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Filed By CIDCO Incorporated
(Commission File No.: 000-23296)
Pursuant to Rule 425 Under the Securities Act
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: CIDCO INCORPORATED
Commission File No. 000-23296
TELEPHONE CONFERENCE CALL TRANSCRIPTION
Male 1: When prompted, please state your name, affiliation, phone and
email. We do ask that you please spell out any unusual
pronunciations.
Operator: Please stand by. We're about to begin.
Male: Thanks.
Operator: Good day everyone and welcome to the sale of CIDCO's telephony
business solidified strategic shift to internet appliance market
conference call. Just a reminder. This call is being recorded. At
this time for opening remarks and introductions, I would like to
turn the call over to Mr. Richard Kent, Chief Financial Officer,
Chief Operating Officer, and Corporate Secretary. Please go ahead,
sir.
Kent: Thank you. And welcome everyone to CIDCO's conference call
regarding our announcement yesterday on the sale of our telephony
equipment business. I'm Rick Kent. I'm the Chief Financial Officer
and Chief Operating Officer of CIDCO, Incorporated. Joining me
today are Paul Locklin, President and Chief Executive Officer, and
Bill Sole, Executive Vice President of Worldwide Sales and
Marketing. If you have not received a copy of the press release,
please call our offices at 408.778.8172 or Bates Churchill at
713.267.7280 and a copy will be sent to you immediately. Before we
start the conference call, I'd like to mention that comments made
on this call may contain projections or other forward-looking
statements regarding the future financial performance of the
Company. We would caution you that such statements are only
predictions and actual events or results may differ materially. We
refer you to the Company's Form 10-K for the year-ended December
31st, 1999 on file with the SEC. This document contains important
factors that could cause actual results to differ materially from
those contained in the Company's projections or forward-looking
statements. This call is being recorded on behalf of CIDCO and is
copyrighted material. It cannot be recorded or re-broadcast
without the Company's express permission and your participation
implies consent to the call's recording. After we have completed
our discussion, we will open the call to your questions. I'd now
like to turn the call over to Paul Locklin, our President and CEO.
Locklin: Thank you, Rick, and good morning to everyone. Today's conference
call is a real pleasure for us at CIDCO because the news is of
such importance to our future. Just to recap for you, for those of
you who may not have the news release in hand, we announced
yesterday a definitive agreement to sell our telephony equipment
business. The sale includes our entire line of telephones and
telephony products. The exciting news is that this is a milestone
and shift in our strategy by allowing us to focus entirely on the
Internet appliance and service business, which is the real key to
our future. Remember, this is not a new strategy or a new product
line for us. But this event is the final step in fulfilling a
strategic vision
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that we first embarked on over a year ago with the introduction of
Mailstation, our flagship Internet appliance product. I'd like to
spend a few minutes explaining why this makes such good business
sense for us and to describe the market successes and
opportunities we see for Internet appliances and services. I will
then turn the call back to Rick, who will provide some of the
particulars of the sale.
First of all, keep in mind that we've been operating under two
distinct and very different business models. Our telephony
equipment business has been a hardware model, focussed on
servicing large telephone companies. Our Internet appliance
business, however, is a recurring revenue subscription based model
that generates higher margins during the ongoing life of the
customer subscription. The sales channel is completely different
and is based on reaching consumers through national retail
outlets. Demand generation strategies and tactics are different as
well, with our new model concentrating on consumer marketing and
retail distribution. We already have Mailstation in more than a
dozen retail chains, including K-Mart, Radio Shack, Target, Office
Depot, Best Buy, Staples and others. There are also major
differences in price points, technical infrastructure requirements
and in other areas. The point is, we have been operating under two
very separate businesses at a time where we need to concentrate on
developing and increasing our penetration of a new market. This
transaction, then, means that both businesses can now be operated
on a much more focused basis, resulting in more efficient
organizations that can be competitive and ensure growth and
customer satisfaction.
