------------------------------------------------------
***More on 3D Scanners
(October 26)
Since the Wave Report published the article on the 3d scanner market in Wave #895, two items have come to our attention. One is the Minolta Vivid 700 scanner. This portable, 3D non-contact laser scanner is priced at $37,500. It was developed for use in industries such as 3D game software development, production/animation, architecture, fashion/textiles, and industrial design.
Second Geometrix has created a club on the Yahoo! Clubs web site to stimulate the market for 3D Scanners. They are currently looking for support from other scanner companies to promote the site as a resource for those interested in the latest scanning technologies.
http://www.minolta3d.com
http://clubs.yahoo.com/clubs/threedimensionalscanning
***Primary Images Announces Barracuda
(October 29)
Primary Image has announced Barracuda, an image generator for the PC-platform. Barracuda is expected to offer up to 1600 million pixels/second/channel. Other features include:
--True, full-screen, super-sampled anti-aliasing on pixels and the depth buffer
--Advanced texture modes include anisotrophic sharpness filtering, surface contour and environmental texture mapping. All detail and projected textures achieved in real-time.
--Hardware support for all major simulation API's with Tempest, OpenGL and GLIDE interfaces. Upgradable software to support custom or new API's.
--Parallel, multi-piped, multi-path flexible image generator.
--On-board polygon and texture storage.
--On-board, flexible, programmable polygon processor.
--Special effects include fog, rain, reflections, shadows and sensor simulationPerformance highlights include:
--Expansions: Barracuda Superhighway - proprietary hardware providing for multiple board applications:
--Barracuda Cruncher - local geometry processing expansion cards: Multiple boards per channels: Multiple channels per system.
--Pixels / sec / channel: Up to 400 million anti-aliased. Peak rate 4800 million texture calculation / sec.
--Simulation polygons: Up to 300K / channel / sec (IG mode). Up to 1M / channel / sec (accelerator mode).
--Polygons: Flat, lit, gouraud shaded, textured flat, textured lit, textured gouraud, additive projected, modulated projected, alpha blend transparency.
--Texture / polygon memory: 32 Mbytes to 64 Mbytes on line.
***Checking out the Crowds - Automatically
Visionics has announced FaceIT DB, which can search live video of large crowds in real time for faces on a watch list and alert administrators to any matches. This eliminates the need for security personnel to continuously monitor video screens. The speed of the FaceIT search engine makes it possible to process thousands or even millions of images in less time than it would take to walk to a file cabinet to pull out a few mug shots.
Possible uses include airports, where a system linking FaceIT DB to a surveillance camera can match one of the passengers' faces to that of a known terrorist, allowing him to be apprehended before he does any damage. In major department stores, a similar setup can alert security personnel to the presence of a convicted shoplifter within minutes of his arrival. FaceIT DB's ability to compare each child's face against a database of missing children can also make it possible to instantly identify some of the subjects as exploited children.
***VideoServer Announces Key Enhancements to Encounter Family of IP Conferencing Products (October 21)
VideoServer announced the availability of version 1.2 of its Encounter family of IP conferencing products. With this announcement, VideoServer supports transfer rates in H.323 multipoint conferences as high as 1.5 Mbps. The Encounter products provide business quality multipoint, multi-network conferencing for audio, video and data collaboration.
The Encounter Family consists of the Encounter NetServer, an H.323 Multimedia Conference Server (MCS); Encounter NetGate, a gateway connecting ISDN and IP conferencing endpoints; and Encounter Gatekeeper, a policy manager for networked conferencing. Together, these products integrate multipoint services, gateway functionality and conferencing management into one conferencing product.
The Encounter NetServer 1.2 offers the following:
· support up to 32, H.323 conferencing users in both the Workgroup and Enterprise Chassis.
· supports transfer rates up to 1.5 Mbps (T1)
· enables the conference participants to choose a video presentation mode to meet the environment and application. The conference can also be set to show a preferred broadcaster
· adds support for calling out to H.323 conference participants.
· Encounter NetGate enables workgroup chassis users to conduct 12 concurrent sessions and Enterprise chassis users up to 16 sessions
· Encounter NetGate 1.2 provides synchronization of audio and video and connection to conference endpoints into a T.120 multipoint conference.
