Replies to post #3244 on Wave Systems Corp. (fka WAVXQ)

[2bStealthy]

Zeev,

Thank for your valuable thoughts.

It is important to note that the vast majority of folks here are really good people. They have been wandering in the wilderness and have only come out of the desert very recently.

If you can stick with it for a few more weeks you will find that many of our best posters will grow upon you (not like a cancer though).

We have been hashing this IP stuff around for a long time and we are a bit weary. Give us some time. We will get a second wind.

[Bluefang]

Dr. Ze'ev: Your course of action for selecting stocks sounds well grounded in common sense, as far as evaluating Wave's prospects or any other.

I am not a technical person as you obviously are, but let me ask a couple of questions. The patents did not impress you, you stated.

If they were commonplace and not particularly unique, why would Intel feel compelled to incorporate the Wave model into their motherboard? If they did not meet the unique test, why not just make something similar, different enough to escape a lawuit and go forward? Same question about IBM, HP, Compaq, Infineon, AMD, National Semi, and others.

Part of the reason many of us Wavoids continue to hold and support this company is because of precisely one of your other points--there is no competition at any price, let alone half.

Sure, there certainly are other encryption technologies, but none that we know of that are programmable after the sale as Wave's is, so as to be able to keep up with advances in this sector. And if you are talking about software only, forget it.

We limit our discussion to the combination of hardware and software encryption. And while at it, you might also think about the concept of trust at the edge. Where there is no Fort Knox storing billions of gold ingots in one central place, just lots of little fortified huts where the couple of coins inside hardly offers any reward for breaking in.

Perhaps some of the other more technical minds can engage you, and in the process, illuminate for us all, whether we are chasing a false god.

Many of the deep thinkers here welcome the challenge of a good hard independent look at a company we think has something unique, necessary and eminently saleable to offer the world. If you find our flaws, it would be helpful to all of us.

Thank you for your most thoughtful reply. Interesting that you met Peter Sprague back in the very first days. Perhaps after doing some research you may join this merry little band. We would be honored to have someone with your credentials.

Sincerely, Bluefang

[aleajactaest]

1. Does it work?
2. Is it protectable and what is the IP ownership
3. Is there a demonstrated predecessor need?
4. Is it sufficiently better than alternatives? (what I termed "twice as good at half the price")
5. Will it be used?
6. Are there potentially better future competitive alternatives?

1. Yes.
2. There are several kinds of business advantage: one of these is being first to market (arguable benefits), another is incumbency (you have to remove whoever is there), another is IP protection (valuable if defensible), another is critical mass (eg you accrue the benefits of scale economies), another is strategic leverage (eg Microsoft's advantage in owning the OS), another is product leadership (ie remaining ahead of the competition in a competitive market), another is contractual advantage (partners are committed to your program under contract), another is financial strength (ie you can engage more effectively in price competition). You narrow the discussion by focusing so narrowly. You might ask, what are Wave's putative advantages. There are several, which others will doubtless enumerate.
3. Looking at various markets, probably. But it isn't obvious to a casual observer. Would you observe the need for house keys if you lived in a land without doors?
4. What alternatives? In the solutions market for "trustworthy" products, there are few if any identifiable competitors.
5. Will it be used? The market study Wave paid for (quibbles about independence) by an apparently objective and reputable third party (quibbles partially answered) gave results similar to those for the introduction of airbags. We all use airbags.
6. Yes. I haven't thunk of 'em yet, but I mean to. I'll be ready in 2011. Or put another way, it's not so much whether as when.

[BCaSE]

Zeev, Sorry I cannot be more concise.

Using Mr. Aleajactaest’s list of your topics, I would add to his good thoughts and those of others. I’m fairly sure you will realize I have aged (not matured) as a WAVX owner and may be dysfunctional from the last few years of nose bleed highs and bone crushing lows. Still, I am in good shape for the shape I’m in. I am not in love with Wave, but I may be in love with the “promise”. This means I will sell the stock as I feel the promise is fulfilled. I don't seem myself as a great investor (didn't sell enough WAVX in $40s). Bottom Line: That’s sort of who I am and here’s my two cents (is this metered).

1. Does it work?

I don’t know for sure. It works on view graphs. It works in controlled demonstrations. It apparently worked in an EDS test lab. Major OEMs are buying into it as if it works. Large industry groups are certifying that it works (again in the lab). I suspect it works after a fashion, has “features” yet unknown, and will be made to work better with each release. That describes it as a product on a single computer. If we look across products, they seem to have viable ideas in several interesting (money making) spaces. If we go to a distributed environment with complex services using evolving standards - well I think everyone (that includes WAVX) will have a problem for awhile, but I think they will work well enough to make a run on the brass ring. OK, OK, I want it to work.

2. Is it protectable and what is the IP ownership

They seem to have bargained their hardware IP for service rights but that probably was a good move for the long run. I don’t know about patents, but the cynic in me says this is a lawyer (read $$) issue. Wave does not have a lot of $$. Beware of Microsoft. Based on the earlier stated observations, WAVX has viable design IP in the rapidly evolving/changing services environment. They appear to have a head start (a product), but if there were no contenders in the wings, there will be lots after the last few days. Can they hold them off. I don’t know. Lack of money to do research may be a problem.

3. Is there a demonstrated predecessor need?

Yes. It is all around us. We are surrounded by protocols, workflow, documents, value icons, etc. As we move to a wireless, distributed, connected environment there is a on-going need for a trust and privacy infrastructure that is beyond the security sold for computers today. The trust and privacy that is coming electronically already exists in industrial solutions that are a foundation to society and our economy. The trick is to provide what works today cheaper, easier, etc. (your next question).

4. Is it sufficiently better than alternatives? (what I termed "twice as good at half the price")

Too early to tell in definitive manner. However, I think the Cubic agreement underscores industries realization that a new “player” is on the field. They will use the technology for military solutions, but a lot of their business is in commercial sectors and I suspect they see the potential for a much better technical solution at a greatly reduced cost. Otherwise they would not change (trust and privacy systems are usually best for the available $$).

5. Will it be used?

Another great question. My first thought is “not until it is available”. My second thought is it will not be truly available until more infrastructure boot straps up. Putting it in almost every computer should.do the trick. At that point, I think there are so many things that need to be flowed, controlled, validated, verified, maintained secure, kept separate, non repudiated, selectively networked, etc. - it will be used (and I am hoping WAVX is a prime mover in the space for the next three to ten years).

6. Are there potentially better future competitive alternatives?

I am sure there are, but the data point right now is nobody has found them yet. If WAVX gets rolling, they should have the funds to remain competitive - given good management. Have you asked about management yet?

7) Bonus credit: Management -

As near as I can tell, it has been excellent for the last three trading days.
Prior to that, I think Scott Adams would have better ideas than I do.
I like them because they hang in there and stay upbeat.
Some days I get concerned that they are coming up with too many good ideas.
I can live with that.
Heck, I would invite any of them down to the wine cellar if they are in town (Of course, they will get better selection if the stock price goes up - if that is a bribe reportable to the SEC, I formally withdraw the offer).

B.