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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ x ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 1999.
OR
[ ] Transition report pursuant to Section 13(d) or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______ to _______.
Commission file number: 0-23296
CIDCO INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3500734
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
220 Cochrane Circle
Morgan Hill, CA 95037
(Address of principal executive offices and zip code)
(408) 779-1162
(Registrant's telephone number, including area code)
----------------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
The number of shares outstanding of the Registrant's Common Stock on August 4,
1999 was 13,468,862.
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<PAGE>
CIDCO INCORPORATED
INDEX
PART I. FINANCIAL INFORMATION Page
ITEM 1. Financial Statements:
Balance sheets at June 30, 1999
and December 31, 1998 .........................................3
Statements of operations for the three and six months
ended June 30, 1999 and 1998 ..................................4
Statements of cash flows for the six months
ended June 30, 1999 and 1998 ..................................5
Notes to financial statements ....................................6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................8
ITEM 3. Quantitative and Qualitative Disclosure about Market Risks ......19
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings ...............................................20
ITEM 2. Changes in Securities ...........................................20
ITEM 3. Defaults Upon Senior Securities .................................20
ITEM 4. Submission of Matters to a Vote of Security Holders .............20
ITEM 5. Other Information ...............................................21
ITEM 6. Exhibits and Reports on Form 8-K ................................21
SIGNATURES ...................................................................22
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
CIDCO INCORPORATED
BALANCE SHEETS
(in thousands, except per share data; unaudited)
June 30, Dec. 31,
1999 1998
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents ......................... $ 39,890 $ 12,349
Short-term investments ............................ 8,686 13,975
Accounts receivable, net of allowance
for doubtful accounts of $1,578 and $1,885 ...... 24,182 27,689
Inventories ....................................... 15,861 22,086
Deferred tax asset ................................ -- 1,490
Income tax refunds receivable ..................... -- 18,367
Other current assets .............................. 259 1,547
--------- ---------
Total current assets ............................ 88,878 97,503
Property and equipment, net .......................... 8,294 9,691
Other assets ......................................... 602 473
--------- ---------
$ 97,774 $ 107,667
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .................................. $ 5,197 $ 12,446
Accrued liabilities ............................... 11,572 14,585
Accrued taxes payable ............................. 57 234
--------- ---------
Total current liabilities ....................... 16,826 27,265
--------- ---------
Stockholders' equity:
Common stock, $.01 par value; 35,000 shares
authorized, 14,418 and 14,418 shares issued .... 144 144
Treasury stock, at cost (992 and 339 shares) ...... (6,967) (4,600)
Additional paid-in capital ........................ 88,916 88,916
Retained earnings ................................. (1,145) (4,058)
--------- ---------
Total stockholders' equity ...................... 80,948 80,402
--------- ---------
$ 97,774 $ 107,667
========= =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
CIDCO INCORPORATED
STATEMENTS OF OPERATIONS
(in thousands, except per share data; unaudited)
Three months ended Six months ended
June 30, June 30,
------------------- ----------------
1999 1998 1999 1998
-------- -------- -------- --------
Sales ................................ $ 47,101 $ 43,387 $ 94,303 $112,740
Cost of sales ........................ 34,508 32,990 69,546 85,046
-------- -------- -------- --------
Gross margin ......................... 12,593 10,397 24,757 27,694
-------- -------- -------- --------
Operating expenses:
Research and development ........ 2,642 3,218 4,578 6,808
Selling and marketing ........... 6,593 15,765 13,925 33,414
General and administrative ...... 1,539 2,053 3,058 5,535
Restructuring ................... -- -- -- 2,672
-------- -------- -------- --------
10,774 21,036 21,561 48,429
-------- -------- -------- --------
Income (loss) from operations......... 1,819 (10,639) 3,196 (20,735)
Other income, net .................... 230 983 395 2,432
-------- -------- -------- --------
Income (loss) before income taxes .... 2,049 (9,656) 3,591 (18,303)
Provision (benefit) for income taxes . -- (3,669) -- (6,955)
-------- -------- -------- --------
Net income (loss) .................... $ 2,049 $ (5,987) $ 3,591 $(11,348)
======== ======== ======== ========
Basic earnings (loss) per share ...... $ 0.15 $ (0.43) $ 0.26 $ (0.81)
======== ======== ======== ========
Diluted earnings (loss) per share .... $ 0.14 $ (0.43) $ 0.25 $ (0.81)
======== ======== ======== ========
Common shares outstanding ............ 13,409 14,035 13,584 14,019
======== ======== ======== ========
Common shares assuming dilution....... 14,471 14,035 14,435 14,019
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
CIDCO INCORPORATED
STATEMENTS OF CASH FLOWS
(in thousands; unaudited)
Six months ended
June 30,
--------------------
1999 1998
-------- --------
Cash flows provided by (used in)
operating activities:
Net income (loss) .................................. $ 3,591 $(11,348)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization ................... 2,787 1,935
Deferred taxes................................... 1,490 --
Equity in losses of affiliate ................... -- 205
Changes in assets and liabilities:
Accounts receivable ............................ 3,507 19,612
Inventories .................................... 6,225 (14,867)
Income tax refunds receivable................... 18,367 --
Other current assets ........................... 1,288 (6,694)
Other assets ................................... (129) (3,864)
Accounts payable ............................... (7,249) (72)
Accrued liabilities ............................ (3,013) 2,782
Accrued taxes payable .......................... (177) (1,875)
-------- --------
Net cash provided by (used in) operating activities ... 26,687 (14,186)
-------- --------
Cash flows provided by (used in) investing activities:
Acquisition of property and equipment .............. (1,390) (6,079)
Sale (purchase) of short-term investments, net ..... 5,220 (11,694)
-------- --------
Net cash provided by (used in) investing activities ... 3,830 (17,773)
-------- --------
Cash flows provided by (used in) financing activities:
Issuance of common stock ........................... 178 822
Purchase of treasury stock ......................... (3,154) --
-------- --------
Net cash provided by (used in) financing activities ... (2,976) 822
-------- --------
Net increase (decrease) in cash and cash equivalents .. 27,541 (31,137)
Cash and cash equivalents at beginning of period ...... 12,349 48,253
-------- --------
Cash and cash equivalents at end of period ............ $ 39,890 $ 17,116
======== ========
Supplemental disclosure of cash flow information:
Cash paid for income taxes ......................... $ -- $ 2,075
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying financial information is unaudited, but, in the
opinion of management, reflects all adjustments (which include only normal
recurring adjustments) necessary to present fairly the Company's financial
position, operating results and cash flows for those periods presented. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission. The financial information should be read in conjunction
with the audited financial statements and notes thereto for the year ended
December 31, 1998 included in the Company's most recent Annual Report on Form
10-K filed with the Securities and Exchange Commission. Results for the interim
period are not necessarily indicative of results for the entire year.
