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Today on Raging Bull one of the idiot bashers was claiming that the Odyssey 1000 is not based on MicroOS.
Typical lies.
One glance at the website will settle the matter.
http://www.edigital-store.com/odyssey1000.html
Note in Specifications:
"Powered by e.Digital's MicroOS™ 2.0 operating system"
They never give up in their next pathetic attempts to distort the truth, do they?
Happy Thanksgiving e.Digital investors! Our time is coming!
That player is a DataPlay device. It is not comparable to the others which are all 10-20 GB jukebox players.
Mary you are absolutely right about the credibility which being part of the editorial content (rather than advertising) gives e.Digital.
Some here apparently believe that e.Digital paid for this exposure. I am sure that is not the case. The reporter (apparently Robert Lorenz, who writes "The Gadget Guide") putting together the article wanted a collection of items which represented cutting edge technology.
The actual text:
"ON OUR COVER
On Fox TV's "24", Kiefer Sutherland plays Jack Bauer, a counter-intelligence agent, and Sarah Clarke plays turncoat agent Nina Myers. While their future on the popular show remains classified, we asked them to help reveal our own internal investigation of the coolest high-tech gadgets for the holidays. Sutherland holds e.Digital's Odyssey 1000 MP3 player and wears Timex's Ironman Speed+Distance System watch. Clarke carries Fujitsu's Stylistic ST4000 Tablet PC. Take a peek at the rest of our roundup."
Immediately following is the column which features the products, starting with the Fujitsu tablet PC and then the Odyssey next.
The text for the Odyssey, which is next to a large picture of the original (July) version of the player states:
"Store Your Music -- And Your Files
With a nod to the Apple iPod, e.Digital's sleek Odyssey 1000 MP3 player (www.edig.com) boasts a whopping 200gigabyte drive (4000-plus songs) and FM tuner. It also doubles as a portable storage unit for your PC files. Coolest feature: voice recognition for easy navigation through your music. About $400."
(Bold emphasis is my own.)
I think it is clear that the voice recognition feature is what prompted the choice of the Odyssey over the iPod for this feature.
This kind of exposure is far more valuable than any advertising (as your post states well.)
The key now is to capitalize on the happy circumstances of a very hot celebrity and national exposure to 75 million readers during the peak holiday shopping period.
For example, why not sell certificates good for one Odyssey player at a 10% discount for early orders prior to product availability?
The margins obtained by the on-line store greatly exceed those of the wholesale business. Remember, when a consumer electronics manufacturer sells a product to a retailer it receives (at best) 20% of the wholesale price. In reality that margin may be only 10% or 15% (notwithstanding the negative margins e.Digital has obtained to date).
The retailer then marks up the wholesale price and receives about 30% of the final selling price.
On a product priced to sell for $400 (retail) the retail gross profit would be about $120 (at 30% margins) and the manufacturer's wholesale price would be about $280, from which the manufacture would receive from $28 (at 10% margins) to about $56 (at 20% margins).
By selling the product on its own on-line store e.Digital captures both profit elements (i.e., $148 to $176) which gives a total margin opportunity of about 37% to 44%. This is partially offset by the distribution costs associated with the on-line store, but the bottom line is obviously potentially huge for direct sales.
The downside is that it is difficult to get shoppers to come to an on-line store and to buy products which they cannot test first-hand.
Hence the value of an editorial endorsement of the product as one of "the coolest high-tech gadgets for the holidays."
JimC
Actually, I wouldn't mind seeing e.Digital really hit the iPOD comparison hard on their website.
- Lower cost
- More features
- Faster data transfer rate
- etc (I am sure that there are more advantages)
Why not sell directly against the established market leader's feature set? What do we have to lose?
Good idea!
I think it is more likely that someone from EDIG will read this board before Sunday than check their office e-mail, so I posted that observation here.
Since one of the selling features of the Odyssey 1000 is that it is Mac-compatible, it would be wise for e.Digital to modify the current product description to include that fact.
For example the original press release included these points:
o Mac and PC compatible
o Mac iTunesTM compatible
but the new EDIG store description omits these important selling features.
Someone should correct the website before Sunday.
Trenddetector, if you look at other products on that site it appears that their system gives the same "may be discontinued" message for any product which the company does not have in stock or on back-order.
Also, judging from the item number assigned to the "Odyssey Millennium" it seems to have been set up on their system a long time ago. The number is lower than that of the Odyssey 100, 200 or 300 and just one digit off that of the Treo 15.
I think this is simply a computer system issue, not a reliable indication that there is any problem with the expected release of the Odyssey 1000.
I was not suggesting that Neutron was trashing e.Digital but Trenddetector certainly seems to have been trying to give the impression that the product had been discontinued in his post.
Perhaps it was unintentional, but that was the impression he left in his post.
Venture capital has essentially dried up across the entire technology spectrum. Look at CMGI, Commerce One (CMRC) and Internet Capital Group (ICGE) for example. All were formed to invest venture capital in technology stocks, yet all are starving for cash sources.
To attract new venture capital EDIG will first have to survive by proving its technology in the marketplace.
I think that it has a reasonably good chance of doing just that. The present share price reflects the current market assessment of that possibility. I think that the share price underestimates the company's potential.
The fact that Neutron does not have the Odyssey 1000 in stock should not be used to imply that the product has been discontinued (as the earlier post apparently tried to do.)
I think it is more appropriate to assume that they simply have not yet received their order.
