continue our investment in CyberLite LED.

in general

administrative expenses were 11% of revenues in quarter. We would expect FGA to be in the range to be in the range of 12 to 17% of revenues in Q1 of 2003. As of December 31, 2002, we had cash and marketable securities of 118 million compared with 106 million at December 28, 2002. For the full year, we generated approximately 12 million in cash-flow from operating activities, giving Kopin tremendous financial strength. DSOs are running at approximately 40 days. Company wide fab utilization is currently at 50%. CapEx for the year was approximately 5 million. For 2003, expect CapEx to be in the range of 7 to 10 million. Depreciation and amortization was approximately 12 million for the year. As the percentage of total 2002 revenues, Skyworks solutions was 26%, Panasonic was 13%, JVC was 15%, and Samsung Electronics was 25%. Looking quickly at our guidance in the first quarter of 2003, despite the traditional seasonality, or end market in

we expect top line growth of at least 5% sequentially in Q1, with CyberLite generating roughly 1 million. Recently we have completed a written supply agreement of HBTs with Skyworks Solutions and our CyberLites have been qualified by a Q1 Asian LED customer. John will elaborate on those two matters shortly. We are starting ramp up volume, production of CyberLite, looking quickly at our guidance for the first quarter of 2003. With that I will turn John over -- the call over to John.

Thank you, Rich. The fourth quarter concluded a successful year for Kopin, and there are several key matters I would like to take you from this today's call. Our first, on the CyberLite -- first let's

the CyberLite. One set of our -- I am sorry. First let me put the year 2002 in perspective. Our fourth quarter results were in line with our first projections and we concluded a successful year for Kopin. Certainly a year 2001 -- 2002 had been challenging the technology companies and Kopin's no exception.

bear focus in overcoming these challenges. We recorded second highest annual revenue level in the company's history. We introduced new

products, including an entire new product line, CyberLite. This new product will be instrumental to Kopin's growth in the coming year. With the

our adjusted new loss in year 2002 generates near about 12 million in cash-flow for operating activities and through our cash increments to

and have no debt. This

capital for continued developing our new product based our new and proprietary

technologies. Now allow me to discuss separate on each of our three product lines. On the CyberLite, this is our third and newest product platform.

lighting is our next generation in lighting. Eventually it will replace all the general lighting and it will be a very big business. At this point, due to the exciting technology for significant number of hardware applications including wireless handsets, digital still cameras, camcorders, portable game systems, laptops, PDAs, and other industrial applications. The fastest growing

of this market are using blue, green, and white LEDs. Manufacturers are looking for several important features. High

, slow operating voltage, and high reliability and high electrostatic

resistance. The

CyberLite LEDs present industry leading features for those categories. We can operate less than 2.9 volts at

amps operating current, and

commercially available LEDs require 3.3 volts or higher, and all of our LEDs have their high

resistance. So therefore, I -- our CyberLite should present much desired properties. And they are based on our new NanoPocket process. NanoPockets are minute

. About only about 50 nanometers across, and two nanometers deep. And they allow much in proved LED operation. We are very

to bring nanotechnology into

production. And we stated, our blue CyberLite LEDs are reasonably qualified by a tier one customer facing Asia. These product qualification is very significant for us. These represent our official rollout of our subplatform and validates our NanoPocket techniques. We are starting to ramp up the LEDs to

this quarter. As Rick had mentioned, with

CyberLite products to contribute at least $1 million in revenue in the current quarter. We are also working very hard in qualify additional t-1 customers and are introducing the

products such as green CyberLite LED chips. It is also important to stress, there is a market for

chips are still growing rapidly. They are about 30% a year according to industry studies. Therefore we believe there are ample room for quite a few players to have defensible products. Now let me turn to our CyberDisplay business. We are delighted with the performance of CyberDisplay, growing in revenue from