Another beneficial result of the sale is that CIDCO now becomes a
pure play that will make it much easier for the investment
community to evaluate, analyze and compare investment
opportunities. Let's take a brief look at some market
considerations. Internet appliances have gained increased
popularity among consumers of all income levels as price points
have dropped and functionality has increased. Industry research
projects that penetration will increase among all income levels
during the next four years. One of the best demonstrations of
consumer acceptance is the increased availability of these
products in major retail outlets like the ones I mentioned. CIDCO
is in the enviable position of leading a category that we
originated with the introduction of Mailstation, which has
generated customer satisfaction levels that may well be
unprecedented for a product of this type. For instance, a market
research study we commissioned among Mailstation users that have
been using the service for three months shows that 1) over 90% of
the users are very or extremely likely to recommend Mailstation to
someone else; 2) more than 85% of the users rate themselves as
very or extremely satisfied with the product; 3) 89% of users say
they are very or extremely likely to purchase Mailstation service
again. And here's a finding that demonstrates one of the most
important characteristics of the business model: the generation of
recurring revenue. Ninety percent of customers say they intend to
renew the service at the end of the first year. These findings
validate our strategy to develop and market Mailstation against
some of the key consumer adoption barriers to PCs and Internet
services. Some of these important barriers include the
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cost, complexity, inconvenience and obsolescence of PCs against
which Internet appliances like Mailstation are ideally positioned
among both users and non-users of PCs. So we have the opportunity
to service a growing and potentially huge market that will
continue to demand alternate Internet access devices that are
simple, convenient and affordable. Accordingly, we are going to
devote more emphasis and resources to product development
activities with the goal of getting products and services to
market faster. These activities will be funded by the working
capital generated by this sale.
Also, I couldn't be more pleased that we were able to reach this
agreement with an experienced telco leader like David Lee. His
experience and reputation in the communications industry and his
commitment to the telephony equipment business assures us that our
telco customers and their consumers will be well served. David
plans to keep the telephony business management and engineering
teams in tact and has committed to continuing the quality customer
service and technical leadership we established at CIDCO. I'd like
to now turn the call back to Rick, who will give you some of the
details of the financial transaction.
Kent: Thank you, Paul. As we announced in the news release, the total
value of the transaction will range from $15 to $20 million. We
feel very satisfied that one of our financial goals was to
monetize the assets of our telephony equipment business and this
range represents a good premium over book value. Here's how it
breaks down: inventory and capital equipment will be sold for an
initial $5 million payment and then paid for as used after the
initial $5 million threshold is reached. That will total about
$9.5 million for both, including $1.5 million as an outright
purchase of capital equipment and about $8 million for the
inventory. So we're receiving an up-front payment of about $3.5
million for a portion of the inventory. The remaining $4.5 million
of inventory will be paid for as the inventory is drawn down in
the normal course of business. In addition, CIDCO will be paid a
decreasing royalty of the revenue over a four-year period. The
royalty will be 4% of revenue for the first 12 months, 3% for
months 13 through 24, 2% for months 25 through 36, and 1% for
months 37 through 48. We also retain the telco equipment accounts
receivable as of closing, which we estimate will be approximately
$20 million and also the obligation for the accounts payable and
other accrued expenses of about $6.5 million. The net result is
that we are freeing up approximately $23 million of working
capital and we will receive future royalty payments of around $10
million. On a discounted cash flow basis, those future payments
are in the $6-$7 million range. Cash flow to CIDCO from the
purchase may range up to $20 million depending on the amount of
these royalty payments.
As we announced, we're going to use the resulting working capital
to fund product development activities as well as an aggressive
marketing campaign. So the transaction is a key instrument in
fulfilling our new strategic direction, providing significant
additional resources to the Internet appliance and services
business and enabling us to remain debt free. At this time, we'd
be glad to answer any questions that you may have. So, Operator,
can we have questions?
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Operator: Thank you, Mr. Kent. The question and answer session will be
conducted electronically. If you would like to ask a question,
please do so by pressing the star or asterisk key followed by the
digit "1" on your touchtone telephone. We'll proceed in the order
that you signal us and we'll take as many questions as time
permits. Once again, please press star "1" on our touchtone
telephone to ask a question. [Pause] We'll go first to Brian
Tenuse with First Security Van Casper.
Tenuse: Good morning, Paul, Rick.