Note 2. Inventories
Inventories are stated at the lower of cost or market, cost being
determined using the standard cost method (which approximates first in, first
out). The Company's inventories consist of finished goods and raw materials
purchased for the manufacture of finished goods.
The components of inventory are as follows (in thousands):
Jun. 30, 1999 Dec. 31, 1998
------------- -------------
Inventories, net of reserves:
Finished Goods ................................ $ 9,683 $ 14,005
Raw Materials (1) ............................ 6,178 8,081
-------- --------
$ 15,861 $ 22,086
======== ========
(1) A reserve of $2,212 and 3,935 (in thousands) related to i-Phone raw
materials has been included in restructuring for the periods ended June 30, 1999
and December 31,1998, respectively. See Note 3.
Note 3. Restructuring
The Company incurred a pretax restructuring charge of $19.9 million in 1998
due to implementation of several streamlining programs, including combining
certain marketing and operations functions, restructuring research and
development activities and discontinuing certain products, resulting in asset
write-downs, lease termination costs and accrued employee costs. No additional
restructuring costs have been incurred in 1999.
The following table lists the components of the restructuring accrual for
the quarter ended June 30, 1999:
Employee Asset
(in thousands): Costs Write-downs Leases Total
-------- ----------- ------- -------
Balance at December 31, 1998 ... $ 60 $ 3,935 $ (112) $ 3,883
Actual results for 1999 ........ 345 1,723 (129) 1,939
------- ------- ------- -------
Balance at June 30, 1999 ....... $ (285) $ 2,212 $ 17 $ 1,944
======= ======= ======= =======
Note 4. Earnings per Share
Basic Earnings Per Share ("EPS") is computed by dividing net income
available to common stockholders (numerator) by the weighted average number of
common shares outstanding (denominator) during the period. Basic EPS excludes
the dilutive effect of stock options. Diluted EPS gives effect to all dilutive
potential common shares outstanding during a period using the treasury stock
method. In computing diluted EPS, the average stock price for the period is used
in determining the number of shares assumed to be purchased from exercise of
stock options.
The following table is a reconciliation of the numerators and denominators of
the basic and diluted EPS:
Three Months Six months
ended June 30, ended June 30,
---------------- -----------------
1999 1998 1999 1998
------- ------- ------- --------
Net income (loss) used to compute
earnings per common share ............ $ 2,049 $(5,987) $ 3,591 $(11,348)
======= ======= ======= ========
Denominator used to compute basic
earnings (loss) per common share ..... 13,409 14,035 13,584 14,019
Shares issuable on exercise of options(1).. 1,062 -- 851 --
------- ------- ------- --------
Denominator used to compute diluted
earnings (loss) per common share ..... 14,471 14,035 14,435 14,019
======= ======= ======= ========
Basic earnings (loss) per share ........... $ 0.15 $ (0.43) $ 0.26 $ (0.81)
======= ======= ======= ========
Diluted earnings (loss) per share ......... $ 0.14 $ (0.43) $ 0.25 $ (0.81)
======= ======= ======= ========
(1) Stock options to purchase 292,659 shares of common stock priced at $7.41 to
$24.95 per share were excluded because their inclusion would be anti-dilutive
for the quarter ended June 30, 1999. Stock options outstanding as of June 30,
1998 were excluded because any stock option inclusion would be anti-dilutive.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following information should be read in conjunction with the interim
financial statements and the notes thereto in Part I, Item 1 of this Quarterly
Report.
Historical Background
CIDCO was incorporated in July 1988 to design, develop and market
subscriber telephone equipment that would support Caller ID, Caller ID on Call
Waiting and other intelligent network feature ("Network" or "Network Feature")
Services (individually or collectively "Services") then being introduced by
Regional Bell Operating Companies ("RBOCs") and independent telephone operating
companies, both domestic and international (collectively with RBOCs, "Telcos").
The Company began operations in 1989, initially funding its business with a
capital investment made by its founders. Prior to its initial public offering,
the Company financed its growth principally through internally generated funds
and short-term borrowings. In March 1994, the Company completed its initial
public offering of Common Stock and had two subsequent public offerings in 1994
resulting in capital infusions to the Company totaling approximately $59.4
million.
Historically, the Company's primary sales and distribution channels
have been direct marketing relationships with certain Telcos ("Direct Marketing
Services"), fulfillment of Telco generated orders ("Fulfillment"), wholesale
shipments directly to Telcos ("Direct to Telco"), and, to a lesser extent,
international accounts, retail stores ("Retail"), and original equipment
manufacturing ("OEM") customers. Direct Marketing Services programs are sales
campaigns run by the Company involving the use of consumer mailings and
telemarketing to sell Services for the Telcos which utilize the Company's
products. As part of these programs the Company, acting as the Telco's "agent,"
generates an order for Network Services, such as Caller ID, and then ships on
the Telco's behalf an adjunct product or a phone product to each customer
"acquired" through the campaign. Fulfillment sales occur when the Company
receives an order and ships the requested product directly to the customer. In
the case of Fulfillment sales, the Telcos generate orders by performing the
marketing activities themselves rather than retaining the Company to perform
such services, as in Direct Marketing Services programs. Direct Marketing
Services sales totaled 32%, 49%, and 25% of sales in 1998, 1997 and 1996,
respectively. Fulfillment sales accounted for 34%, 35%, and 43% of sales in
1998, 1997 and 1996, respectively. Sales through Direct Marketing Services and
Fulfillment channels for the quarter ended June 30, 1999 were 12% and 16% of
total sales, respectively, and for the six months ended June 30, 1999 were 17%
and 29% of total sales, respectively.
This Report contains forward-looking statements that reflect the
Company's current views with respect to future events that may impact the
Company's results of operations and financial condition. In this report, the
words "anticipates," "believes," "expects," "intends," "future," and similar
expressions identify forward-looking statements. These forward-looking
statements are subject to risks and uncertainties and other factors, including
those set forth below under the caption "Factors Which May Affect Future
Results," which could cause actual future results to differ materially from
historical results or those described in the forward-looking statements. The
forward-looking statements contained in this Report should be considered in
light of these factors. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof.