33.6 million in 2001 to $41.1 million in 2002. Our market share is about 30% in camcorder. We continue to be very successful in the camcorder market but we still outside higher for this year. Two key goals for Kobin CyberDisplay business in 2003 are; first increase a percentage of revenue derived by sales of color display, which will improve our profitability. And second, customer diversification. Broadening our customer base to spare our known camcorder market share. Throughout 2002 we have been focusing our

color

technology for our CyberDisplay. In early fourth quarter we introduced CyberDisplay 180K. It is a 180 thousand pixels

for each diagonal color

enlarge display. This can be driven by

standard

for Sony and Panasonic. This display is a smaller color display of it's kind, and uses are new color

technology. This display should give Kopin a strong position in the emerging micro display market in digital still cameras and gaming systems. In addition, the 180K display gives our camcorder customers a cost effective upgrade to color without a need to redesign their product. It is important stress our new color suited technology is a major break through for our micro displays. We are in the position to

our portfolio products, especially our color display in the coming months of being additional attractions in digital still cameras and personal entertainment. We are definitely observing a convergence of a entertainment communication computing. This convergence has been talked about for quite a few years, but we are now seeing clear signs. When the band width costs, contents, and

are coming together. Such convergence requires variety of new displays. Especially those have small

factors, full color, low power consumption, inexpensive, and

manufacturability. We intend to certify the market

with our CyberDisplay. We are currently working with several

customers in digital still cameras, gaming, and camcorder markets. In the fourth quarter, let's switch to HBT. We continue development of our new GAIN-HBTs. In late January, announced that they are available for sampling. Gain HBTs are truly the second generation HBTs. They possess all the characteristics that Kopin vertical

all the superior performance. They are the most power -- are power efficient, fastest

,

, and are perfect to meet the high quality requirement

color display handsets.

our customers

some time this year. We also very satisfied with our agreement with

Skyworks Solutions on the supply agreements of HBT wafer. We have always had very strong relationship with both Alpha Industries, Conexant, and Conexant system wireless system, which from Skyworks Solutions. In fact, our relationship Conexant dates back to the early days as part of a

. As you may know, Kopin and

institute the first HBT power transistors for CDMA handsets in 1996. We look forward to continue our long and close relationship. So to recap briefly before we turn the call back to your questions. CyberLite were qualified by a first LED customer and we are starting to ramp

in this quarter. We will continue to work very hard to add additional production customers and with the CyberLite and the

driver for

in year 2003. In our CyberDisplay business, we are focusing on increasing sales of color displays and diversifying our customer base. Our new product in

slated for the coming months as well as our

production of 180K color display will help the customer -- or help the company meet our objectives. We are currently working to obtain a design wing for our

camcorder application. In our HBT business, we are moving forward in our relationship with Skyworks, and we

due to superior

of a new

display enabled wireless handset. We do expect to get designing of some

year 2003. Our

each of the product categories give us confidence that year 2003 will be a successful year for Kopin. As the year progress we look forward to sharing with your our success in achieving each of our operational objectives. We will now like to open the call to your questions.

Thank you, sir. Today's question and answer session will be conducted electronically. If anyone does have a question, just press '*' '1' on your touchtone phone. Once again, that is '*' '1', and we will take our first question from Michael Masdea with Credit Suisse First Boston.

Hi, it is actually

for Michael. A question on your HBT business. Could you give us your expectation for unit growth in the first quarter, and then in the fourth quarter, could you give us what the decline was excluding the impact of Skyworks?

With regard to unit growth, our overall revenue target is an increase of 5%, and that's the guide

provide. With regard to the fourth quarter decline, we really have never broken it out between Skyworks and other companies. We just talk about it as a unit.

OK. All right, thanks very much.

Thank you. And next we move to Kalpesh Kapadia with CE.

Hi, good afternoon guys. fan: Good afternoon.

Rich, can you -- you know, your growth margins held up pretty well despite a big drop-off in your III-V business. What's driving that, and then I have a couple of follow-ups.

The gross margins for display picked up and basically offset the decline in the HBT.

OK. And there was a reshuffling in your operating expense structure. You clearly talked about R&D going up due to investment in CyberLite and SG&A go down. Can you tell us how we should look at going forward. You mentioned there will be slight decrease in R&D and about SG&A would be called at 17%. How do we model going forward in terms of raw dollars for these two areas?

Well, I think historically Q1 SG&A is

our highest because we have a lot of annual meeting costs and all of that good stuff that happens. And so, historically, the number for SG&A is in the 2.5 -- 2.7 million range per quarter. And so we will probably be back into that type of range for Q1,

because of the annual meeting expenses. And you know, R&D is higher. We took

around 20- 25% but we haven't put in quite a bit of effort in for the CyberLite part of the qualifications that we got going on. And that will probably continue into the second quarter, then that -- a lot of those costs will start getting absorbed into costs of sales in Q3 and 4.

All right. And then in terms of your profitability. Please

targets for 80 million or so in operating, break even, and 20 million or so in net EPS

. How does the target change in light of this new business that you

.

