E.DIGITAL DROPS BRANDED PRODUCTS, PURSUES OEM
829 words
2 January 2004
Warren's Consumer Electronics Daily
Volume 4; Issue 1
English
(c) Copyright 2004 Warren Publishing, Inc. All Rights Reserved.
E.Digital has scrapped its branded Odyssey digital audio players as it embarks on an OEM-focused strategy that's forecast to boost revenue to $1.5-$2 million in the 4th quarter ending March 31 from $700,000 the previous quarter. E.Digital unveiled the Odyssey 1000 digital audio platform last Jan. featuring its MicroOS technology, 1.8'' hard drive and 2.5'' LCD. The company has tentative licensing agreements with several companies including ''a major consumer'' brand that's expected to introduce product in late spring, CEO Fred Falk told analysts in a conference call.
E.Digital was founded as Norris Communications in 1988 and was among the early purveyors of handheld storage devices with its Flashback digital voice recorder. It embarked on its retail strategy in 2001 with the Treo and Odyssey series of hard drive and flash-based digital audio players. The company began, however, to move away from retail in late 2002 as it prepared to introduce the Odyssey 1000 platform. The Odyssey personal digital jukebox was available in 15 GB ($299) and 40 GB ($399) configurations and sold through retail and e.Digital's Web site. E.Digital signed an agreement in Sept. licensing its Odyssey platform to an Asian OEM manufacturer, but the decision to halt retail sales of branded products was made ''independently'' of that, a spokeswoman said. E.Digital move was partly prompted by the introduction of OEM branded product based on its platform, she said. The spokeswoman declined to identify the OEM customer. But sources said Gateway introduced and sold online the DMP-X20 jukebox player with a 20 GB hard drive ($299) last fall based on e.Digital's technology. The Gateway device used Hitachi's 1.8'' hard drive. The first revenue from that pact with Asian OEM is expected in the fiscal 4th quarter, company officials said.
Among other tentative licensing agreements e.Digital has struck is one for a personal video player that will feature a 7'' LCD and ship next fall and a flash-based digital audio player based on the MicroOS, Falk said. The latter will contain a 1'' hard drive with a 1.5 GB capacity that was developed by Cornice. The drive, rather than being removable, is designed to sit directly on a motherboard, which cuts costs. E.Digital has been working with Cornice ''several months,'' Falk said. While Taiwanese manufacturer Digitalway and Softeq Development Corp. had earlier signed licensing pacts, neither is involved in the new agreements, a spokeswoman said. Softeq is developing a MicroOS-based digital audio product for HP that the latter expects to sell to one of its customers, e.Digital has said. In total, the licensing agreements are expected to produce annual revenue from ''several hundred thousand dollars to several millions,'' Falk said.
Also on the horizon are the first shipments of a car audio ''infotainment'' system based on e.Digital's MicroOS that will be marketed by Eclipse by Fujitsu Ten. E.Digital signed a licensing agreement with Eclipse in March 2002 and production started last fall, Falk said. Revenue from sales of the Eclipse product is expected to book in the 4th fiscal quarter. The agreement yielded an initial $30,000 in the fiscal year ended March 31, according to SEC documents.
To raise funds for continued product development, eDigital registered with the SEC to sell 23.8 million shares as part of Series D and E private placements of preferred stock made in Dec. 2002 and Nov. 2003, respectively. About 12.8 million shares were issued to noteholders in the conversion of $2 million in promissory notes. The sale of 10.9 million shares of Series E preferred stock yielded proceeds of $1.2 million for e.Digital. The largest holder of Series D preferred stock is the Jerry Polis Family Trust with 8.8 million shares; Basso Equity Opportunity Holding Fund had 1.6 million shares of Series E.
Meanwhile, Apple Computer declined to comment on Internet rumors it would introduce a $99 iPod digital audio player at MacWorld Expo, San Francisco, next week. Such a product would pit iPod against digital audio players marketed by Creative, Dell and D&M Holdings' Rio, among others. Apple, which introduced the iPod in Oct. 2001 with a 5 GB capacity, has occupied the higher end of market with models containing 10-40 GB capacities and $299-$499 pricing. Reports also have suggested Apple may be weighing introduction of so-called mini-iPods with new color or replaceable skins. Apple also is said to be considering a version of an iPod that would be capable of displaying video. Another possible scenario has Apple introducing an iPod based on Toshiba's new 0.85'' hard drive that's expected to be formally unveiled at CES next week. Toshiba is a key supplier of hard drives for the iPod, including the 1.8'' version that helped launch the product.