By the way, Neutron also shows the Silhouette in stock:
http://www.neutronexpress.com/prod.cfm/201569/E._DIGITAL/13-830960/
Reasons to stay
One of the problems of message boards is the tendency of many to center their lives around them. On Raging Bull we see a large number of pathetic bashers with well over 5,000 posts attacking both a company in which they claim no financial interest and the shareholders of that company (for the crime of investing in that firm's stock.) This can create an atmosphere in which even dedicated long-term investors can become discouraged if they (falsely) believe that the rantings of the bashing psychopaths represent rational investor sentiment.
When you view the company objectively it is clear that it does have both talented engineers and interesting technology which have been combined to create quite a few products which would seem to have wide consumer appeal.
No one can deny that a number of prominent companies, including IBM, Lucent, Samsung, Toshiba, Fujitsu, Bang & Olufsen, Texas Instruments and Intel (among others) have worked with the company as either a technology partner or a customer. Thus far these relationships have not produced the huge revenues that we have all (perhaps too optimistically) anticipated. But the seeds are there for the future and the mere fact of these associations demolishes the basher's favorite charge (that EDIG is a "scam").
No one can deny that the company has, just within the past twelve months, designed and offered for sale (to retailers or to OEMs) nearly 20 products, including the MP2000, the Treo 10 and Treo 15, the Classic XP3, the MXP100 (in three versions), the MXP100 Sport (again in three versions), the Evolution DataPlay player, the Odyssey 100, 200 and 300 and the Bang & Olufsen BeoSound 2.
Within the next quarter we have been told to expect the Odyssey 800 and 1000, the Fujitsu Eclipse automotive system, a DivX-based airline inflight entertainment system and (perhaps) the Silhouette and other DivX products.
No one can deny that the products have been sold by a number of respected retailers including CompUSA, Good Guys and Circuit City as well as through e.Digital's on-line store.
Certainly there are a number of problems present at e.Digital that (currently) prevent its stock from rising to its former level. The primary concern today is cash - both to sustain operations and to fuel the company's growth.
The failure of the direct-to-retail initiative put a tremendous cash burden on the company. The primary source of cash to date has been the sale of new stock (either preferred or common) and with the decline in the share price over the past three years that source has become less reliable.
Yet the company has survived and about 13 million shares remain from the recent registration. At current prices that would yield about $2.6 million - enough to fund operations for the next nine months. Also, there are on-going engineering fee revenues and quite a bit of inventory that has been written down to zero which, if sold, would generate a substantial amount of additional cash. These latter two cash sources should add at least another three months of funding for operations. Thus the company has about one year to prove itself.
During that time period it will become clear whether the Odyssey 1000, the Fujisu Eclipse, the IFE initiative and other current projects will create sufficient cash flow to sustain the company and (finally!) generate profits.
We and all other technology stock investors have been through a very difficult couple of years. Many world-class companies (e.g. Lucent) are selling for only 1-2% of their peak prices. Over 80% of the top 150 tech stocks are now selling for less than 10% of their peak prices.
Will the market for technology stocks become favorable again? Of course it will. And that will create a more receptive market for EDIG as well.
Is that potential worth holding onto a stock now priced at only $0.18/share?
You have to answer that yourself, but most here would agree that the upside certainly exceeds the downside at this point.
I don't think that any of us are wearing rose-colored glasses anymore, but neither is it appropriate to don blinders to the real opportunity which EDIG still offers.
JimC
tugs1, a free atomic clock sychronizing program is available at this site:
http://www.worldtimeserver.com/
Consider the source
The latest nonsense from Raging Bull to infect this message board is beyond belief. Why would any reasonable person accept the drug-induced postings of a fool who has used dozens of absurd aliases to bash e.Digital non-stop over the past four years?
Is his "investigative reporting" reliable? Well, ask yourself whether you can trust someone
- who couldn't last one year at one of the easiest colleges in the country, yet later claimed to have an MBA from Northwestern,
- who variously claimed to be a floor trader, a VP of a bank, owned his own businesses, etc., yet in reality is unemployed and living off his parents, grandparents and an incredibly foolish girlfriend,
- who posts from that girlfriend's apartment in great detail about his various escapades with other women and his degradation of her,
- who admits to frequent drug use,
etc., etc.
over the official financial statements certified by Ernst & Young, one of the most respected public accounting firms.
And before someone tosses Enron and Worldcom up as examples of why public accountants can't be trusted, remember that those cases were due entirely to the fact that greed over consulting fees overcame proper accounting conservatism. Is anyone actually going to suggest that e.Digital/Norris was paying huge consulting fees to Ernst & Young to get them to go along with the so-called "Jabra scam"?
Ridiculous!
I am quite sure that a careful examination of the financial statements (by someone other than the pathetic idiot described above) will disclose that e.Digital/Noriss received some cash for their equity position in Jabra and that it was all properly recorded.
Get back to reality, people!
IFE potential
I have been doing some research into the prospects for the IFE market and believe that e.Digital might just have found a potential cash cow in that segment.
Here is a link to a good source on the airline industry. Note the statistics on the top 25 domestic airlines. If/when we discover which airline e.Digital is working with we should be able to estimate the total market potential by comparing that airline's total passenger miles to that of the entire domestic industry.
http://www.airlines.org/public/industry/display1.asp?nid=5527
For example, Continental had 58,692 million passenger miles in 2001 compared to 645,146 million passenger miles for the top 25 U.S. airlines. Thus an order from Continental would represent 9% of the total market. Since airlines tend to copy each others' programs, we would have a good chance of capturing a substantial share of the market if we can land one or two airlines in a trial program.
It will be interesting to see what develops here.
Now that the Collier situation has been resolved perhaps we can begin to move ahead again.
I also like the fact that the chairman of the board has a significant share position now.