Both: Good morning, Brian.
Tenuse: Three, three quick questions for you. First, will you change
facilities as a result of this? Secondly, do you have plans to
change the name of the Company? And can you give me a sense of
subscription pace in September? I've got the data for July and
August.
Kent: Brian, this is Rick. I'll handle the facilities question real
quick. What we plan to do or hope to do is to sublet one of our
buildings to that, the new company, the telco company so that we
will be out of that building. We plan to consolidate as much as
possible into our headquarters building and that probably will be
our single focus here in Morgan Hill. At the same time, we're
opening a little bit bigger facility up in Mountain View. We've
had one in Palo Alto, but we're going to move that to Mountain
View for an expansion of our product development activities under
Dave LaRue and Tim Dooley, but most of us will be here in Morgan
Hill, but we will have that product development office. Paul, do
you want to handle the name and ...
Locklin: Yes. Brian, as far as the name change. It's something that's under
current consideration, but we have no plans in the immediate
future to make a name change. We appreciate maybe some of the
positive aspects of doing that, but at this point in time, it's
not an immediate thing on our list of activities here. I think
Bill can probably address the subscriber activities for the month.
Sole: Hi, Brian. The subscriber activation rate is running ahead of
August. We think that we'll be over 8,000, maybe approaching 9,000
for the month. There is three things actually right now that are
impacting that. One: we're getting into better seasonality for
people shopping. July and August are very slow retail months so
we're seeing an uptake in traffic in the stores to date. Second,
is the retail outlets. As you know, we opened up Radio Shack,
Target and K-Mart. We did that in August, late August. It takes a
while for these retail outlets to become productive. You may have
noticed the third element, which is more advertising, more media
coming out, in that Target did a circular ad last Sunday--K-Mart,
I'm sorry. And we're seeing a very large subscription activation
trend this week as a result of that. In fact this week, we'll have
by far our best activation week ever. So, we're starting to now
see the impact of those additional mass market retailers coming on
board, the advertising trend and shopping coming back.
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Tenuse: Paul, do you think you've already established some branding with
the CIDCO name and the Mailstation unit and is that part of the
reason for the contemplation of changing the name and secondly,
did you get any data from your marketing study that would tell you
Yahoo-enabled units are selling better, I guess I would say, than
your previous versions? Or can you tell?
Locklin: Brian, as far as the name change, certainly one of the things that
we've done is that we've invested a fair amount of money in the
CIDCO name and we'll be investing more money between now and the
end of the year with fairly heavy advertising. So that's, that's
one of the large considerations in making a name change. And we're
still wrestling with that, like they said before. As far as the
Yahoo content incorporated in the Mailstation, you know, I think
that most of our sales now have been with Yahoo content and so we,
so it's not, we really haven't been able to detect a, a
difference. We didn't have that many sales prior to adding the
Yahoo content to the, to the service, so...I just, I don't think
we had enough experience prior to putting the Yahoo in to have a
real comparison. But it does seem to something that it's
important. People, people do like it and, you know, in the future
we may have a variety of products, some with, some without but
right now we're pretty [indecipherable] at it.
Okay, thanks.
Operator: We'll take our next question from Scott Butler with Scott Butler.
Butler: Hi, congratulations, gentlemen. I am trying to get a better sense
of kind of what the SGNA run rate is going to be like going
forward. Can you give us some color on that, then I have a couple
of follow-ups.
Kent: Sure. This, this is Rick. That the key component when you talk
about SGNA is, is really the sales and marketing component. We are
planning on spending heavy advertising during the remainder of
this year, throughout 2001 and at this point in time, into 2002.
So we are looking at around twenty million dollars per year for
that external marketing piece. When I look at the fourth quarter
which is coming up for this year, the year 2000, about half of
that twenty million dollars spent will be in the fourth quarter so
almost ten million dollars, I believe, will be in that quarter.
Beyond that our run rates will be fairly level. When you talk
about GNA and regular sales spending, we're gonna be, oh,
somewhere in the six and a half million plus range for the rest of
that. But again, the big component really is, is external
marketing.
Butler: In surveys the stores up here in the Portland, Oregon area, I've
noted a lot of out-of-stock situations at K-Mart and Target.