<PAGE>
Results of Operations
The following table sets forth for the periods indicated the percentage of sales
represented by certain line items in the Company's Statement of Operations:
Three months Six months
ended June 30, ended June 30,
--------------- ---------------
1999 1998 1999 1998
------ ------ ------ ------
Sales .................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales ............................ 73.3 76.0 73.8 75.4
------ ------ ------ ------
Gross margin ............................. 26.7 24.0 26.2 24.6
------ ------ ------ ------
Operating expenses:
Research and development .............. 5.6 7.5 4.8 6.0
Selling and marketing ................. 14.0 36.3 14.8 29.7
General and administrative ............ 3.3 4.7 3.2 4.9
Restructuring ......................... -- -- -- 2.4
------ ------ ------ ------
22.9 48.5 22.8 43.0
------ ------ ------ ------
Income (loss) from operations ............ 3.8 (24.5) 3.4 (18.4)
Other income, net ........................ 0.5 2.3 0.4 2.2
------ ------ ------ ------
Income (loss) before income taxes ........ 4.3 (22.2) 3.8 (16.2)
Provision (benefit) for income taxes ..... -- (8.4) -- (6.2)
------ ------ ------ ------
Net income (loss) ........................ 4.3% (13.8)% 3.8% (10.0)%
====== ====== ====== ======
Sales
Sales are recognized upon shipment of the product to the customer less
reserves for anticipated returns or, in the case of Direct Marketing Services,
non-retention of certain Services provided by the Telcos, and customer credit
worthiness. Sales increased 9% to $47.1 million in the second quarter of 1999
from $43.4 million in the second quarter of 1998. This increase in sales was
mainly due to the increase in wholesale channel sales of the cordless phone
product, the CL980; partially offset by decreased adjunct sales from both Direct
Marketing Services and Fulfillment Programs. The CL980 is a new cordless phone
product that supports Network Features and our Telco customers are aggressively
promoting it through their own marketing channels. Adjunct product sales
decreased to 43% of dollar sales volume in the second quarter of 1999 from 61%
of dollar sales volume in the second quarter of 1998. This decrease was mainly
due to the decrease in the average adjunct selling price, which fell 33% in the
second quarter of 1999 from the second quarter of 1998 due to competitive
pricing pressures. For the six-month periods ended June 30, 1999 and 1998, sales
decreased 16% to $94.3 million from $112.7 million mainly due to the decrease in
adjunct product sales, partially offset by the increase in cordless phone
product sales.
Gross margin
Cost of sales includes the cost of finished goods purchased from the
Company's offshore contract manufacturers, costs associated with procuring and
warehousing the Company's inventory and royalties payable on licensed technology
used in the Company's products. Gross margin as a percentage of sales increased
to 27% in the second quarter of 1999 from 24% in the second quarter of 1998.
This increase was primarily due to product cost reductions and higher margin
Network Feature phone sales. For the six-month periods ended June 30, 1999 and
1998, gross margin as a percentage of sales increased slightly to 26% from 25%,
respectively. This increase was primarily due to the absence of one-time charges
in the first six months of 1999 that were present in the same period of 1998.
Excluding one-time charges, gross margin for the first six months of 1998 was
31%. The decrease in gross margin between the first six months of 1999 and 1998
(adjusted for one-time charges) was primarily due to the decrease in sales
generated by direct marketing sales programs that, in the first quarter of 1998,
had significantly higher gross margins in conjunction with significantly higher
marketing costs. The Company expects gross margins to vary in the future due to
changes in sales mix by distribution channel and product mix. For the remainder
of 1999, the Company believes gross margins will range between 20% and 30%.
Research and development expenses
Research and development expenses consist of salaries for personnel,
associated benefits and tooling and supplies for research and development
activities. The Company's policy is to expense all research and development
expenditures as incurred except for certain investments for tooling. Research
and development expenses decreased to $2.6 million in the quarter ended June 30,
1999 from $3.2 million in the second quarter of 1998. For the six-month periods
ended June 30, 1999 and 1998, research and development expenses decreased to
$4.6 million from $6.8 million, respectively. These decreases primarily resulted
from decreased spending on iPhone(R)(1) related development projects due to the
discontinuance of its Internet Solutions Division as well as overall expense
reductions due to the restructuring initiated in the third quarter of 1998.
Research and development expenses as a percentage of sales decreased to 5.6% in
the quarter ended June 30, 1999 from 7.5% in the same period of 1998. In the six
months ended June 30, 1999, research and development expenses as a percentage of
sales decreased to 4.8% from 6.0% in the same period of 1998. The Company
expects that research and development spending will remain at approximately the
same absolute dollar level experienced in the first six months of 1999 for the
remainder of 1999.
Selling and marketing expenses
Selling and marketing expenses consist of personnel costs, telephone
and electronic data exchange expenses, promotional costs and travel expenses.
Selling and marketing expenses decreased to $6.6 million in the quarter ended
June 30, 1999, from $15.8 million in the comparable period of 1998. For the six
months ended June 30, 1999, selling and marketing expenses decreased to $13.9
million from $33.4 million in the comparable period of 1998. Selling and
marketing expenses decreased as a percentage of sales to 14.0% in the quarter
ended June 30, 1999 from 36.3% in the same period of 1998. In the six months
ended June 30, 1999, selling and marketing expenses decreased as a percentage of
sales to 14.8% from 29.7% in the same period of 1998. These decreases were
primarily due to decreased external marketing costs for the Company's Direct
Marketing Services programs for Network Services. These external marketing costs
totaled $4.1 million in the first six months of 1999 as compared to $19.9
million in the same period of 1998. The balance of the decreases were due to
overall expense reductions resulting from the restructuring initiated in the
third quarter of 1998. The Company expects that selling and marketing expenses
as a percentage of sales may vary in the future due to changes in sales mix by
distribution channel. For the remainder of 1999, the Company believes selling
and marketing expenses will range between 15% and 20% of sales.