I put an order in for more shares today.
This is not a new 20 million share stock offering. It is a report of planned sales against the original 20 million shares registered.
Note the title:
PROSPECTUS SUPPLEMENT NO. 7
(TO PROSPECTUS DATED APRIL 29, 2002)
E.DIGITAL CORPORATION
746,774 Shares of Common Stock
This is simply the seventh supplement to the original prospectus.
And to counter the rather snide comments made that I am pursuing some "personal vendetta" or am seeking a position on the board for myself - neither is true.
I have no interest in a board seat with e.Digital. There are many fine candidates in the San Diego area who have large positions in the stock and the kind of expertise which would enhance the company's board deliberations immeasurably.
My public position is not contrary to the opinions that I have stated privately at many times over the past three years. Many here know me personally (TwoMil, MaryInRed, tolstoy, moxa, venieris, DaBoss - all of whom I like and respect) and they will attest that my efforts to increase insider share ownership have been consistent during that period.
Nor is this evidence of dissension among long-time shareholders. I have owned a huge stake in this company for more than five years and intend to continue that ownership position for many more years. I want that investment to prosper and I strongly believe that a change in the Board of Directors is essential for that to happen.
Best regards to all.
JimC
How to send a message that you believe in EDIG!
Do you believe more strongly in this company's prospects than the Board of Directors? If you have purchased more than 1,000 shares in the past three years then you have made that statement more forcefully than either Allen Cocumelli or Victor Ramsauer - who, although members of the Board for the past three years, own 1,000 shares combined!
By voting against their retention as board members you are stating that you want, as your personal representative guiding this company, only those who are willing to side with you where it counts - financially!
What will this do? Will it cause them to be removed from the board?
No, it is symbolic protest, no more.
First, I do not expect that more than 10% of the shares will vote as I suggest. And even if more than 50% do so, it would have no effect upon the Board membership.
Sadly, there is no way to actually "vote out" a nominated board candidate. The way proxy elections work, if a director receives even one vote he can be elected. There is no requirement that a director receive a majority of votes to be elected. The number of candidates slated equals the number of positions available, so any votes withheld are merely a visible protest.
I just feel that we need to express our frustration with their incredible failure to support this company's stock by refusing to vote for their retention.
At many points over the past three years a public announcement that a board member or officer had purchased shares in e.Digital could have been a tremendous vote of confidence that might have reversed the downward slide in share price. That was particularly true in February - April this year when uncertainty over the equity registration drove the share price below the critical $1.00 level. Perhaps if the board and key company executives had stepped to the plate and purchased even 1,000 shares each as a message of confidence in the company's future it might well have halted that decline and enabled the subsequent share sales to yield far more cash that would today be used to expand the company. Yet none did so.
That failure of leadership is the primary reason that I believe that Fred Falk should also be denied the votes of shareholder. In addition, while Fred has a large personal position in e.Digital and deserves our thanks for preserving the company during the dark 1998-1999 period, with the critical cash shortage facing the company today it is imprudent to spend $15,000 per month (over 40,000 shares!) on the expense related to his retention. The company is being very well served by Jim Collier's expertise and it would benefit all to simply combine the CEO/COO positions. As much as I like Fred personally, he is clearly not critical to the company's future.
As far as Robert Putnam - in my opinion he has been a negative influence on the shareprice for quite some time. He has no credibility today due to his frequent "exaggerations" in his direct shareholder communications during 1999-2001. Robert pledged his shares in Atco as security for a 1998/1999 financing which Norris/e.Digital needed at that time, but he was well-rewarded with warrants for that action. There is simply no rationale for maintaining his position with the company today, especially since he must divide his attention between Atco and e.Digital. While his cost is probably no more than $4,000 per month, that requires the company to sell more than 11,000 shares each month to retain his services as an employee. We simply cannot afford that waste.
If you agree, you may easily express your feelings with your proxy vote. The easiest way to do this is to vote on-line. There you simply select those board candidates (by checkmark in the box next to their names) from whom you wish to withhold your votes. As stated previously, I strongly recommend that you withhold your votes from Allen Cocumelli, Fred Falk, Robert Putnam and Victor Ramsauer.
Should this matter be put off until the shareholder meeting as some have suggested? No, simply because casting your vote before the meeting demonstrates to management just how strongly you feel about this matter. Any discussion at the meeting will last no more than two or three questions before it is quietly shunted aside and relegated in the minds of the board to the hard feelings of a tiny number of shareholders. Only a proxy vote makes your position perfectly clear to all.
I remain a huge shareholder in this company - far larger than any non-insider that I am aware of - and feel strongly that the time for private lobbying efforts is well past. As a personal favor to Fred I kept my campaign quiet last year but I no longer feel that the majority of the Board truly represents the best interests of the shareholders.
Despite the suggestions by our ever-present psychotic bashers, this is not a dispute between those who believe in this company and those who do not. It is a disagreement about how best to support this company.
My point is simply this: My financial stake here says that I care about this company and obviously believe in its prospects far more than those who are entrusted to guide it for the shareholders' benefit. It is long-past time to see that our board is populated only by those who are willing to side with the shareholders in the one way that all can measure - with share positions of their own.
I remain confident that e.Digital share ownership will richly reward all who hold fast. Why should we accept as board members those who do not feel likewise?
JimC
From 10Q filed 2/14/02:
Item 4. Submission of Matters to a Vote of Security Holders
At the Company’s fiscal 2001 Annual Meeting of Stockholders held on November 6, 2001 the following individuals, constituting all of the members of the Board of Directors were elected: Allen Cocumelli, Alfred H. Falk, Robert Putnam, Walter “Skip” Matthews, Victor Ramsauer and Robert Jecmen.