Target, incidentally, up here did run a, a circular also and there
seems to be a lot of indications that, that restocks could be
higher levels. Can you comment on that and, and comment on your
prior
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expectation for having one hundred thousand subscribers by
year-end and what, what your sense is there? I, I know we don't
have a lot of data points.
Sole: Sure, Scott. This is Bill. Its, its good news and bad news that
we're running into the out-of-stocks there in, in your area. We've
heard actually a number of comments and, and that range. The
K-Mart ad that ran was, was very successful from everyone's
standards and they bought an initial stock of inventory of about
ten thousand units. Deployed about five thousand into the field
and left about five thousand in the deep seas so we're working
diligently with K-Mart to try to get the inventory into the stores
as quickly as possible and they are, in fact, working on reorders.
We have gotten significant reorders from all of our run rate
customers that have been on board with the product and we recently
got some sizable reorders from Radio Shack going forward so we
think that we are still on track to hit that hundred thousand
subscriber level. One of the big things is Q4 we have some
significant activity taking place, aside from the seasonality, of
course, that, that will get into the Christmas shopping season, we
have our television advertising campaign which will kick off
October 2nd. Actually, there's a spot on the Monday night football
game and then most of the rest of the spots are on cable, cable
stations so we'll have about four weeks of good TV advertising
that will boost things up. We have a large promotion that will
take place in the November timeframe right after Thanksgiving with
a thirty dollar carry case being given away by the retailers for
people that purchase a Mailstation and we think that those two
activities combined with the Christmas seasonality will give us
very strong subscription rates in the Q4 timeframe. So we still
see hitting that number.
Kent: And, Scott. This, this is Rick again. I just want to interject. In
that SGNA question, we're actually more like 12 to 13 million in
SGNA before the external marketing. Wanted to get the right number
out there.
Butler: Okay, I'm sorry. Let me, let me clarify that. So you're at...you
had indicated that you were at 20.
Kent: Twenty.
Butler: Are you talking about consolidated?
Kent: Yeah. I'm talking about if I'm looking at the Mailstation business
run rate for SGNA without external marketing or an annual basis...
It's going to be 12-13 million dollars.
Butler: Okay, gotcha. And just one other question. Product at, there's
been some Mailstations showing up on Egghead. Has that been a
successful channel for you and is that somewhat a function of what
may have been perhaps a weaker than expected August with some
overflow or can you describe that, that situation?
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Sole: This is Bill, again, Scott. The sense that we're on websites with
the product. They're getting it probably through one of our
distribution partners which would be Ingram or DNH. We don't get
very many sales off our web-based activities. We are, of course,
doing a fair amount of advertising with Yahoo. We have a store on
the Yahoo site but again, this is a, a new product in a new
category and so the Internet lends itself very well to products
that people know about. That they can shop online and get the best
possible price. For us we really need brick and mortar kind of
locations for people to come and touch and see the product so the
bulk of our sales will come from traditional retail and other
traditional channels with web-based activities kind of growing
over time as the category becomes much more recognized.
Butler: Right. Yeah. Hard to sell something over the Internet if they
don't have Internet access, I guess.
Sole: Well, that...well you do, do get a gifting piece in there so for
people that, that, you know, are online and have email and, and
see a product like this, they, you know, reference it to someone
who maybe isn't online but, it's, it's still a challenge until
people know what it is.
Butler: Got it. Congratulations. Good luck.
Sole: Alright. Thank you.
Operator: We'll go next to Michael Cody with Sodini & Company.
Cody: Thanks. Hi, Rick, Paul and Bill.
Both: Hi, Michael. Hi, Mike.
Cody: I have a couple of questions for you. Could you break it down, the
accounts receivable and inventory on the balance sheet as of June
30 in regard to what was for telephony and what was for the
Mailstation?