General and administrative expenses
General and administrative expenses consist of primarily salaries,
benefits and other expenses associated with the finance and administrative
functions of the Company. General and administrative expenses decreased to $1.5
million in the quarter ended June 30, 1999 from $2.1 million in the comparable
period of 1998. In the first six months of 1999, general and administrative
expenses decreased to $3.1 million from $5.5 million in the comparable period of
1998. As a percentage of sales, general and administrative expenses decreased to
3.3% in the quarter ended June 30, 1999 from 4.7% in the comparable period of
1998. In the first six months of 1999, general and administrative expenses
decreased to 3.2% as a percentage of sales from 4.9% in the comparable period of
1998. These decreases are mainly due to the absence of a one-time charge of $1.2
million incurred in the first quarter of 1998, as well as overall expense
reductions due to the restructuring begun in the third quarter of 1998. The
Company believes that general and administrative expenditures will remain at
approximately first six months spending levels during the remainder of 1999.
Restructuring
The Company incurred no additional restructuring charges in the first
six months of 1999 as compared to $2.7 million in the first six months of 1998.
The Company currently expects no further restructuring charges in 1999.
Provision (benefit) for income taxes
The Company recorded no tax provision in the first six months of 1999
due to a loss carry-forward from 1998. In the first six months of 1998, the
benefit for income taxes reflects an effective tax rate of 38%.
(1) iPhone is a registered trademark of InfoGear Technology Corporation.
Liquidity and capital resources
The Company's cash, cash equivalents increased $27.5 million during the
six months ended June 30, 1999 primarily from cash generated from operations of
$26.7 million, the sale of short-term investments of $5.2 million and the
proceeds from the issuance of common stock of $0.2 million, partially offset by
acquisition of treasury stock of $3.2 million and acquisition of property and
equipment of $1.4 million. Cash generated by operations of $26.7 million
resulted primarily from the receipt of income tax refunds of $18.4 million,
decreased inventories of $6.2 million, net income of $3.6 million, decreased
accounts receivable of $3.5 million, depreciation and amortization of $2.8
million, decreased deferred taxes payable of $1.4 million, and decreased other
assets of $1.2 million, partially offset by decreased accounts payable of $7.2
million and decreased accrued liabilities and income taxes payable of $3.2
million.
The Company had working capital of $72.1 million as of June 30, 1999,
as compared to $70.2 million at December 31, 1998. The Company's current ratio
increased to 5.3 to 1, as of June 30, 1999, from 3.6 to 1, as of December 31,
1998. The average daily sales outstanding rate decreased to 47 days from 83 days
in the second quarter of 1999 over the last quarter of 1998.
The Company has a line of credit for up to $15 million. Borrowings
under the line bear interest at the bank's base rate and the interest is payable
monthly. The bank's base rate was 7.75% per annum at June 30, 1999. Borrowings
under the line are secured by substantially all of the Company's assets. As of
June 30, 1999, the Company had not borrowed any funds under the line. The line
is primarily used as security for letters of credit used to purchase inventory
from international suppliers. Letters of credit secured by this line totaled
$2.5 million as of June 30, 1999.
On January 27, 1999, the Company announced plans to purchase up to two
million shares of its outstanding Common Stock. As of June 30, 1999, the Company
had repurchased 713,000 shares at an aggregate purchase price of $3.1 million.
The Company plans to continue to invest in its infrastructure,
including information systems, to gain efficiencies and meet the demands of its
markets and customers. The Company believes its remaining 1999 capital
expenditures will be approximately $3.0 million. The remaining 1999 capital
expenditures are expected to be funded from available working capital. The
planned expenditure level is subject to adjustment as changing economic
conditions necessitate. The Company believes its current cash, cash equivalents,
short-term investments, and borrowing capacity will satisfy the Company's
working capital and capital expenditure requirements through the end of 1999.
Factors That May Affect Future Results
Dependence on Telco Services and Maturation of Market
Approximately 51%, 65% and 84% of the Company's revenues during the
first six months of 1999 and the years 1998 and 1997, respectively, came from
the Company's sales of Network Feature adjuncts and the balance from Network
Feature phones. The size of the overall market for Network Feature products and
Services is a function of the total number of potential subscribers with Network
Feature-enabled telephone lines and the rate of adoption of Network Feature
Services, or the "penetration rate," among those subscribers. Customer adoption
of Network Feature Services has been in the past, and likely will be in the
future, dependent on a variety of factors, including the rate at which Telcos
from time-to-time elect to promote Network Feature Services, the perceived value
of the Services to end users, including the extent to which other end users have
also adopted Network Feature Services, and the end user cost for the Services.
There can be no assurances that Telcos will continue to promote Network Feature
Services that one or more Network Feature Services will gain market acceptance
or that, in areas where the Services are accepted, those markets will not become
saturated. In addition, even if peak market penetration for Network Feature
Service has not been achieved for the entire United States market, one or more
regional markets may become saturated. Further, the market for Network Feature
adjunct products may be eroded as Network Feature functionality is designed into
competitively priced phone products as a standard feature. While this adjunct
market decline may increase the market for the Company's Network Feature phones,
this could increase the Company's dependence upon growth of this product line
and there is no assurance that the Company will not see increased competition in
this arena, which could drive down margins and sales. Declines in demand for or
revenues from Network Feature Services, whether due to reduced promotion of such
Services by Telcos, competition, market saturation, price reduction,
technological change or otherwise, could have a material adverse affect on the
Company's business, operating results or financial condition. In addition, as
penetration rates for adoption of Network Feature Services increase towards
projected saturation levels, the expenses, or "cost per order," the Company must
incur in its Direct Marketing Services arrangements to obtain incremental end
user adoption of Network Feature Services increases, which may result in
unfavorable pressures on the Company's profitability.
Dependence on Telcos; Concentrated Customer Base
A significant portion of the Company's revenues is derived from a small
number of Telcos. During the first six months of 1999 and the years 1998 and
1997, respectively, the percentage of revenue derived by the Company from its
significant (greater than 10% of total sales) customers was 80% (three
customers), 62% (four customers) and 77% (four customers). There can be no
assurance that the Company will retain its current Telco customers or that it
will be able to attract additional customers. The Company generally does not
enter into long term contracts with its Telco or other customers where on-going
minimum purchases are required. Moreover, the arrangements are typically both
nonexclusive and terminable at will following a specified notice period,
generally 20 to 60 days. In addition, these Telco customers may have significant
leverage over the Company and may try to obtain terms relatively favorable to
the customer and/or subsequently change the terms, including pricing, on which
the Company and such customers do business. If the Company is forced to accept
such terms and/or change the terms, including pricing, on which it does
business, the Company's operating margins may decline and such decline may have
a material adverse effect on the Company's business, results of operations or
financial condition.