The following proposals were approved at the Company’s Annual Meeting of Stockholders:
1. ELECTION OF DIRECTORS:
Affirmative Votes/Negative Votes/Votes Withheld
Allen Cocumelli 123,500,220 -0- 1,877,250
Alfred H. Falk 124,523,602 -0- 853,868
Robert Putnam 123,168,435 -0- 2,209,035
Walter "Skip" Matthews 123,515,640 -0- 1,861,830
Victor G Ramsauer 123,512,727 -0- 1,864,743
Robert Jecmen 123,470,880 -0- 1,906,590
2. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP, AS THE INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING MARCH 31, 2002.
Affirmative Votes 124,860,632
Negative Votes 315,577
Votes Withheld 201,261
Note: I voted for Fred Falk and withheld my vote for all of the other candidates.
Suggestion for proxy voting
There are six candidates nominated for seats on the Board of Directors of e.Digital. Collectively these individuals own 1,952,000 shares of EDIG (Falk has 1,115,000, Putnam has 625,000, Diaz has 210,000, Cocumelli and Collier have 1,000 each and Ramsauer has none.)
In the past year only two of these individuals purchased any shares. Jim Collier bought 1,000 shares and Alex Diaz bought 210,000 shares.
For the past three years I have been quietly lobbying Fred Falk and Alan Cocumelli (through e-mails, phone calls and face-to-face meetings) to encourage senior management and the Board of Directors to demonstrate their confidence in the company's future by purchasing EDIG shares on the open market.
For example, here is a portion of an e-mail I sent to Allen Cocumelli in October last year:
For more than one year I have urged Fred Falk, in telephone conversations and e-mails, to bring to the attention of the Board of Directors of e.Digital Corporation my contention (and that of most shareholders of this company) that the lack of insider buying of the company's stock is a serious problem.
As a development stage enterprise, e.Digital is unable to attract investors with a history of positive operating results. Consequently the shareprice is entirely dependent upon investor expectations about future prospects for the company. Study after study have shown that the actions of insiders provides a reliable guide to company prospects. All of the press releases about future products or business relationships are meaningless when the absence of insider buying suggests that those who have the best, most complete knowledge of the company's progress do not feel sufficiently convinced to risk their own capital by purchase of e.Digital stock.
No insider has purchased any stock in the open market in more than three years despite prices as low as $0.06/share in 1999 and as low as $0.73 this year.
The chief accounting officer of the company sold essentially all of her position in the company in February 2000, realizing a gain of approximately one million dollars, yet has not repurchased any shares since that date.
Two new officers, a chief financial officer (since departed) and a chief operating officer, joined the company in the past year but neither purchased any shares of common stock.
Most telling, however, is that the four independent members of the Board of Directors own, collectively, only 1,000 shares of e.Digital stock.
Yet the sale of equity to independent investors remains the only significant source of cash for the company. Twice in the past two years the company has been forced to raise funds in this manner due to the lack of adequate cash flow from operations. Both of these equity sales were very dilutive to current shareholders and in each case resulted in a significant decline in share price when the preferred stock buyers subsequently liquidated their positions.
As a Board member, and especially in your capacity as Chairman of that Board, you have a fundamental fiduciary obligation to the shareholders of e.Digital Corporation to protect and advance their interests in this company. I submit that the lack of equity ownership by you and the other independent members of the Board has seriously damaged the company by indirectly increasing the cost of capital. Further, this serves as a continuing signal to investors that the company's prospects do not merit or justify its current shareprice.
Prior to last year's shareholder meeting I also sent an e-mail to Fred Falk and Robert Putnam which contained these comments:
I note from the proxy material just sent that the four outside directors (Cocumelli, Jecmen, Matthews and Ramsauer) now own the collective total of 1,000 shares of e.Digital common stock. These directors have a financial stake of approximately $1,000 in the company that they guide.
This is, simply put, an insult to all of the shareholders of this company!
I understand that there are times when insiders cannot purchase stock due to their knowledge of undisclosed material information. However, I cannot accept that as an excuse for their continuous refusal to align themselves with the interests of the company's shareholders (by purchasing e.Digital stock) over the entire period of the past two years.
In my opinion as a former officer of a NYSE-traded public company these directors are not complying with their fiduciary obligation to represent and advance the interests of the common stock shareholders. Their failure to purchase stock has been a continuous negative message to the investing public about the long-term prospects of e.Digital and has hurt the company's ability to secure equity financing at reasonable prices.
Consequently I am withholding my vote for retention of these four outside directors.
Today I strongly urge all e.Digital shareholders to demonstrate their displeasure over this matter by voting against the election of Fred Falk, Robert Putnam, Allen Cocumelli and Vicor Ramsauer to the e.Digital Board of Directors.
I believe that Jim Collier's exceptional performance in bringing new products to market clearly warrants a vote in his favor (despite his low shareholdings.)
I remain confident in the company's prospects, as my own very large share position attests. However, in my opinion the four individuals listed above have not acted in the best interests of the shareholders (by failing to purchase shares at a time of critical need) and it would be wrong to endorse their retention on the Board of Directors.
JimC
Will do, DaiLin. You are doing a very good job of posting valid information on the Raging Bull message board, countering the nonsense of the bashers over there.
Mass merchandisers and brand equity
These products are scheduled to begin shipping July 1, and will be available through consumer electronics retailers, online merchants, and traditional mass merchants throughout the United States and Canada.
Any guess on the reaction if EDIG announces in July that a major mass retailer like Target or Wal-Mart is now carrying its branded products?