Sole: Okay, I'm gonna deal a little bit from memory here. In general, as
of June, our receivables were a great extent telco. You know,
somewhere in the 90% range telco. I believe they were a little bit
over twenty million dollars in that point in time. When we look at
the inventory, it was probably about half and half telco and
Mailstation. The key to inventory will really be, actually the key
to both of those will be the activity in the month or so before we
actually close the transaction and we'll probably close the
transaction sometime in the December 1st timeframe. You know, it's
subject to Hart-Scott-Rodino and subject to shareholder approval
so we've gotta get those things done but the activity in the telco
business in the month or month and a half leading up to that close
will be the key factor in our inventory balance at that time and
also our receivables balance at that time.
Cody: Okay, and you said that you're going to retain the telco
receivables until the deal is finalized...or, I'm....
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Sole: Yes, what we're really selling is we're selling the capital
equipment and we're selling the inventory so as of the close we
will keep all accounts receivable up to the date of the close and
we'll collect those over the, you know, the normal telco
collection period of about 60 days. So those will be ours.
Anything after the close of, of business on the day we, we close
the deal will be receivables for the new company.
Cody: Right. Right. Okay, could you tell me...we talked about SGNA and,
and external marketing expenditures, what about your R&D plan. It
sounds like you're gonna ramp those up. It sounds like perhaps
considerably.
Sole: Yes. In the, the product management area, if I look at just pure
R&D spending, in the first part of the year for Mailstation, we
were spending in the range of 600,000 a, a quarter. We will
quickly be up to around a million a quarter in pure R&D spending
so it's like exclude facilities and allocations. Pure R&D spending
will just about double pretty quickly here. As we look out say a
year from now, that spending will probably go up another 60% over
the next year so there's gonna be some heavy additions there in
terms of people. We identified a number of folks currently that
were...some were starting and some we're going after...that we're
hiring on. As a matter of fact, we been Mountain View and we're
excited about the, the talents we're getting in that group.
Cody: Okay. And what about the telco channel in terms of selling
Mailstation. Will you continue to sell their SBC or, or what about
internationally like Telephonica de Orsintina?
Sole: This is Bill. We will certainly continue the international
activities. In fact, we're looking at multiple, different business
models for the international market space so we'll continue that
piece of it. SBC, we had mentioned before, will no longer have the
e-message product as they focus heavily on the DSL area. We are in
potential conversations with other telephone companies. If you,
you know, can come to a business model that works mutually, we
certainly will address that as an optional channel for us going
forward as well to compliment the retail channel.
Cody: Okay. Alright, thanks. And just one last question. Rick, if you
wouldn't mind, very briefly, could you try and run through that
purchase price one more time? I, it was a little bit too fast for
me to get it in terms of the initial five million dollar payment
and then one and a half million, I think, was for capital
equipment in or out and then for inventory and then I got the
royalty amounts and that's gonna be approximately ten million of
the purchase price which is 67 million of the present value. What
component of that is in the 15 to 20 million, is this present
value or is the, you know, the total value?
Kent: The 15 to 20 million really takes into account the present value
of the stream of payments. You know, that stream of payments, the
royalty payments, is based on their revenue in each of those four
years which is something that's a little bit hard to predict so I
look at that stream of payments, you know, I would predict
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somewhere in the 10 million dollar range again with a discounted
cash flow value of somewhere in the 6-7 million dollar range.
Cody: Okay. So how do you come to the 15-20 million total purchase
price. Let's say that the present value is 7 million and there's 5
million initial payment. Where...then you're at 12 million there,
then where's difference?
Kent: Okay. So if I have about, in capital equipment and inventory, I
have about 9.5 million.
Cody: Okay.
Kent: So the 5 million dollar initial payment pays for the capital
equipment...
Cody: Okay.
Kent: ...and then the first 3.5 million of inventory. Again, we're
dealing with some variables here. It depends how large inventory
is on the date of close but if I estimate that it, there's about
another 4.5 of inventory that will be paid for then I'm up to 9.5
real quickly.
Cody: I see.
Kent: ...another 5.5 million of the royalty payments, I'm up to 15
million. If I look at what, what kind of our projections, I go a
little bit above that so I'm in the 16-17 million on a discounted
basis.
Cody: Okay. Alright, I gotcha. I understand now what the, what the
inventory situation. Great. Thank you.
Kent: Thank you.
Operator: We'll go next to Brian Seltzan of Waveland Capital Management.