Well, it usually

, it really shouldn't change that much. And in fact it should actually improve. Right now we are running quite a number of wafers through, and have been for the last several quarters as part of the CyberLite operations. And the goal is from here on in to start collecting revenues on those. So we are not anticipating big cost increase, at least for the next few quarters, and actually just a lot of the revenue incrementally fall into the bottom lines of the CyberLite.

So your growth margin should have should improve?

Yes.

Should improve...

Yes.

to more contribution on -- from CyberLite?

Absolutely.

And a question for you, John. You were quoted in the New York Times article a couple of days ago. You are gearing up to supply 100 million units for the

. How would it transfer into the revenues, if you were to look at the ASP?

As you well know, the ASP is in the LEDs blue and green, that they are all in tenths of a cents per chip. So you could calculate out. But we are selling to achieve one customer, so we

satisfied with the price.

comment about the early call, early questions about the HBTs ASP. Of course we never really want to talk about

individual customers, but normally ASP goes on

around 10-15% or so on the HBT. It is not a normal and this is still the same for this year.

With the new agreement with your largest customer, is it still -- are in the still magnitude?

We are quite happy with the agreement.

And not giving

who are the 10

customers for the quarter?

The same folks that I mentioned, Skyworks, JVC, and Panasonic and Samsung.

And I would only ask one more, John. When you look at three different business that you have, what are -- you talked about market growth projections for LED being 30%. Clearly you are starting off with a low base, so you are going to outperform the market in that area. What are your expectations for market growth and coping growth empirically for the other two business, HBT and display?

I think that HBT right now, as you well know, the handset business is still -- growing maybe this year, maybe 10%. So I think HBT is outside of two areas. One area of course, we hope that people will design in the

which I think they will. But they will be only giving us a revenue growth for next year, not this year. The second part is very important which we are seeing now is lot more activities in the

, which is the really the LED. And I think these things will be a surprise both

a lot of people. So if it does take off, I think, the HBT can grow so many faster than maybe the handset.

Same in terms of CyberDisplay?

The CyberDisplay, I think the camcorder we actually did wonderful job on camcorder, and especially last year. We don't think that we can get too much more, because you know the rest of the business in many ways are owned by Sony, which makes their own displays. So I think the growth will come from several other areas. They just do cameras, personal entertainment, and it would be mostly all in color display. So if we can get design into that area, I think we

become a much higher growth for us in the second half this year.

And thank you very much, and good luck.

Yes. I think

thank you.

Thank you. Next we move to Earl Lum of CIBC World Markets.

Good afternoon, gentlemen. Couple of quick questions. John, with regards to the CyberLite, you talked about your tier one customer. Can you at least let us know -- are you starting to ship products that is being implemented into handsets, and at this point, do you know of how many models of handsets that maybe utilizing your particular product?

And your question was that, how many of those handsets that are using our new product. We do not have

. We know they are being shipped to somebody. And it's a customer is a tier one customer in Japan, in the Asia that we are shipping to. So we do not know which models they are going into at this point.

And your tier one customer, is that in Japan?

We say Asia.

OK, and as you continue to ramp up your volumes, your gross margins were up because of displays, but can you tell us why? Was there a mix shift that happened in CyberDisplay this quarter that caused the margins to increase?

No, just continued increases in our

during the course of the year, we've done a number of things to improve yields. We do said counts and just a lot of that started off clicking together in Q4.

SO even though your revenues were down sequentially, your margins on that business was actually up substantially. And would you expect that to continue to improve?

Well, I think that clearly, John has indicated that we are looking at introducing in the second half of the year a number of color displays and all of those should be coming out of premium of the current monochrome, which should help margins -- the ASP, excuse me. And of course, those are the normal slight declines and so on and so forth. So we do expect margins to improve as we roll out more color, I guess, is a short answer.

OK. And then, I think someone has asked this earlier, but your break even level at this point still remains on the revenue line at about 18 million? Is that correct?

18 to 20 million

, because the CyberLites really are not significant at this point.

OK, and can you talk about -- at this point, with your ramp-up of what your yields are at, do you feel pretty comfortable on how that is progressing for the CyberLite as you continue to ramp towards this million dollar revenue goal for the first quarter?

Yes, I think that the question is are we happy with the progress with the ramping. The short answer is yes. We -- obviously we wish we could do better but our

ourselves are ready to be happy with the progress.

All right, and, John, if I just do a quick calculation to get to a million dollars of revenues, you'd be running somewhere in the 10 million a quarter run rate in terms of getting it. Does that sound about right?