Consider the effect from the exposure of the e.Digital brand name to millions of daily shoppers in stores of that type.
What is that worth in terms of building brand equity for future product launches?
We are clearly on the verge of a massive build-up in revenues as we approach the holiday shopping season with more than a dozen e.Digital branded or designed products in the marketplace:
MXP-100
MXP-100 Sport
MP2000
Treo15
Treo20
Renegade
Musical Classic XP3
Bang&Olufsen
Fujitsu Ten
Evolution/MTV DataPlay
Odyssey 100
Odyssey 200
Odyssey 300
DivX video players
And who knows how many more?
JimC
I do not believe that the new Treo 15 will have a USB 2.0 port.
I think that the only real change is the increased hard drive capacity.
The players coming after this one (due in mid-July per the conference call) should have USB 2.0, however.
No, you were very far off. Twenty years to establish CDs as the standard?
Although CDs were first sold in 1983, it took only five years for CD sales to exceed LP sales (the previous standard) and shortly thereafter LP sales dropped very rapidly.
http://www.rci.rutgers.edu/~dmorton/sound_recording_overview.htm
Sorry, but anyway you look at it your point (that it took a very long time for CDs to become established) just isn't true.
Your statement "It took almost 20 years for the CD to become the standard" is not accurate.
Here is a history of the CD and digital music:
http://www.oneoffcd.com/info/historycd.cfm
In 1980 Sony and Phillips first proposed the CD standard. After acceptance by the industry and slight changes it was introduced in the U.S. in 1983.
800,000 CDs were sold that first year and by 1986 (3 years later) 53 million CDs were sold in the U.S.
I think that it is less productive to speculate about the reasons for current share price fluctuations than to look at the near-term prospects for the company.
If Jim Collier's repeated statements about achieving breakeven by the Jan-Mar, 2003 quarter are correct, then the sales level in that quarter will exceed $10 million.
Assuming a constant operating expense rate of $500,000 per month, it would require sales of at least $10 million and a gross margin of at least 15% to cover those expenses in one quarter.
We know that the sales in the quarter ending 3/31/02 were about $800,000 and that sales in the current quarter (ending 6/30/02) were about the same from Ran Furman's comments in the conference call.
We also know that sales were held down by the delay in the registration statement approval (which delayed the receipt of cash needed for inventory build-up to meet retailer orders.)
So what sales will the company achieve in the middle two quarters? (Ending 9/30/02 and 12/31/02.)
I'll guess $3 million and $6 million as more retailers are added, more audio products are added, DataPlay products begin generating revenues, telematics shipments begin and DivX products are introduced.
Add these estimated quarterly sales for the current year and you are at about $20 million.
How do you value a company that produces more than a ten-fold increse in sales in one year and is rapidly growing?
Let's assume a price/sales ratio of ten.
The total market value on an expected sales basis would be $200 million or $1.33/share. That is a fair value for the company right now.
By the quarter ended 3/31/03 the annual sales rate will be $40 million and the projected sales rate will be at least $60 million. (See tolstoy's comments on RB about Archos' sales.)
By these standards the share value would be $2.67 to $4.00 within twelve months, or six to ten times the current level.
I am very confident about our prospects and felt that management did a great job is sketching out the broad brush picture of the company's future.
Given Jim Collier's conservatism, I would be willing to bet that he left out some other developments or down-played our prospects in several areas. Remember that he gave few clues in his shareholder meeting speech about all of the developments which have already been announced this year.
JimC
Accounts receivable financing for e.Digital will likely be the primary source of funds as the business begins to grow, as Ran Furman indicated in the conference call.
There are dozens, perhaps hundreds, of companies which can provide receivable financing. One common approach is called "factoring." This is the outright sale of the receivable to a third party. That third party would advance a portion of the funds owed by the retailer to e.Digital (usually about 80%) then pay the balance, less a fee (which might range from 1.5% to 4%, depending upon the payment terms of the receivable) after the invoice is actually collected from the retailer. The fee is intended to cover the costs of collection and the interest expense of the transaction.
The company saves the cost of an accounts receivable staff but gives up some flexibility in dealing with its customers.
The effective interest rate on this type of financing is that fee (adjusted for the built-in accounts receivable function cost) annualized for the time period involved.
Here are some sources of information about this technique for generating cash:
http://www.toolkit.cch.com/text/P10_3700.asp
http://www.universalfundingcorp.com/work.php3?Loc=work
There are two gross margins involved in a product sold in a retail store. The retailer's gross margin is the difference between the price that he sells the product and the price that he pays e.Digital.
For electronics retailers like CompUSA that might be 25%, so a $250 Treo would cost that company about $188.
The wholesale gross margin is what e.Digital receives. That is the difference between the price that it sells the product to the retailer and the cost of the product to manufacture.
E.Digital said that it is receiving 20% margins on its next generation Treo. At the above $188 price to the retailer, that translates to a gross profit of about $38 for e.Digital.
Thanks tolstoy. Now I know enough to make even more foolish statements, but at least I'll sound like I know what I am talking about for about 30 seconds.
tolstoy could probably guide you through that process.
I'll take a stab at it. You currently have an analog storage media (videotape) that will output an analog signal. That signal would have to be digitized and compressed in an MPEG4 format in order to be stored on CDs or DataPlay discs.
I believe that Macs can do this currently. For a PC example, see the following item:
http://www.cnn.com/2000/TECH/computing/03/31/sony.digital.studio/
Good luck.
Good points, moxa1, and it should be noted that the company's strategy has changed from a somewhat passive approach (supplying its software and designs to others) to a very pro-active effort to build the market for its own products.