The Company's sales and operating results are substantially dependent
on the extent of, and the timing of, this relatively small number of Telcos'
respective decisions to implement and from time-to-time promote Caller ID,
Caller ID on Call Waiting and other Network Services on a system-wide or
regional basis. The extent to which the Telcos determine to implement and/or
from time-to-time promote Network Services may be affected by a wide variety of
factors, including regulatory approvals, technical requirements, budgetary
constraints at the Telcos, consolidation among Telcos, market saturation for the
Services, the profitability of the Services to the Telcos, market acceptance for
the Services and other factors. The Company typically has little control over
any of these factors. There can be no assurances that the Telcos will continue
to implement and/or promote Network Feature Services, or that the Telcos will
select the Company's product and program offerings. Moreover, the Company
believes that certain Telcos have begun to perform for themselves the customer
acquisition services currently undertaken by the Company through its Direct
Marketing programs, rather than through third parties such as the Company. The
continuation of this trend among the Telcos could have a material adverse affect
on the Company's business, results of operations and financial condition. The
Company operates with little or no backlog and its quarterly results are
substantially dependent on the Telcos' implementation and/or promotion of
Services on a system wide or regional basis during each quarter. The Company's
operating expenses are based on anticipated sales levels, and a high percentage
of such expenses are relatively fixed. As a result, to the extent that the
Telcos delay the implementation and/or promotion of these Services which were
anticipated for a particular quarter, the Company's sales and operating results
in that quarter may be materially and adversely affected.
New Product Introduction; Technological Change
The telecommunications industry is subject to rapid technological
change, changing customer requirements, frequent new product introductions and
changing industry standards, which may render existing products and Services,
obsolete. The Company's future success will depend in large part on its ability
to timely develop and introduce new products and services which keep pace with,
and correctly anticipate, these changes and which meet new, evolving market
standards and changing customer requirements, as well as its ability to enhance
and improve existing products and services. Product introductions and short
product life cycles necessitate high levels of expenditure for research and
development. There can be no assurance that the Company's existing markets will
not be eroded or that the Company will be able to correctly anticipate and/or
timely develop and introduce products and services which meet the requirements
of the changing marketplace or which achieve market acceptance. If the Company
is unable to develop and introduce products and services which timely meet the
changing requirements of the marketplace and achieve market acceptance, the
Company's business, results of operations or financial condition may be
materially and adversely affected.
In particular, the Company is seeking to expand its product offerings
into a new business area, Internet/E-Mail appliances, and expects to devote a
significant portion of its research and development resources on enhancing and
further developing its MailStation(TM)(2)product line, "e-mail appliances" which
allow electronic messaging via an easy-to-use device. These are significantly
new areas for the Company and its existing research and development as well as
sales and marketing personnel. There can be no assurances that the Company will
be successful in timely developing such products or that, if developed, there
will be a market for such products. Moreover, there can be no assurances that
the Company's existing personnel will have the skills necessary to timely
develop, market and sell products for this market or that, if it becomes
necessary to do so, the Company will be able to hire the necessary skilled
personnel to develop, market and/or sell products in these new areas.
Significant undetected errors or delays in new products or releases may
affect market acceptance of the Company's products and could have a material
adverse effect on the Company's business, results of operations or financial
condition. There can be no assurances that, despite testing by the Company or
its customers, errors will not be found in new products or releases after
commencement of commercial shipments, resulting in loss of market share or
failure to achieve market acceptance. Any such occurrences could have a material
adverse effect on the Company's business, results of operations or financial
condition. Further, if the Company were to experience delays in the
commercialization and introduction of new or enhanced products, if customers
were to experience significant problems with products or if customers were
dissatisfied with product functionality or performance, this could have a
material adverse effect on the Company's business, results of operations or
financial condition.
Fluctuations in Quarterly Revenues and Operating Results
The Company has experienced in the past, and may experience in the
future, significant fluctuations in sales and operating results from quarter to
quarter as a result of a variety of factors, including the timing of orders for
the Company's products from Telcos and other customers; the success of the
Company's own direct marketing programs, in particular, deriving adequate sales
volumes while controlling related costs; the addition or loss of distribution
channels or outlets; the impact on adoption rates of changes in monthly end-user
charges for Services; the timing and market acceptance of new product
introductions by the Company or its competitors; increases in the cost of
acquiring end-user customers for Services and the resulting effects on operating
expenses; technical difficulties with Telco Networks; changes in the Company's
product mix or sales mix by distribution channel that may affect sales prices,
margins or both; technological difficulties and resource constraints encountered
in developing, testing and introducing new products; uncertainties involved in
the Company's entry into markets for new Services; disruption in sources of
supply, manufacturing and product delivery; changes in material costs;
regulatory changes; general economic conditions, competitive pressures,
including reductions in average selling prices and resulting erosions of
margins; and other factors. Accordingly, the Company's quarterly results are
difficult to predict until the end of each particular quarter, and delays in
product delivery or closing of expected sales near the end of a quarter can
cause quarterly revenues and net income to fall significantly short of
anticipated levels. Because of these factors, the Company believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful and that such comparisons should not be relied upon as indications of
future performance. Due to all of the foregoing factors, it is likely that in
some future quarter the Company's operating results will be below the
expectations of public market analysts and investors. In such event, the price
of the Company's Common Stock would likely be materially adversely affected.
Need to Develop Alternative Distribution Channels
Historically, the Company's Telco customers have been the primary
distribution channel for the Company's products. However, the Company is seeking
to diversify its distribution channels toward direct-to-end-user, retail and
other alternate distribution channels to the extent such channels do not
conflict with current Telco partnerships, with the goals of broadening the
Company's market opportunities and adding predictability to the Company's
quarter-by-quarter revenues. In addition, the Company is considering alternative
channels for the marketing and sale of its new MailStation product. Moving into
these new channels may involve a number of risks, including, among other things,
the establishment of new channel relationships and presence, the cost of
creating brand awareness and end-user demand in the new channels, the viability
of the Company's product offerings in the new channels and managing conflicts
among different channels offering the Company's products. There can be no
assurance that the Company will be successful in identifying and exploiting
alternate distribution channels or in addressing any one or more of these risks.