· H.320 users can now dial the numeric alias of the H.323 endpoint by using DTMF tones. For Direct Inward Dial (DID) users, ISDN endpoints can call IP endpoints by using a unique phone number. By offering several methods to dial remote endpoints, Encounter NetGate makes it easier to bring together H.320 and H.323 endpoints.Encounter Version 1.2 will be available on November 4, 1998. Encounter NetServer 1.2 starts at $24,990 for an eight-user system; Encounter NetGate starts at $20,165 for a four-session system; and Encounter Gatekeeper starts at $2,900.
***GeoSystems Opens the Web's Largest Map Store (October 27)
GeoSystems Global announced the launch of MapQuest MapStore, which offers more than 60,000 map titles and is the premier site to provide a search engine of the United States Geological Survey topographic maps available for purchase. Visitors can enter MapQuest MapStore by its link on the MapQuest home page.
GeoSystems Global Corp. is a supplier of geographic information products and services to companies, encompassing the print, electronic publishing, telecom, and travel industries.
***IBM unveils talking Web browser
(October 27)
The Business Times reports that IBM has unveiled a talking Web browser that provides spoken Internet access to blind and visually impaired computer users. The new software, called Home Page Reader for Windows, offers these computer users a comprehensive tool to access and navigate the Internet by reading aloud the information found on a Web site.
Home Page Reader was originally developed at International Business Machines Corp's Tokyo Research Laboratory. Chieko Asakawa, a blind researcher at the Tokyo lab, played a key role in the early development of the software. She said a skim reading feature of the software will let the blind obtain information from the Web as quickly as the sighted, allowing more people than ever will benefit from the wealth of information available on the Internet.
Originally developed in Japanese, Home Page Reader has been made available in English. The software uses IBM's ViaVoice OutLoud US English text-to-speech technology and Netscape Navigator to speak Web-based information in a complete, clear and easy-to-understand format.
Home Page Reader recognizes HTML tags, the programming language used to design Web pages, to accurately translate text, tables, graphic descriptions, allowing blind users to obtain the same information as sighted users. The software uses a simple 10-key numeric keypad interface that allows blind users to interact with their computer and easily navigate the Internet. A male voice is used to read text and a female voice to read links, so users can distinguish Web page information when it is spoken.
Home Page Reader also provides a convenient and simple method for saving and organizing Web page bookmarks. Additionally, the software offers an integrated electronic-mail feature that expands user's communications with family, friends and business associates via e-mail messages.
Home Page Reader will be sold in the US beginning January 1999 at a retail price of US$149 (US$1 = RM3.80). The software runs on Microsoft Windows 95, Windows 98 and Windows NT. System memory requirements include 32MB RAM for Windows 95 and Windows 98, and 64MB RAM for Windows NT. Also required is 7MB of hard disk space and an additional 10MB if installing Netscape Navigator. Minimum system processor requirements are a 150MHz Pentium with MMX or equivalent.
***Internet Is Becoming a Major Portion of Overall Corporate WAN Traffic (October 20)
The latest survey from ZD Market Intelligence, a division of Ziff-Davis, reveals that an increasing part of the corporate backbone load is comprised of Internet related communications. Table 1 shows that Internet-related traffic is the second most common type of WAN traffic.
Data Traffic on Corporate
WANs by TypeCPU to CPU 7%
CPU to PC 8%
Internet 21%
LAN to CPU 2%
LAN to LAN 6%
LAN to PC 10%
PC to CPU 40%
Video 2%
Other 4%
.
Microcomputer to mainframe or minicomputer (CPU) has been a major source of WAN traffic for several years because PC-based employees still have to access data that resides on these older machines, according to Dr. Stan Schatt, ZD Market Intelligence's vice president for Research.Often the company's mission-critical applications such as their customer database or its accounting data is still running on a mainframe or minicomputer. Companies have been migrating their key applications to LANs the past several years. This trend toward distributed processing is reflected in the 18% overall LAN-related traffic. But what is really interesting is the next wave of computing, the explosive growth of Internet-related traffic on corporate WANs. Which industries are responsible for this explosive growth and what specific applications are fueling this wide area network traffic? Table 2 describes WAN Internet-related traffic by Industry.