Three years ago the company was expecting that large consumer electronics companies and the major record labels would cooperate to establish a structured digital audio delivery and utilization system in which e.Digital's patented MicroOS would play a major role as the only system available which could efficiently handle multiple codecs and digital rights management systems on small flash memory devices. Under this scenario the company would enjoy rapidly growing licensing and engineering fees as it supplied its intellectual capital to the products produced by others.
For a variety of reasons, which had no root in e.Digital's expertise or qualities, that world never developed as envisioned by the company and its shareholders.
Jim Collier was brought on board about one year ago and set out to establish a new business plan. The approach that he is taking is to first demonstrate the technical viability of a product (prototypes), then the consumer acceptance of that product (e.g. the e.Digital On-Line Store), followed by a successful exposure in significant retail channels (e.g. Good Guys and CompUSA).
At that point the major consumer electronics firms will have evidence that the products are worth branding under their own labels.
Only now is e.Digital finally getting the level of serious interest from such firms that was expected three years ago.
Today the concept is to provide much more value to consumer electronics firms by offering a wider range of services, thereby greatly increasing the per unit revenue opportunity.
E.Digital intends to offer such firms the option of managing the entire process from design, through manufacturing, distribution and customer service/support.
- Several products are in the marketplace now and by all accounts are not only superb technically, but are selling very well. This includes the only voice-controlled digital audio player on the market.
- More retailers are being added each month and already include three of the largest consumer electronics retailers - CompUSA, Good Guys and TigerDirect.com for e.Digital-branded products and Circuit City for an OEM product.
- More OEMs have been added including one of the most prestigious consumer electronics companies in the world, Bang & Olufsen and the top automotive infotainment company, Fujitsu Ten.
- Partnerships are stronger than ever. IBM features two e.Digital products in its own annual report.
- New technology (Fujitsu telematics and DivX video) has been introduced this year.
- An entirely new class of consumer digital audio devices (DataPlay) is about to hit the market using e.Digital technology under the MTV brand. Samsung and Toshiba are both expected to launch DataPlay devices designed by e.Digital.
- A dynamic new management team is in place and has delivered on every promise made to the shareholders this past year. This includes several individuals with extensive and successful backgrounds in marketing consumer electronics products and great personal relationships with all of the major retailers.
- A very sophisticated end-to-end design, manufacturing, importing, warehousing, retail distribution system has been developed with APL Direct Logistics and has been been employed to rapidly bring new products to market.
- Revenues are climbing rapidly. We have been told that the most recent quarter exceeded the previous quarter's revenue, despite the fact that retail shipments had just commenced at the end of March. The current (June 30) quarter should far surpass the March quarter due to those shipments.
- Within a few months e.Digital will begin receiving both design and manufacturing revenues for automotive infotainment products marketed by Fujitsu Ten - the premier brand in that field.
- Revolutionary DivX video devices are being designed in conjunction with that technology leader and will be available later this year.
- Investor relations have improved. The company now conducts quarterly conference calls to answer all shareholder questions directly and posts its answers for all to see on its website.
- The capital structure of the company has been greatly enhanced by the first of a series of large equity infusions which will support a more rapid expansion in retail channels.
Consider this: If e.Digital's retail customers sell out their inventory of EDIG products every 30 days and the EDIG gross margin is 15%, then each $1 million of EDIG inventory will generate about $14 million of annual sales. Reaching a $50 million annual sales level would only require about $4 million in inventory (and sufficient retail locations carrying the products.)
Take a relatively conservative price/sales ratio (given the rapid revenue growth rate such a sales level would imply!) of 5 and you would have a stock priced at least four times the current level. And total sales would probably quickly move well beyond that $50 million mark as telematics, DivX and DataPlay revenues began to flow in to the company.
So despite the constant harping of bashers and critics on other message boards, in what way is this company worth less as a long-term investment than it was one, two or three years ago?
Because the price is lower? A rational man would look at that as an opportunity, not a symptom.
JimC
murgirl, that is the e.Digital Renegade digital audio player.
Good find!
Now we know who is manufacturing it for us (and perhaps some large U.S. retailers soon as well!)
As you know, Maycom also manufactures the MXP-100 for e.Digital.
Another significant step for e.Digital. This agreement gives the company much better access to the highly-developed Asian markets for digital audio players.
Just as Jim Collier felt that he had to bring an e.Digital product to market to demonstrate the viability of the EDIG design for OEMs, the introduction of e.Digital products into the Asian marketplace will reinforce this message to the big consumer electronics firms such as Toshiba, Samsung, Panasonic and Sony on their home markets.
It is very difficult for U.S. brands to penetrate the Japanese and other huge Asian markets. By developing a partnership with DGN we can now expect to sell our products through their established distribution channels.
In addition, it appears that the e.Digital product line sold in the U.S. is about to be greatly expanded with DGN products sold under the e.Digital brand name. This will increase shelf space at the retailer and brand awareness at the consumer level.
The near-term introduction date (July) indicates that e.Digital and DGN have been working together for some time. Once again Jim Collier has kept a major development under wraps until he was ready to announce it.
We have many more such positive developments to look forward to over the next few months and I expect that the majority will suddenly appear as this one, the DivX news and the Fujitsu Ten/e.Digital telematics announcement did, without prior indication.
Great things are happening in the company and the revenues will ramp up rapidly, triggering a substantial growth in the share price.
Are you prepared for the that happy development?
JimC
Large tech stocks have lost huge amounts of market capitalization since the beginning of this year but especially in the past two weeks.