That's within the ballpark.

All right. Thank you.

Thank you. And next we will move to

with Adams, Harkness & Hill.

Yes, thank you. Congratulations on the CyberLite announcement. That's clearly good news.

Thank you, we're very proud of it. Many people

it is not easy to get tier one guys qualify you.

Yes. John, what are some of the applications besides signage for the green LED market that you would like to move into?

OK. The green

we see a change going on in the market right now. As you well know, white LED usually has been done with. The blue LED --

and to give you the white. We see a lot of activities going on where they call

one. Where you really have red, blue, and green LED in one unit. They give you the white.

So therefore, green coupling together with blue now. And a lot of activity is there. We think it is going to be a great probe market and also the ASP in green usually is significantly higher than ASP of blue. Because green is harder to make at this point. And a good green is the hardest to make.

OK. Any idea for when you would be rolling out green? I mean, is that near term or is that next 12 months?

We are working very hard on green. I think once you can get blue, we should be able to get green. Because our NanoPocket commodity is very good.

OK. And then, Rich, on the gross margin, I expected you to say that a lot of the expansion came from moving the test and assembly over to

.

No. There has been no change in the relative workloads between west

and Korea.

That's right. I think the important thing I feel Rich is mentioning is that as we get better and better volume, we also have a very intense work towards

improvement. And we are making a lot of good improvement in the yield.

OK. When was the Skyworks agreement reached, John?

It's recently.

reach an agreement. I think I want to mention that we always have working under verbal agreement with Conexant and Rockwell. And our Skyworks is a new entity is the first time we seen

do a written agreement from

.

OK, so it is

question, because Rich mentioned that Skyworks was a 10% customer during the fourth quarter, and I am assuming that you have been shipping to them during the first six weeks of this quarter, so approximately number some sort of verbal..

That's right. It is a first time we sit down together to prepare a document together. It took some time.

OK, if we were to think of like a normal run rate for Skyworks, you know, during 2002, excluding the fourth quarter hiccup that we had, is it fair to say that the -- that run rate looking to 2003, is there some percent that you can put around that?

percent of the business, 80% business. How much did they second slush to someone else?

Oh, the question is really how much they

. You have to always ask -- I don't think anything has changed between this year and last year.

Oh, fantastic. OK. Let me see. What about the interest on the 180K as we look out over the year? You know, is 180K going to start contribute more significant revenue? I am assuming about 95 -- 98% was monochrome during the fourth quarter.

Yes, the question is what is our

monochrome and color. I would say about production, the difference -- the

displays is almost

. Is almost 90 -- over 95% on monochrome. We are obviously now try to

the balance, but I think Rich made a comment -- even our

a year ago is up. We have soon have increase in margin, even on the monochrome.

And then last one, John, and I will pass it on. When we turn the corner into 2003, a couple of the big OEMs had mentioned that there was about two to three weeks worth of handset inventory -- excess inventory in the channel. And you know, our assumptions were that that would get burned off relatively quickly. Any idea on what the inventory level is in the channel right now in the handset side?

I

to the handset side because we once had removed. But I don't think that our customers are

for inventory

that concerns me.

OK. All right. I will pass it on. Thank you.

Thank you.

Thank you. Next we have a question from Chris Versace of Friedman Billings Ramsey.

Good afternoon gentlemen.

.

Just two questions for you. You're saying that your revenues are gonna be up about five percent sequentially. I assume that includes the one million target from CyberLite. Kind of backing that out, the business will be down slightly. Can you just give some comment? You know, do you expect it to be down in HBT, given normal seasonal patterns, or is that more on the display side, or, kind of what's going on in the more traditional business?

It would be more associated with the HBT being down normal seasonal trends.

OK. And then, maybe I misread the press release, or maybe I didn't hear the explanation, but you mentioned SG&A runs about, you know, two and a half million or so in a quarter, yet it was down dramatically in most recent quarter. Could you talk about that?

It was just a matter of where the expenses came in. We've had very tight expense control in the fourth quarter because of all the effort and money that we were spending on R&D. In Q1, as I said, that typically is one of our higher quarters because we have annual meetings and a whole host of expenses that come in, so that's why we're giving guidance that it's gonna be up.

Right. But, if I look at it from even the third quarter, I think it was something like 2.5 million and it dropped about, you know, 800,000. That's a pretty steep drop.

As I said, we had very significant expense controls because we knew we were putting a lot of money into R&D.