If the Company is not successful, it may lose significant sales opportunities
and will continue to be substantially dependent upon the Telco channel for sales
of its products.
Risks Related to Contract Manufacturing; Limited Sources of Supply
The Company's products are manufactured for the Company by third
parties that are primarily located in Malaysia, China and Thailand. The use of
third parties to manufacture products involves a number of risks, including
limited control over production facilities and schedules and the management of
supply chains for the manufactured products. Moreover, reliance on contract
manufacturers in foreign countries subjects the Company to risks of political
instability, financial instability, expropriation, currency controls and
exchange fluctuations, and changes in tax laws, tariffs and rules. See "Risks
Relating to International Sales." Many of the key components used in the
Company's products are available either only from single sources or, even if
potentially available from multiple sources, involve relatively long lead times
to manufacture, such that the Company cannot quickly obtain additional supply
without incurring significant incremental costs. In general, the Company does
not have supply contracts with its suppliers and orders parts on a purchase
order basis. The Company's inability to obtain sufficient quantities of
components required, or to develop alternative manufacturing capability if and
as required in the future, could result in delays or reductions in product
shipments that could materially and adversely affect the Company's business,
results of operations and financial condition.
Dependence on Key Personnel; Hiring and Retention of Employees
The Company's continued growth and success depend to a significant
extent on the continued services of its senior management and other key
employees and its ability to attract and retain highly skilled technical,
managerial, sales and marketing personnel. Competition for such personnel is
intense. There can be no assurance that the Company will be successful in
continuously recruiting new personnel or in retaining existing personnel. None
of the Company's employees is subject to a long-term employment agreement. The
loss of one or more key employees or the Company's inability to attract
additional qualified employees or retain other employees could have a material
adverse effect on the Company's business, results of operations and financial
condition. In addition, the Company may experience increased compensation costs
in order to attract and retain skilled employees.
Risks Relating to International Sales
The Company has had relatively limited international sales to date.
However, the Company believes that international sales, particularly in Latin
America, Asia-Pacific and Europe, may represent an increasing percentage of the
Company's sales in the future. The Company's future success will depend in part
on its ability to compete in Latin America, in the Asia-Pacific region, and in
Europe, and this will depend on the continuation of favorable trading
relationships between the region and the United States. The Company's entry into
international markets will likely require significant management attention and
may require significant engineering efforts to adapt the Company's products to
such countries' telephone systems. Moreover, the rate of customer acceptance of
Network Feature Services in areas outside of the United States is highly
uncertain. There can be no assurance that the Company's Network Feature products
will gain meaningful market penetration in target foreign jurisdictions, whether
due to local consumer preferences, local regulatory requirements, technological
constraints in the local Networks, the extent to which the local Telcos
determine to promote Network Feature Services, or other factors. Dependence on
revenues from international sales involves a number of inherent risks, including
new or different regulations, economic slowdown and/or downturn in the general
economy in one or more local markets, international currency fluctuations,
general strikes or other disruptions in working conditions, political
instability, trade restrictions, changes in tariffs, the difficulties associated
with staffing and managing international operations, generally longer
receivables collection periods, unexpected changes in or impositions of
legislative or regulatory requirements, reduced protection for intellectual
property rights in some countries, potentially adverse taxes, delays resulting
from difficulty in obtaining export licenses for certain technology and other
trade barriers. International sales will also be impacted by the specific
economic conditions in each country.
Management of Infrastructure
The Company's future success will require, among other things, that the
Company continue to improve its operating and information systems. In
particular, the Company must constantly seek to improve its order entry and
tracking and product fulfillment service capabilities and systems in order to
retain and/or obtain Telco customers. The failure of the Company to successfully
manage and improve its operating and information systems may adversely affect
both the Company's ability to obtain and/or retain its Telco customers and
accordingly, could have a material adverse effect on the Company's business,
results of operations or financial condition.
Competition
The telecommunications industry is an intensely competitive industry
with several large vendors that develop and market Network Feature products.
Certain of these vendors have significantly more financial and technical
resources than the Company. The Company's competitors include in-house divisions
of the Company's current and potential customers, as well as companies offering
specific services and large firms. In addition to U.S. companies, competitors
for the Company's phone products include both large Asian and European consumer
electronics companies and smaller Asian and European manufacturers. If the
Company's existing customers perform directly the customer acquisition services
currently undertaken by the Company through its Direct Marketing Services
programs, or if potential customers retain or increase internal capabilities to
provide such services, the Company's business, results of operations and
financial condition could be adversely affected. The introduction of new
competitive products into one or more of the Company's various markets could
have a material adverse effect on the Company's business, results of operations
or financial condition.
Limited Protection of Intellectual Property;
Risk of Third-Party Claims of Infringement
The Company has patent protection on certain aspects of its existing
technology and also relies on trade secret protection, copyrights, trademarks
and contractual provisions to protect its proprietary rights. There can be no
assurance that the Company's protective measures will be adequate to protect the
Company's proprietary rights, that others have not or will not independently
develop or otherwise acquire equivalent or superior technology, or that the
Company will not be required to obtain royalty-bearing licenses to use other
intellectual property in order to utilize the inventions embodied in its
patents. There also can be no assurance that any patents will be issued pursuant
to the Company's current or future patent applications or that patents issued
pursuant to such applications or any patents the Company currently owns will not
be invalidated, circumvented or challenged. Moreover, there can be no assurance
that the rights granted under any such patents will provide competitive
advantages to the Company or be adequate to safeguard and maintain the Company's
proprietary rights. In addition, the laws of certain countries in which the
Company's products may from time-to-time be sold may not protect intellectual
property rights to the same extent as the laws of the United States.
Frequent claims and litigation involving patent and other intellectual
property rights characterize the telecommunications industry, like many
technology-based industries. The Company from time to time may be notified by
third parties that the Company may be infringing patents owned by or proprietary
rights of third parties. The Company has in the past and may in the future have
to seek a license under such patent or proprietary rights, or redesign or modify
their products and processes in order to avoid infringement of such rights.
There can be no assurance that such a license would be available on acceptable
terms, if at all, or that the Company could so avoid infringement of such patent
or proprietary rights, in which case the Company's business, financial condition
and results of operations could be materially and adversely affected.
Additionally, litigation may be necessary to protect the Company's proprietary
rights. Any claims or litigation involving the Company's owned or licensed
patents or other intellectual property rights may be time consuming and costly,
or cause product shipment delays, either of which could have a material adverse
effect on the Company's business, financial condition and results of operations.