Kent: Brian?
Operator: Mr. Seltzan, your line is open.
Brian: Hello, can you hear me?
Kent: Yes.
Brian: Oh, sorry about that. So...a couple of questions. You guys are
getting royalty on sales over the next four years. Is that right?
Kent: That is correct.
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Brian: So if I sort of just add up 4, 3, 2 and 1 and get 10 and it seems
like 10 points would imply like 100 million of sales over the next
four years. It seems very low, doesn't it?
Kent: Well, we can hope that that's low and that we'll get greater
amounts. I think the 100 million number that, that you suggest is
one that probably that most people are comfortable with. Brian,
one of the, one of the issues with the business has been it's been
tough to predict...
Brian: Right.
Kent: ...as you know. You know, I'd rather be conservative in these
numbers then, then really aggressive.
Brian: Okay, fair enough. Couple other questions. How many employees are
you gonna have at the new company? At, at Mailstation?
Kent: The Mailstation will have approximately 100 employees. About half
of those are customer support people so they're people supporting
our end customer on the telephone with our end customers and doing
activations on, on the units.
Brian: Got you. Can you draw any conclusion from the, you know, from the
monthly...the people that decide to go monthly as opposed to pay a
year in advance. Can you draw any conclusions from the
Yahoo-enabled units versus the non-Yahoo-enabled units in terms of
term or is there not really enough data from the older units?
Sole: Brian, this is Bill. I, we don't really have enough data from
that. We're not necessarily saying any positive or negative impact
from it. One thing we do notice with the Yahoo-enabled unit is we
do get more questions from people because it's a new feature set
essentially for people to use. But other than that we don't, we
don't really have any data to determine whether we get more or
less return from it.
Brian: Okay. And can you just sort of highlight, you know, new product
introductions and timing and what you guys have planned, you know,
just sketch it out roughly?
Sole: This is Bill again. We have some introductions that will be made
at Comdex for a couple of new versions of products. We have
product roadmap that will be unveiled here before too long but it
is just a bit premature right now to go through that. We're
expecting to have multiple new products that will, that will be
introduced over the course of the next year, many of them in the
first half of next year.
Brian: And the price points of those products would be similar?
Sole: We will have a range of price point products. We certainly have a
ninety-nine dollar price point product now. We will have enhanced
feature assessed with
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products that come out that will have a higher price range. We
have plans to, you know, get to a lower price point over time as
well. So we'll be, we'll have a very nice product line up with a,
with a good range in pricing.
Brian: Okay. Thanks guys.
Kent: Thanks, Brian.
Operator: We'll take our next question from Clint Codhill of Codhill Capital
Management.
Codhill: Good morning, guys.
Sole/Kent: Good morning, Clint.
Codhill: Most of my questions have been answered and I just have a few real
quick ones here. First, in terms of the, in the terms of the telco
business, any of the guys from that group will remain with, with
the Mailstation and I guess the question kind of leads towards the
potential for cordless product and so I guess there is some sort
of engineering and technology and that will be required to make
that work.
Locklin: Clint, this is Paul. The, the two groups were fairly distinct here
so it's gonna be fairly easy to, to make the division and all
folks that have been with the telco business will go. However, we
have cross licenses back and forth here so all the technology
that's associated with the cordless activity will be available to
us for development into Mailstation products and we're seriously
thinking about that.
Codhill: Okay. This is, this is kind of clean, cleaning house question for
Rick. Just so aside from the 1.5 million capital equipment that
will be reduction on your long-term assets, any other changes to
your long assets or current assets?
Kent: Well if you look over, over the say our regular operating period,
obviously our receivables will go down significantly because we'll
be collecting telco receivables and not replacing those
immediately. The Mailstation business will increase, which will
have those receivables going up over time but we'll collect the
telco receivables. Inventory, again, will go down pretty
substantially as they pay for the telco inventory. As far as the
rest of current assets, no, we retain all, all the cash and
investments, marketable securities that we have so the rest should
stay fairly stable.
Codhill: Gotcha. So, so in essence basically you're, you're liquefying the
inventory and accounts receivable and converting it into cash.
Kent: That's correct.