OK. Great. Thank you.

Thank you. And next we move to

with Pacific Edge Investments.

Hi. Good afternoon. Thanks for taking my call.

I was just wondering, John, or Rich, maybe you could help us a little bit more on the HBT. How much of the sequential down was sort of inventory burn-off? And do you think it is burned off so that basically

in a more or less flat line then going forward? Because it was a significant drop.

Honestly, JD, it's tough to answer that. You know, we get an order for our customer and we can speculate as to why it is what it is, but you'd really have to go back to the customer. So, we'd only be giving you a speculation.

We did hear a lot of talk from people saying they were really gonna put inventory levels as low as possible, so we're attributing that to -- and as John said, we believe that the

levels that a lot of our customers were not concerned about inventory levels. So, we're speculating that a lot of that is the result of pushing inventory levels down.

Gotcha. OK. Do you know -- the end product, or the end use for the LEDs in

-- is that as a blue light for

, or is that actually being converted to a white light or a back light?

OK. The question -- JD, your question is our blue LED is going white, converted to white, or just used as a blue. I believe right now it's a little bit of both. Some of them go the blue light

very popular in China and in our market in the Korean market -- white light seems more seems more popular in Japan or the United States. So, right now, there's a lot of things

now.

OK. But most of that is actually for keypad back-lights, though?

Yes, that's absolutely true. I would believe

of the application right now is going to the keypad. Because the keypad applications -- the low voltage, the high

is particularly in demand -- feature. And we have just the right product for them.

Yeah. And if

better than company average

margins?

You mean the LEDs?

Yeah.

We believe when the LED goes in production it will be enjoying a very good gross margin.

Excellent. Great. Thank you. Keep up the good work.

Thank you.

Thank you. Next we move to David Wang with the Seidler Companies.

Good afternoon, gentlemen.

I just had a few quick questions. Could you touch on your current inventory levels for a little bit?

I think we basically have a

inventory finished product. Rich may want to make comment on that.

Yeah, historically we've never carried finished goods in either HBT or CyberDisplay. The vast majority of our inventory is just raw materials.

OK.

See, we basically build it to the order.

OK. And what about the current pricing environment of your business?

Yeah, the question of pricing -- I think it has been difficult years for both -- for all the technology companies. In HBT

is usually like semiconductors come down 15 percent a year. In many ways we see

and it's not any more in many way -- instead, I think it's still in the normal trend. On Display, last year we had a pretty good year. Right now we've seen a little bit

decrease in the monochromes, just like normal trend. I think with color we will compensate that.

So, everything seems to be, again,

to the normal trend.

OK. Thank you.

And I want to make comment. On the LED part, although everyone thinks the price point will be coming down -- which, I think maybe -- but we're seeing pretty good

right now.

OK.

Thank you. Next we move to Tom

with

Partners.

Hi, guys. Congratulations on the LED announcement.

Thank you very much.

I just have housekeeping question. On the four that you mentioned -- Skyworks, JVC, Panasonic and Samsung -- can you give the percent, again as to what they were of business?

Yeah. Second

.

26.

I know Skyworks was 26. I know Samsung was 25. JVC was 15 and Panasonic as 13.

Great. What are you taking in terms of ASP declines in the

business in '03?

Right now, we're looking at the same thing we've seen for the last two or three years; 10 to 15 percent.

OK. OK. That's great. Thank you.

Thank you. Next we move to Brian Alger with Pacific Growth Equities.

Hi, this is

calling in on Brian Alger's behalf.

I had a question about your achievable market share and what you thought it might be in the still camera digital market, as compared to the 30 percent market share that you are enjoying right now in the camcorder market. Do you think that it's achievable for you to get up to the 30 percent market share eventually in still cameras?

The question is about market share in digital still cameras. First of all, in digital still camera right now, only 10 percent of it is still camera using displays in the viewfinder -- electronic viewfinder. The number of still cameras sold last year in 2002 is around 20 million. But, it is growing about 30 percent a year.

However, there is a market trend changing now. The electronic viewfinders are currently always in the high-end model of the DSC -- the digital still camera. But, it is coming down to the middle range. If it does so, then I think a lot of market will open up for electronic viewfinders.

It is still just an emerging business. It reminds me when camcorder was at the beginning. In 1999 when it was first started it was zero display in a camcorder using our display. In three or four years we get about 30 percent.

So, it is possible, because the market right now is coming down from high end right now using our electronic viewfinders.