On December 31, 2001 the aggregate market value of the 150 largest technology firms was $2.497 trillion.
On April 19, 2002 that group had dropped in value to $2.236 trillion - a decline of 15.6% for the year.
By this past Friday, May 3, 2002, the group was down to $1.942 trillion, down 26.7% on the year.
In just two weeks the 150 largest technology stocks have lost $293.4 billion in total market capitalization - a decline of 13.1%.
Among the biggest declines were the following:
Microsoft lost $41.1 billion, dropping from $57.20 to $49.56 per share (13.4%).
Intel lost $23.8 billion, dropping from $30.10 to $26.56 pe share (11.8%).
Oracle lost $19.6 billion, dropping from $11.93 to $8.43 per share (29.3%).
Ericsson lost $10.7 billion, dropping from $3.54 to $2.29 per share (35.3%).
Sun lost $7.8 billion, dropping from $9.15 to $6.77 per share (26.0%).
Worldcom lost $12.4 billion, dropping from $5.98 to $1.79 per share (70.1%).
Qualcomm lost $7.9 billion, dropping from $37.26 to $26.84 per shareb (28.0%).
Verisign lost $3.2 billion, dropping from $24.53 to $8.75 per share (64.3%).
Other big drops in share price:
EMC is down from $10.79 to $8.01 (25.8%).
JDSU is down from $5.48 to $3.84 (29.9%).
Palm is down from $3.64 to $2.56 (29.7%).
JDSU is down from $5.48 to $3.84 (29.9%).
Juniper is down from $12.04 to $9.05 (24.8%).
Micron is down from $29.50 to $22.61 (23.4%).
i2 is down from $3.79 to $2.68 (29.3%).
Akamai is down from $3.63 to $2.23 (38.6%).
Conexant is down from $12.12 to $8.06 (33.5%).
etc., etc., etc. ....
So, as you can see, it is not just EDIG that lost ground in the past two weeks. For comparison, EDIG dropped from $0.73 to $0.55 (24.7%).
Like I post every week, keep everything in perspective.
JimC
e.Digital products featured in TigerDirect catalog
I received a catalog from TigerDirect.com in the mail today and noticed that e.Digital products are given one-half page (page 66) of the 2 pages devoted to MP3 players.
The section is headed "e.Digital Super Digital Audio Performance!" and features these products:
MXP100 w.340MB microdrive - $279.99
MP2000 w.128MB CF card - $169.99
MP90 wFM tuner, 64MB MMC - $149.99
VR2032 Voice Magic recorder, 32MB - $99.99
VR2008 Voce magic recorder, 8MB - $69.99
They also list the IBM 340MB Microdrive separately for $129.99 in the e.Digital section.
Great exposure for the products and the name! The e.Digital section is located one page after the order form in the catalog.
JimC
Longer-Term Strategy
While the retail marketplace for e.Digital products may be the best near-term opportunity, longer-term it is clear that Jim Collier is directing his efforts at building a company based upon selling e.Digital-designed products under the brand names of consumer electronics giants.
The approach that he is taking is to first demonstrate the technical viability of a product (prototypes), then the consumer acceptance of that product (e.g. the e.Digital On-Line Store), followed by a successful exposure in significant retail channels (e.g. Good Guys and CompUSA).
At that point the major consumer electronics firms will have evidence that the products are worth branding under their own labels.
Only now is e.Digital finally getting the level of serious interest from such firms that was expected two years ago.
However, at that time the company was pursuing a licensing-only strategy. Today the concept is to provide much more value to consumer electronics firms by offering a wider range of services, thereby greatly increasing the per unit revenue opportunity.
E.Digital intends to offer such firms the option of managing the entire process from design, through manufacturing, distribution and customer service/support.
That is why the agreements Actel (10/16/01 "Silicon Solution for Digital Music and Voice Recorder/Players"), Musical (9/17/01 "Multi-Year Licensing Agreement") and with APL Direct Logistics (9/7/01 "Product Fulfillment and Customer Service Partner") are so significant to the company's future.
Thus far the new strategy has been implemented very well. The recent equity registration gives the company access to the capital needed to take this process much further and to build e.Digital into the successful, growing enterprise that we have all hoped it will become.
JimC
Sales Opportunities in Retail Channels
Since the immediate sales objective of e.Digital seems to be the expansion of its retail distribution for its own brand, consider the following:
Five retailers are the most likely customers for e.Digital products - Best Buy, Circuit City, CompUSA, Good Guys and RadioShack. There are other regional chains (like Good Guys) such as Tweeter and Sharper Image which might also be considered good prospects.
What could e.Digital generate in sales from these retailers?
Best Buy is the largest consumer electronics retailer in the country. Its 420 Best Buy stores and 1,300 Musicland stores will produce $23.300 billion this year.
Circuit City is the second largest consumer electronics retailer with sales of $10.400 billion from its 627 Circuit City and Circuit City Express locations.
CompUSA is owned by a private entity and does not disclose total sales. It operates 221 locations.
Good Guys, located on the West Coast, will generate $800 million from its 79 locations this year.
RadioShack operates 7,199 locations which have an aggregate sales volume of $5.050 billion.
To estimate EDIG sales potential I have assumed that each retailer can sell x units per location per week, based upon its overall size and sales success:
Best Buy: 7 units/week/location (Best Buy locations only)
Circuit City: 3 units/week/location
CompUSA: 4 units/week/location
Good Guys: 3 units/week/location
RadioShack: 1 unit/week/location
At an average wholesale price of $200/unit that would translate into the following annual sales volumes for EDIG:
Best Buy: $30.7 million (153,300 units)
Circuit City: $19.6 million (97,800 units)
CompUSA: $9.2 million (46,000 units)
Good Guys: $2.5 million (12,300 units)
RadioShack: $74.9 million (374,300 units)
Total: $136.9 million (683,700 units)
Added to the above should be some quantity for the on-line sales of e.Digital products at sites such as Tiger Direct and e.Digital's own store.