Codhill: And in terms of current cash position and fiscal sale, what, what
is the current cash position and have you guys been able to sell
the Cisco stock yet?
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Kent: Well, Clint, the cash position as of the end of June was 42
million.
Codhill: Sure.
Kent: We are utilizing some cash now as we accelerate our marketing
campaign.
Codhill: Sure.
Kent: There's, there's no question about that. As far as particular
balances, I'll wait until the end of the quarter to actually get
into that. In terms of Cisco, we have been able to sell 90% of the
Cisco stock. There was a holdback of 10% of that stock which Cisco
does in every transaction. However, we've collared that 10% so
that we have no market risk on that stock.
Codhill: Gotcha. That, that should be it.
Kent: Good. Thank you, Clint.
Operator: We'll go now to David Adagio of Boston Company.
Adagio: Hi, gentlemen. My question's been answered, thank you.
Kent: Thanks, David.
Operator: And we'll take a follow-up question from Michael Cody of Sodini &
Company.
Cody: Thanks. Was there any perceived value in the development work that
you've done with the voice over IP-enabled telephones and I'm
assuming that the royalty payments to you in future years will
include sales of those funds.
Locklin: Michael, this is Paul. Yeah, the, the future royalty payment will
include those phones, as well as any future products that the new
company develops. So yes, I think the, the new IP activities were,
the value that was recognized in the, in the purchase price and
the we should enjoy the benefits of that, as they as these
products come to market in term of the royalty stream.
Cody: Okay, thanks. And do you, are you still expecting for those to
come to market in the fourth quarter?
Locklin: The plan was to introduce products in the fourth quarter on a, on
an evaluation basis. We didn't expect to have any significant
revenues in the fourth quarter but I think in the first half of
next year there will be.
Cody: Okay, thank you.
Operator: Our last question comes from Brian Selzan of Waveland Capital
Management.
Selzan: Hey, guys. Just one follow-up. Rick, relative to the tax impact
from this transaction, can you just tell me if, you know, qualify
what that was?
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Kent: Well, the key in most of this is when we look at the capital
equipment and the inventory they're effectively being sold for
book value so they're being monetized. The profit or gain comes
from the royalty, the stream of royalty payments. We have a very
significant NOL which stays with the Mailstation business so we
again, we're not paying taxes until we are seeing significant
bottom line profit from the Mailstation business.
Selzan: Okay. On the Cisco stock, you also sold and you're able to shelter
the gain there as well?
Kent: That's correct.
Selzan: Okay. Great. Thank you.
Kent: Thanks.
Operator: At this time, we have no further questions. Mr. Kent, I'd like to
turn the conference back over to you for any additional or closing
remarks.
Kent: I would like to thank everybody for joining us this morning.
Again, the company is very pleased to have completed this
transaction or have signed a definitive agreement and hope to
complete the transaction by around the 1st of December. Again,
thank you for joining us today and... Thank you very much.
Operator: That concludes today's conference. Thank you for your
participation. You may now disconnect.
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WHERE YOU CAN FIND ADDITIONAL INFORMATION
Investors and security holders of CIDCO are advised to read the proxy statement
regarding the business combination transaction referenced in the foregoing
information, when it becomes available, because it will contain important
information. CIDCO intends to mail a proxy statement about the transaction to
its stockholders. Such proxy statement will be filed with the Securities and
Exchange Commission. Investors and security holders may obtain a free copy of
the proxy statement (when available) and other documents filed by the company
at the Securities and Exchange Commission's web site at http://www.sec.gov. The
proxy statement and such other documents may also be obtained from CIDCO by
directing such requests to the address listed above.
CIDCO and its officers and directors may be deemed to be participants in the
solicitation of proxies from CIDCO's stockholders with respect to the
transactions contemplated by the definitive agreement. Information regarding
such officers and directors is included in CIDCO's Annual Report on Form 10-K
for the fiscal year ended December 31, 1999 and in its proxy statement for its
2000 annual meeting, filed with the Securities and Exchange Commission. These
documents are available free of charge at the Securities and Exchange
Commission's Web site at http://www.sec.gov and from the CIDCO contact listed
above.