Internet-related WAN Traffic by Industry
Agriculture/Mining/Construction 8%
Medical 3%
Wholesale-Retail 20%
Transportation/Utilities 7%
Manufacturing 7%
Services 34%
Education 10%
Government 4%
Finance/Real Estate/Insurance 7%It is not surprising that the Services industry is the most likely to generate Internet-related traffic over its WANs according to the ZD Market Intelligence study. This group includes engineering management companies (22%), EDP professionals (14%), membership organizations (12%), as well as lawyers, consultants, etc. What type of activities do people in the Services industry do via the Internet to generate this surprising amount of WAN traffic? Table 3 supplies the answer.
Internet Applications of Services Companies with Internet WAN Traffic
Research 35%
E-mail 27%
Home Page 21%
Intranets 6%
Other 11%Professionals in the Services industry generate a lot of Internet-related traffic researching their content areas and examining their competitors' home pages. In many cases, this means looking over a competitor's home page to compare breadth of offering, prices, etc. It also often includes examining a competitor's job listings to learn about any new areas that company is planning to enter. E-mail is the second-leading source of this Internet traffic. The explosive growth of products such as Qualcomm's Eudora reflects this growth of Internet-related E-mail traffic.
Employees frequently need to examine their own companies' home pages in order to keep up with company business. If they use Internet hardware and software to look at private areas of their companies' home page, ZD Market Intelligence classifies that type of traffic as Intranet traffic, the fourth leading source of Internet related WAN traffic for Services companies. While everyone talks about electronic commerce, it only represents around 5% of the current WAN traffic for Services companies.
The Internet is clearly a growing source for companies' WAN traffic. It is bound to grow even more explosively in the near future as electronic commerce takes off. The Services industry currently has the most Internet related WAN traffic.
Competitive research, as well as research into content areas, is clearly the primary use of the Internet at these companies. E-mail and home pages are both significant generators of WAN traffic.
***Worldwide Digital DBS Subscribers Will Grow Five-Fold by 2002 (October 20)
Cahners In-Stat Group predicts the worldwide digital direct broadcast satellite (DBS) subscribers will reach 55.4 million in 2002, five times the number of subscribers in 1997.
The report entitled Digital DBS Industry, from the Digital Television service, reveals that the growing DBS platforms will enable the number of worldwide subscription revenue to reach $28 billion by 2002.
Digital DBS Industry (No. DT9803) report, written by Michelle Abraham, provides DBS subscriber and subscription revenue forecasts through 2002. Profiles of digital DBS service providers from North America, Latin America, Western Europe, Eastern Europe, Asia Pacific, Japan and the rest of the world are all included.
The profiles contain ownership structures, programming, partners and financial data where available. Digital DBS Industry covers the second of the eight digital television delivery systems. The report is priced at $2,995, which includes analyst inquiry privileges on topics covered in this report.
***Micron Technology Ratings Lowered; Off S&PWatch (October 21)
Standard & Poor's lowered its ratings on Micron Technology Inc. At the same time, Standard & Poor's affirmed its double-'B' bank loan rating on the company. All ratings were removed from CreditWatch, where they were placed March 18, 1998. The outlook is now negative.
The downgrade reflects the challenges of integrating capacity acquired from Texas Instruments Inc. and ongoing unprofitable conditions in the highly stressed semiconductor "DRAM" memory industry, mitigated by the company's strong technology position, substantial liquidity, and good cost structure.
Boise, Idaho-based Micron Technology is the only U.S.-based memory manufacturer. Following the subsidized transfer of its own technology to the Texas Instruments plants during 1999, Micron will be the world's No. 1 or No. 2 memory chip supplier. Micron will benefit from improved economies of scale, gain access to Texas Instruments' international customer base and will be exempted from royalty payments to Texas Instruments for 10 years.
The memory industry has been impacted by a protracted severe supply-demand imbalance. Prices, which have been under pressure since the beginning of 1996, fell 65% during Micron's latest fiscal year, including the effect of Korean suppliers' lower manufacturing costs due to the devalued Won. Micron's semiconductor gross margin was 5% for the fiscal year ended August 1998, although margins have exceeded 60% in strong points of the cycle. Overcapacity is expected to constrain DRAM revenue growth and depress industry wide profitability and cash flows for at least the next several quarters.
