Neonode Inc (NEON) 2003 Q4 法說會逐字稿

At this time I would like to remind everyone in order to ask a question please press '*' then the number '1' on your telephone keypad. We will pause for just a moment to compile the Q&A roster. At this time sir you have no questions.

OK we do invite any of you to call us with specific issues that may come up during the quarter and both David Brown and I would be glad to take calls from you during that time.

Sir.

Yes.

I am now showing that you have two questions. The first question comes from Austin Lewis.

Hello, Bill and Dave, great quarter.

Thank you.

Thank you.

Just wanted to touch base with you on this announcement from AT&T that they are going to go into voice over IP in a hundred markets this morning and just wondering if you are seeing you know what kind of activity you are kind of seeing in voice over IP? It has been rumored to be picking up and some of the other names in the space are kind of jumping around but just kind of wanted to see what kind of activity you guys are working on in that area?

Be glad to. We have seen a large amount of design activity that are VOIP specific in the past. Several of our products processed both data and the voice path as well as the signaling path and so that is why several customers have chosen our product to put into VOIP. One of the customers that I mentioned a minute ago is building a VOIP gateway down in Australia. There are numerous other customers that I did not mention in the US that are building both gateway products and those products that do call concentration that is part of the VOIP system.

Frankly I am not surprised to see the larger service providers reacting competitively to VOIP. VOIP has actually been in use for some period of time by the smaller providers especially in the calling card or the prepaid card arena. And we know that some of our cards have been used in equipment's that has been supplying that kind of capability. I am, we are pleased to see the growth in VOIP. We think we will participate in it in a fairly large way.

OK. Great. And secondly could you expand maybe a little bit more on your comments about the storage space and your storage controllers, I know that is a very large market but what kind of gives you comfort that you are going to maybe be able to step in the competition with companies like Q-Logic and kind of try to take a little bit of market share.

We in the storage market, the breadth of the market as well as its size, there are a number of players that are looking for independent suppliers of controller products. The disc drive manufacturers obviously have to be compatible back into the server side. We have both scuzzy products today and Fibre Channel that are fully competitive technologically with what we have, with what's in the market today. With what is actually occurring also in the software advantage that we provide customers in this arena, we provide a Fail-Over which features is a very useful for a multi-port storage controller product. The products of the future will be the serial products that I mentioned, which is a Serial (inaudible) scuzzy and Serial ATA.

Serial technology which is the latest way of accomplishing communication with the storage media itself, allows for a longer cable runs and allows for faster transfer of data. Carl Munio who is our Engineering Vice President who has joined us from Antares, has an extensive background in the storage controller market by virtue of his prior experience both at Sun and at Antares and we actually have the technology on board in SBE today to make the new serial attached products that work. So we will in fact be introducing that type of product which will supplement what we have today, but we are in fact advancing into the market place in the storage side today with the resources that SBE has which are in a contrast of what Antares was able to do in its own market place. So we have existing products that we're taking out today. We have a new product that will be following behind us.

OK. Do you think you'll need to, is this more of a newer technology, where you will be able to get decent gross margins or you are going to be kind of trying to enter the market at a cost, a cheaper cost or?

The products that we will sell will be addressed towards the high-volume, high-performance segment where we expect to be able to maintain margins at least above the 50% level. As volumes opportunities project themselves we expect to see stiffer competition in the higher volume segments from the big guys, and we will participate in the lower volume segments but as the higher volume ones come along and we can participate at the reasonable margin level than we have certainly to take those on.

OK. And then lastly could you just touch on the progress of the total product a little bit more in depth as far as what kind of reaction you're getting from customers initially and maybe what the potential market is for that product?

The customer interactions that we've had have been strictly on the application side with only a few products having been field tried. At this point of time we have total products with FPGA, a Field programmable gate array on them that have the full of logic of the design. But these products are meant for field trial only because they are relatively expensive to produce. Our field trailing of these products will start within 30 days and these products will in fact be taken and put into the high volume applications that are in these large server forms.

The FPGA product will be followed by an ASIC, which brings the cost of the board down to a reasonable level and those products will be available within 90 days, we have already had a functioning A6 that came out their fab and so that will continue to be tuned to available after the FPGA product and used for the field trial. That this point in time there is nobody that is out there supplying a tow product that produces in the range of 200,000 simultaneous sessions. Probably appreciate when people come into to a large server with a large number of separate request, the server has to -- server slow down by quite a bit of it processes every thing in within the CPU, the tow product allows for the off loading that computation in the holding that the simultaneous sessions under the board itself which is an Ether net board with a tow chip on it and therefore allows the server to go back to its full capacity of processing. So the products that we have are addressing the high-end functionality and there is nobody within this space sheet and the number of applications that we see in this is a quite large.

Whether other applications other than server firms.

Yes the tow product is also will be used in the for storage controllers. It allows for a number of simultaneous communications into the storage side as well.

OK, could you give me an idea of maybe what do you feel like that range or may be what do you feel like the size of that market might be? What the storage and combination with the server firms.

I can't give a size of the total market, the market as we see it is in multi $100 million size.

OK, great. Thank you every much.

Thank you.

Congratulations.

Yes thank you.

Your next question comes from Taylor Topkin (ph).

Good job in the quarter guys.

Thank you.

Of our backlog how much of that is going to ship in the January quarter?

November, December, January quarter we have backlog at this point of time which is build above that $4.1 million which was the end of the quarter. We have current backlog and for shipments some of for this quarter it is in the 2.9 to - back 2.9 million range.

So your quarters how they are done pretty much.

That's right considering the Christmas slows that goes on yes, we some more -- think that we've - I think well happen in the January time frame. But our ability to respond to a significantly higher volume will be some what limited by that time.

Right, OK that's good. (inaudible) answered and few but on the tow, can you give us a little bit colors for us like the competition how it compares to Datex and Lacrotex Co (ph) and in the field trial where you are going up against the head-to-head?

At this point in time the tows that been on the market and it have been delivered the customers have been handling simultaneous sessions in the range of about 40,000 these - that kind of capability is quite adequate for the storage market which is where the tow was originally developed for. On the other hand the people that have enter large database inquiries, the people that do a lot of streaming of data such as Yahoo with their premium sites do in fact require a greater number of sessions to be handled within the single server and everybody wants to have this thing happened in the range of the multi 100,000 simultaneous session.

The difficulty today has been that the storage base still products do not meet server applications for access at that end of a range. As a result of that many of the people -- many of the competitors in the market today had taken products out and they have wanted their pick when they got into the middle of their application itself. But by virtue of the background that the Antares products have with Sun and the Solaris products that are in the market, the server - Solaris servers that are out there today we have, we have levied a decided advantage in being able to hit the high performance segment of this market. In spite of all the difficulty that Sun is having in it's own market place today in servers, there is a huge number of servers out there today.

Huge number of server forms that are front-ended with Sun machines. We also have however a Linux compatible TOE as well. And that product is following quickly on the heels of the Solaris based TOE product. So there are competitive products out there today. They don't meet your requirements of the more stringent applications which our server forms and there are a number of people out there starting with the Yahoo's, the Google's and a number of large defense installations where they have many a points of access they are trying to maintain.

OK, great thank you.

Thank you.

At this time there are no further questions.

OK, we do appreciate your interest in SBE and we look forward to speaking with you again next quarter. Thank you very much.

This concludes today's conference call, you may now disconnect.