Possible Volatility of Stock Price
The market price of the Company's Common Stock has experienced
significant fluctuations and may continue to fluctuate significantly. The market
price of the Common Stock may be significantly affected by factors such as the
announcement of new products or product enhancements by the Company or its
competitors, technological innovation by the Company or its competitors,
quarterly variations in the Company's or its competitors' products and services,
changes in revenue and revenue growth rates for the Company as a whole or for
specific geographic areas, products or product categories, changes in earnings
estimates by market analysts, speculation in the press or analyst community and
general market conditions or market conditions specific to the technology
industry or the telecommunications industry in particular. The stock prices for
many companies in the technology sector have experienced wide fluctuations that
often have been unrelated to their operating performance. Such fluctuations may
adversely affect the market price of the Company's Common Stock. Year 2000
Compliance
The information provided below constitutes a "Year 2000 Readiness
Disclosure" for purposes of the Year 2000 Information and Readiness Disclosure
Act.
The Year 2000 problem arises from the use of a two-digit field to
identify years in computer programs (for example, 98=1998), and the assumption
of a single century, namely the 1900s. A program created with this assumption
may read or attempt to read "00" as the year 1900. If computer or information
systems do not correctly recognize date information when the year changes to
2000, there could be an adverse impact to the operations of a company who is not
sufficiently prepared. To minimize the possibility and extent of such an impact
to the Company's operation, the Company has put into place a formal Year 2000
Compliance Project that focuses on four key readiness areas: (1) product
readiness, addressing the Company's product functionality; (2) internal
infrastructure readiness, addressing internal information systems and
non-information technology systems; (3) supplier readiness, addressing the
preparedness of our supplier base; and (4) customer readiness; addressing the
preparedness of our customer base. The Company has appointed a Year 2000
Compliance Officer, and for each readiness area, a task force is systematically
performing company-wide risk assessment and contingency planning, conducting
testing and remediation, and communicating with employees, suppliers, customers
and third-party business partners to uncover problem areas and develop action
plans related to the Year 2000 problem. Below are overviews of each readiness
area and the Company's progress thereon for becoming ready for the Year 2000.
Product Readiness
The Company has completed its review of Year 2000 issues with respect
to its product line. The Company's telephones, telephone adjuncts and
accessories, and other products, with the exception of one product, do not
calculate dates or rely upon software that calculates dates. Any date
information that is displayed on these products is provided by the Telco Service
provider over the Telco's Network, and only month and day information is sent
over the Network and displayed by the products. Additionally, the user can set
the date information in two (2) of the Company's current products. In other
words, The Company's products simply display the date information that the Telco
provides, or in some cases, the date information that a user inputs.
Accordingly, Year 2000 issues are not relevant to the functionality of these
products. For the one product that calculates dates, the MailStation e-mail
appliance, the related software will, under normal use, record and process
calendar dates falling on or after January 1, 2000 with the same functionality,
data integrity and performance as the software records and processes calendar
dates on or before December 31, 1999. In any future products developed by or for
the Company that may calculate or utilize date information, the Company will
take steps to assure Year 2000 compliance.
Internal Infrastructure Readiness
Remediation of internal information systems, hardware and software is
in process and is mostly complete. The Company has migrated to a new software
platform for it's enterprise-wide accounting and management system, which is
warranted to be Year 2000 compliant and which is currently being tested for
compliance. For other systems, the Company is in the process of modifying
non-compliant systems, has established a schedule for prioritized system
compliance, and is in the process of executing the Compliance Project. In
addition to applications and information technology systems, the Company is
implementing, testing and developing remediation plans for embedded systems,
facilities and other operations. One particular area of activity is in
examining, testing and reviewing the interfaces between the Company's various
internal systems, some of which may require further revision to be Year 2000
compliant. Most systems are now compliant and the Company expects all systems to
be compliant by no later than September 1999.
(2) MailStation is a trademark of CIDCO Incorporated.
<PAGE>
Supplier Readiness
This program is focused on minimizing the risk associated with
suppliers in two areas: (1) a supplier's ability to continue providing products
and services, and (2) the Year 2000 compliance of suppliers in their internal
operations. The Company has contacted all its material suppliers. The Company
has received responses from the vast majority of its preferred suppliers.
Supplier issues that potentially affect the Company's operations and products
are targeted to be resolved by September 1999. The Company has informed its
suppliers that it will reevaluate its business relationship with any supplier
who either fails to respond or cooperate with this project, or who fails to
certify as to Year 2000 compliance by July 1999. The Company has also placed a
number of non-mission critical suppliers on hold and continues to work with and
seek alternatives to certain mission critical suppliers who have not certified
that they are compliant.
Customer Readiness
This program is focused on minimizing the risk associated with our
customers in two areas: (1) a customer's ability to continue ordering and
utilizing the Company's products and services, and (2) the Year 2000 compliance
of customers in their internal operations, especially with respect to Electronic
Data Interchange ("EDI") with the Company. The Company has contacted all its
significant customers. The Company has received responses from most of its
customers and anticipates that the majority of customers will respond and
provide the Company with the requested information, and will participate with
the Company in joint testing of EDI processes and interfaces. Customer issues
that potentially affect the Company's sales of products and services are
targeted to be resolved by September 1999.
Risk Factors, Costs, Remediation and Contingency Planning:
The Company's overall Year 2000 project is currently in the remediation and
contingency planning phases on a number of fronts. The Company believes that its
greatest potential risks are associated with the systems of the Company's
suppliers, and secondarily, problems associated with the Company's
infrastructure needs. For example, it is possible that infrastructure service
providers (e.g., electricity and/or water providers) may, despite assurances, be
unable to deliver services without interruption to the Company's headquarter
facilities and/or to the Company's overseas manufacturers. For example, reports
indicate that China may suffer electricity outages for failure to adequately
prepare for the year 2000. The Company utilizes contract manufacturers in
Malaysia, China and Thailand and plans to build surplus product inventory this
year as a contingency measure. Additionally, it is possible that one or more of
the Company's Telco customers may choose to defer the commencement of programs
that they would ordinarily start in the last quarter of 1999 or the first
quarter of 2000 to avoid Year 2000 issues that may arise with respect to Network
Services. Such a decision could have a detrimental impact upon the Company's
revenue for those quarters.