Micron's 64%-owned Micron Electronics Inc. subsidiary manufactures and direct markets personal computers. While the company's products are well regarded, Micron Electronics has not matched the performance of sector leaders Dell Computer Corp. or Compaq Computer Corp. Following severe losses in early fiscal 1998, new management has instituted a program to reestablish Micron Electronics' brand position, operating efficiency, and competitiveness, although the profitability of second-tier PC suppliers is likely to remain modest in any case. Micron sold 13% of Micron Electronics in February 1997 for $250 million and sold 90% of its contract assembly business for $250 million in February 1998.
For the fiscal year ended Aug. 31, 1998, Micron reported earnings before interest, taxes, depreciation, and amortization of $150 million, while debt was $865 million. Cash flows have been volatile in recent years. Free operating cash flows were negative $284 million in fiscal 1998. Negative free cash flows are likely over the near-to-intermediate term due to depressed earnings and the costs to re-equip the factories acquired from Texas Instruments. Still, the semiconductor operations' cash of $317 million at Aug. 31, 1998, subsequently augmented by a $550 factory conversion payment from Texas Instruments and a $500 million equity investment from Intel Corp. should provide a substantial cushion to support the company through the balance of the downcycle. Cash balances of $328 million at Micron Electronics are not considered available to Micron. The bank loan rating on Micron is affirmed at double-'B', as the loan agreements were amended to secure the loans during September 1998. The loan security includes working capital and property, plant and equipment at the main Boise campus and at the Lehi, Utah site is secured by working capital.
OUTLOOK: NEGATIVE
Micron faces the challenges of integrating a large global operation and reengineering the acquired facilities. Ratings already anticipate that Micron's financial performance in 1999 could be weaker than in 1998 due to continued semiconductor sector stresses. However, should industry conditions deteriorate beyond current trends, or should Micron's profitability and cash flows decline further and impair its financial flexibility, ratings could be lowered, Standard & Poor's said.OUTSTANDING RATINGS LOWERED AND REMOVED FROM CREDITWATCH
Rating To FromCorporate credit rating BB- BB
Subordinated debt B B+
Universal shelf debt BB-/B BB/B+ -
***Toshiba sinks into red in 1st half of FY 1998 (October 26)
Kyodo News reports that Toshiba Corp. said its unconsolidated earnings in the first half of fiscal 1998 sank into the red for the first time in 48 years due mainly to slumping domestic consumption and the Asian financial crisis.
In the six-month period that began April 1, Toshiba incurred pretax and net losses, both at 6.4 billion yen, on sales of 1,599.95 billion yen. Sales were down 12.3% from the corresponding six-month period the year before. Toshiba will pay a 3 yen per-share dividend despite the loss, off 2 yen per share over last year, the company said.
Toshiba listed its shares on stock exchanges in May 1949, and posted losses in the first year, but since then its business has been in black for almost five decades.
The company blamed the loss on the plunge in the price of semiconductor memory chips, personal computer color displays and other peripherals, and on slumping sales of household electrical appliances.
The company cited floundering sales of computer systems, compact disk-read only memory (CD-ROM) drives, computer components and peripherals, as well as heavy facilities and machinery, such as nuclear power plants, as a reason for the decline in overall sales.
Toshiba projected that profits from the second half of the year will offset the losses from the first half. It projected pretax and net profits for the entire 1998 business year at 15 billion and 12 billion yen, respectively, on sales of 3.5 trillion yen.
*** Electronic Arts announces second quarter results (October 21)
Electronic Arts announced its results for the second fiscal quarter ended September 30, 1998.
Second Quarter Review: Net revenues for the second quarter were $245.8 million, a 29 percent increase, compared to the $189.8 million reported for the same quarter of the prior fiscal year. During the quarter, Electronic Arts incurred a one-time, pre-tax charge of $41.8 million as a result of a write off of acquired in-process research and development associated with the completion of its acquisition of Westwood Studios, Inc. Including this charge and the consolidated operating results of Westwood, the Company reported a net loss of $25.3 million, or a loss of ($0.42) per basic share, compared to net income of $41,000, or $0.00 per basic share, reported for the second quarter of fiscal 1998, which also included a one-time, pre-tax charge for merger costs. Excluding the one-time charges in both years but including Westwood's consolidated results, the Company's net income was $10.7 million, or $0.17 per diluted share, for the current quarter compared to $7.1 million, or $0.12 per diluted share in the second quarter of fiscal 1998.