I hope I answered your question. It will not happen overnight. It will take a few years.

Well, I always like to look to the future. Thank you.

Yeah.

Thank you. Next we move to

with

.

Hi, guys. Congratulations on the CyberLite.

I actually had a question about the CyberDisplay business. I was wondering what kind of market size in terms of units you guys were considering when you were talking about 30 percent market share. And then, I was wondering, how do you expect to the color displays to kind of layer into that through the year in terms of market size?

Yeah. Let me answer this question. The number of camcorders sold last year was estimated around 12 million.

OK.

So, you can get that number. Then on the digital still cameras, games and personal entertainment,

activities there. There's nothing we can

on design

. Almost all of them are color. I think the trend is going color. Even the camcorders in two or three years will be all color.

Great.

So, we're seeing a very good trend there. And our color

technology is really

. I cannot emphasize enough -- it is a very important thing. Because we now can get

colors at a very low cost now.

Great. And also, can you give us a sense of how that would affect your gross margins?

It will increase it.

Right. Can you help us out a little bit more, maybe with a range?

to get Rich to talk about it.

Actually,

, I think it's a little premature. We're having a lot of those discussions with folks right now.

It really is because the

. We have just beginning learning how to do

production and color

display. We don't know the real number yet. We don't think it will be too different from the monochrome display. Until we get to those volumes, we still don't know. And that's why we are kind of a little bit hedging on the gross margin. If we can get the same view as we have done on monochrome -- which, we fully expect that -- then you will be

.

OK. Two really quick ones. One, I guess, what percentage then -- I guess if you can give us a sense of what your expectation is for this year if you look out blended -- what might be a reasonable expectation of color versus mono in terms of your percentage revenue mix. And then also, I just had a quick question about your

on HBT.

OK. On the color versus monochrome, I think that we'll be very happy

on color by the end of this year's run rate. We should see -- there are a couple of design

, which, again, we think we can achieve that.

On the case of gain ...

I guess I was most interested in ...

I could say that most everybody in HBT

are working with us on the

. It is very important. It can save you a lot of power. It give you better

. It gives you much more design margins.

Um-hmm.

So, I think this is a big plus for people. Now, how fast it can go into production -- as you well know, there is a long shake-out process of reliability testing, and that will probably determine how fast it can go to production.

And sense of how sort of on top of your normal HBT ASPs -- what percentage extra this might add?

Currently, I think that we're talking about maybe 25, 30 percent premium. But, in large

, I'm sure you begin to converge. Because it's basically

the same system, but the material costs much higher to do it at this point, and the

will provide the customer as well as our yield -- obviously, it's sort of different because of the four different elements in the base area -- it takes some

at this point.

OK. Congratulations.

Thank you very much.

Thank you. And our last question will come from Kalpesh Kapadia with C.E. Unterberg.

Hi, Rich.

You made a comment about Q1

CyberLite being down slightly; the majority is due to the HBT business seasonality. Camcorders are also seasonable products from Q4 to Q1. Why would that be up or flat? Would you care to comment on that?

Well, I think right now our

is that our revenue will grow over time

in the first quarter. To

, we believe we can get about a million dollars for CyberLite. And yes, there's some seasonality going on, both in Display and HBT. So, I think that basically the seasonality is cancelled out by --

by the CyberLite.

And Rich, lastly, the DSOs picked up slightly. Is that because it was a backend-loaded quarter? Or, what was driving it?

In some respects, it was somewhat of a backend-loaded quarter, particularly in the Display. I think very early on, people were tentative about Christmas. They got a little bit more

as the quarter went on.

Sure. And lastly, John, can you -- when you get a chance -- mail us the

?

Well, you see, I get more jokes on this

over the last few days, ever since the

came up. And I wish I never said it. But, you know how the reporters are.

way that people,

. So, we'll put it

, which itself surprises me, too.

So, yeah, I think this will tell you how small our

are, and

-- it's very bright and runs on low voltage. I think we're very proud of our people.

by such a really a very outstanding customer. It's just really something that -- that's really -- we get great achievement, I would say. Yeah.

Keep up the good work. Thanks.

Thank you very much.

There are no further questions. I will now turn the conference back over to you, Dr. Fan.

Yeah, I think that -- I just want to summarize. I think fourth quarter's over. Looking forward to the year 2003, and I'm happy that you guys spent so much time with us, and I'm looking forward to talking to you in April. Thank you.

That does conclude today's conference. Thank you all for your participation.