With respect to suppliers and information systems, the Company is well
along with performing remediation and contingency planning, but cannot predict
whether significant problems will yet be identified. However, based on the
status of the assessments made and remediation plans developed and implemented
to date, the Company currently does not believe that problems identified will
pose significant issues, or that direct costs associated with such issues will
exceed $1,000,000. Once the Company has completed its assessments, developed
remediation plans for all problems, developed remaining contingency plans, and
completely implemented and tested its remediation plans, it will be better able
to estimate remediation costs, and it will provide updated estimates at that
time.
As the Year 2000 Compliance Project continues, the Company may discover
additional Year 2000 problems, may not be able to develop, implement, or test
remediation or contingency plans in time, or may find that the costs of these
activities exceed current expectations. In many cases, the Company will be in a
position of relying on assurances from suppliers and infrastructure service
providers that new and upgraded information systems and other products will be
Year 2000 compliant. The Company plans to test such third-party products and
services, but cannot be sure that its tests will be adequate or that, if
problems are identified, they will be addressed by the supplier in a timely and
satisfactory way. Because the Company uses a variety of information systems and
has additional systems embedded in its operations and infrastructure, it cannot
be sure that all of its systems will work together in a Year 2000-compliant
fashion. Furthermore, the Company cannot be sure that it will not suffer
business interruptions, either because of its own Year 2000 problems or those of
its customers or suppliers whose Year 2000 problems may make it difficult or
impossible for them to fulfill their commitments to the Company.
Item 3 Quantitative and Qualitative Disclosure About Market Risk
Management believes that the market risk associated with the Company's
market risk sensitive instruments as of June 30, 1999 is not material, and
therefore, disclosure is not required.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
PhoneTel Communications, Inc. filed a complaint in August 1998 in
Federal District Court in Texas, alleging that CIDCO Worldwide, Inc. (an
affiliate of the Company) and 14 other defendants violated one or more of
PhoneTel's telephony patents. Although this matter is at an early stage,
management believes that the Company has not infringed any of PhoneTel's
patents, and that it would prevail in any litigation which may proceed from this
complaint. Management of the Company currently believes that the outcome of this
matter and the ultimate effect if any will not materially impact the Company's
consolidated financial position, results of operations, or cash flows.
In the ordinary course of business, the Company may be involved in
other legal proceedings. As of the date hereof, the Company is not a party to
any other pending legal proceedings that it believes will materially affect its
financial condition or results of operations.
ITEM 2. Changes in Securities
None.
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Stockholders on May 26, 1999.
There were three proposals under consideration:
1)To elect one Class B Director to hold office for a three-year term
and until a successor is elected and qualified. Ernest K. Jacquet
was nominated. The results were:
VOTES FOR 11,998,632 VOTES WITHHELD 137,288
2)To approve the Company's 1999 Employee Stock Purchase Plan.
The results were:
VOTES FOR 11,780,185 VOTES AGAINST 322,661
VOTES ABSTAINED 33,074
3)To ratify the appointment of PricewaterhouseCoopers LLP as
independent public accountants for the Company for the fiscal year
ending December 31, 1999. The results were:
VOTES FOR 12,068,586 VOTES AGAINST 46,983
VOTES ABSTAINED 20,351
<PAGE>
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Index to Exhibits at page 23 below.
(b) Reports on Form 8-K.
The Company filed no reports on Form 8-K during the three
months ended June 30, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CIDCO INCORPORATED
August 6, 1999 By:/s/Paul G. Locklin
Date Paul G. Locklin
President and Chief Executive Officer
Chairman of the Board of Directors
August 6, 1999 /s/Richard D. Kent
Date Richard D. Kent
Chief Financial Officer, Chief Operations
Officer, Chief Accounting Officer and
Corporate Secretary
<PAGE>
CIDCO INCORPORATED
Index to Exhibits
Exhibits Page
3.1 Amended and Restated Certificate of Incorporation. (1) --
3.2 Second Amended and Restated By-laws of CIDCO Incorporated dated
January 26, 1999. (7) --
4.1 Amended and Restated Loan and Security Agreement dated March 29,1999
between Registrant and Comerica Bank-California. --
4.2 Rights Agreement dated as of January 27, 1997, between the Registrant
and United States Trust Company of New York, as Rights Agent. (3) --
10.4 Patent License Agreement dated as of May 1, 1989 between the
Registrant and American Telephone and Telegraph Company. (1) --
10.5 Form of Indemnification Agreement. (1) --
10.17 Sublease dated Nov. 18, 1994, between Thoits Bros. and
the Registrant for 180 Cochrane Circle. (2) --
10.18 Lease dated Nov. 1, 1994, between Thoits Bros., Inc. and the
Registrant for 105 Cochrane Circle, Units A, B, C, D, and E. (2) --
10.20 Registrant's 1994 Directors' Stock Option Plan. (2) --
10.21 Registrant's 1994 Employee Stock Purchase Plan. (2) --
10.24 Employment Agreement dated June 28, 1996 between Registrant
and Ian Laing. (4) --
10.30 Registrant's Second Amended and Restated 1993 Stock Option Plan. (5) --
10.31 Registrant's Amended and Restated 1998 Stock Option Plan. (5) --
10.32 Employment Agreement dated June 1, 1998 between Registrant and
Richard D. Kent. (5) --
10.33 Employment Termination Agreement dated Nov. 12, 1998 between
Registrant and Daniel L. Eilers. (5) --
10.34 Employment Agreement dated Nov. 12, 1998 between Registrant and
Paul G. Locklin. (6) --
10.35 Employment Agreement dated Sept. 30, 1994 between Registrant and
Timothy J. Dooley. (6) --
10.39 Employment Agreement dated June 5, 1998 between Registrant
and William A. Sole. --
(1) Incorporated herein by reference to the Company's
registration statement on Form S-1, File No. 33-74114.
(2) Incorporated herein by reference to the Company's Form
10-K for the year ended December 31, 1994.
(3) Incorporated herein by reference to the Company's Form
10-Q for the quarter ended March 31, 1997.
(4) Incorporated herein by reference to the Company's Form
10-Q for the quarter ended June 30, 1997.
(5) Incorporated herein by reference to the Company's Form
10-Q for the quarter ended September 30, 1998.
(6) Incorporated herein by reference to the Company's Form
10-K for the year ended December 31, 1998.
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