To put this unit potential in perspective it should be noted that approximately 80 million portable CD and cassette players are sold each year in this country.
To support this sales potential would require at least one month's inventory level. That would amount to $11.4 million. (Additional working capital would be supplied by the Asian manufacturers of the products through normal payment terms.)
The recent equity registration gives e.Digital access to sufficient funds which could support this business opportunity.
Note: This is not a sales projection, but rather an indication of the sales potential which appears to be open to e.Digital in the near future as the company adds retail distribution channels.
Longer-term, much larger mass merchandisers like Wal-Mart and Target could be approached if and when e.Digital establishes its credibility as a high quality consumer electronics brand with proven consumer success.
Other revenue sources will come from DataPlay reference design licensing fees, automotive infotainment and DivX products, all of which are expected to be introduced this year.
Others will likely have different estimates of unit sales potential per location per week or the likelihood of e.Digital's success in adding these retailers, but it is clear to me that sales will quickly ramp up over the next few months.
Jim Collier said that he expects the company to be "revenue neutral" by the Jan-Mar, 2003 period. If the company is producing wholesale gross margins of 15% by that point and the operating expenses are at $500,000 per month that translates into a sales projection of $10 million for that quarter, or an annualized rate of $40 million.
He is also reported to have said that he expects e.Digital products to be in the majority of consumer electronics retail locations by the forthcoming holiday shopping season.
He has delivered on every promise that he has made to e.Digital shareholders and he is obviously expecting sales to attain a very substantial level over the next six to nine months.
JimC
tugs1, sorry but I don't know the answer to that question.
Can I suggest that you send an e-mail to Ran Furman at EDIG?
I believe (not certain!) that his e-mail address is Ran@EDIG.com
EDIG just completed the first of a series of very important and positive transactions which will significantly strengthen this company and benefit its shareholders.
The small equity sale just announced was at a very attractive price, given the recent weakness experienced by the stock. To achieve a direct sale of a large block at a discount of only 10-15% is remarkable.
Remember, there was no underwriter involved so the company saved at least 5-6% by avoiding the cost of a public offering. In addition, selling even that size block into the public market, considering the current climate, would have certainly depressed the share price by more than 15%.
Yesterday I noted that most of the downward price pressure on the stock occurred on just a few days when apparently several shareholders of moderately-large size liquidated their positions. You many blame those foolish decisions, perhaps prompted by fears over the loan refunding issue, as the primary factor behind the current low share price.
E.Digital is proceeding as I expected in my comments last week:
By: jimc1997 $$$$$
26 Apr 2002, 03:37 PM EDT Msg. 961067 of 965835
(This msg. is a reply to 961062 by danielcoats.)
danielcoats, I commented on this the other day:
Once the registration statement is declared effective by the SEC I expect that the company will sell a relatively small block of shares (probably less than 5 million) sufficient to repay the loan and add cash for operations and working capital.
I would guess that the price for this block of shares will probably be at or near (i.e. within 10-15%) the current market price.
I believe that the buyer of the shares will be an institutional investor affiliated with the party who has supported the company with the $1 million bridge loan since January.
I also expect that the company will announce a conference call to address new opportunities available to the company.
Once the market digests this news the share price will likely move up sharply and larger blocks of stock can be sold at more attractive (from the company's perspective) prices as needed to fund working capital expansion.
It is my understanding that the institutional investor who purchased this block of shares was interested in taking a much larger position at current prices. However, EDIG management decided to sell only what was absolutely necessary at this time and compromised with the other party by arranging a partial payment and extension of the loan due date, thereby avoiding a larger sale at these low prices.
As noted by others, this sale occurred without the inducement of warrants or other devices. To my knowledge this is the first time e.Digital or its predecessor, NCII, have ever sold common shares in this manner. This is another step in the maturation process of this company.
Note also how off-base the various prophets of doom have been about the relationship of e.Digital, its lender and this institutional investor. It is a very healthy relationship which will benefit all shareholders of this company.
The new shareholder is in this investment for the long haul and its interests are exactly the same as all other shareholders - a healthy and growing company which will translate into a much higher shareprice over time.
I am very, very pleased by this development. I expect more good news to be released in the very near future.
The upcoming shareholder update will be extremely interesting to all. I have advised Fred to dispense with the call-in portion of that event and to organize it as a series of responses to shareholder e-mails. This should make it much more productive from an information delivery standpoint.
JimC
Today is a good day for all longs to add to their positions in EDIG. I spent the last four days on the West Coast and what I learned made me more confident than ever about both our short-term (next four weeks) and long-term (one to two year) prospects.
The financial concerns about near-term debt refunding (which drove many to sell their shares at absurdly low prices) have been resolved by the registration statement approval and the loan maturity extension. In the recent environment (widespread fears about a debt crisis and lack of news from the company about new business prospects due to the restraints of the S-3 approval process) it is not surprising that the share price declined so significantly.
However, as shareholders realize that those issues have been resolved and with the announcements which the company is now free to make, the share price should begin to recover.
In that regard, the forthcoming conference call should be very encouraging to all.
At some point those who sold will start to jump back in, driving the price upward quickly.
Today's light volume indicates to me that few have really grasped this new reality yet.
Consequently those who act to buy shares at these levels will be well-positioned as events unfold.
JimC