On a geographic basis, during the quarter revenues in North America grew 55 percent compared to the same quarter a year ago, primarily as a result of a strong product release schedule on both the PlayStation and the N64. Overall international revenues decreased 15 percent for the quarter primarily due to the timing of available new product releases with culturally appropriate content for those territories. In spite of strong market conditions in Europe, second quarter revenues decreased 16 percent compared to the year-ago period. Including currency rate declines, which averaged 18% in the Asia Pacific region and 19% in Japan, revenues in the Asia Pacific and Japan territories declined by 10 and 15%, respectively, compared to year ago results. Revenue comparisons in local currencies were positive in both territories.
***RealNetworks Announces Record Third Quarter Revenues (October 20)
RealNetworks reported results for the third quarter of fiscal 1998. Net revenues for the quarter ended September 30, 1998 were $17.2 million, a 91% increase over net revenue of $9.1 million reported in the third quarter of 1997. This represents the 13th consecutive quarter of revenue growth. Net loss for the quarter was $1.4 million, or ($0.04) per share, compared to a net loss of $2.2 million, or ($0.09) per share on a pro-forma basis, in the prior year quarter.
For the nine-month period ended September 30, 1998, net revenues were $44.8 million, a 100% increase from net revenues of $22.4 million in the comparable prior year period. Net loss for the nine-month period ended September 30, 1998, including a charge of $17.9 million related to the acquisition of VIVO Software, Inc. in the first quarter of 1998, was $23.6 million or ($0.74) per share. Net loss for the nine-month period excluding this charge was $5.7 million, or ($0.18) per share, compared to a net loss of $8.6 million, or ($0.38) per share on a pro-forma basis, in the prior year period.
"Our business results this quarter demonstrate continued rapid growth in the demand for streaming audio and video on the Internet," said Rob Glaser, chairman and CEO, RealNetworks, Inc. "Not only did we achieve record sales in each of our main lines of business, but the Internet experienced a breakthrough event made possible by streaming media. "Over two million viewers watched the Clinton Testimony online using our RealVideo technology, including 600,000 users watching through our Real Broadcast Network. This activity represents a record in Internet broadcast history and was enabled by our strategic relationships with major broadcasters, including ABCnews.com, Fox News, CNN, NPR, and Broadcast.com."
Above and beyond the strong revenue growth and accelerated use of RealVideo and RealAudio by consumers and content providers during the quarter, the Company has recently announced a series of agreements with AOL, Netscape and Lotus for the distribution of the Company's software products. In addition, RealNetworks shipped the second beta version of RealSystem G2, which includes new streaming Web video technology recently licensed from Intel as part of a technology and marketing relationship. During the quarter, the Company also announced a joint development and distribution agreement with Inktomi to create the industry's first streaming media cache solution.
"We have been very pleased with the market reception to our new RealSystem G2," said Glaser. "Over 135 leading technology and content companies worldwide have embraced RealSystem G2 as their media delivery system of choice. We are also pleased to have had over 30 companies showcasing a wide variety of RealSystem G2 solutions, including technology developed by custom application developers, tools vendors, corporate intranet solutions providers, content management and e-commerce solution providers at Internet World earlier this month."
Recent events and new content have increased the demand and interest in streaming media, and viewers are using RealPlayer in record numbers. As of October 20, 1998, RealNetworks estimates that:
· More than 85% of all Web pages on the Internet using streaming media use RealAudio, RealVideo or RealFlash and more than 300,000 hours of live RealAudio and RealVideo programming are available each week.
· There are more than 35 million registered users of RealPlayer.
· More than 125,000 RealPlayers are being distributed daily.
· More than 8 million RealPlayer G2 players have been downloaded in 3 months.
· There are more than 80 branded RealChannels built into RealPlayer G2, including major brands such as CNN, ESPN, and the Wall Street Journal.
· Average daily usage of RealChannels increased 80% from August to September, and 150% since July.
· On average, there have been 300,000 requests per day in October for RealChannels via the RealPlayer, and 500,000 online viewers requested RealChannels on September 21, the day the Clinton Testimony was broadcast online.
***ESS Technology Reports Third Quarter Results (October 20)
ESS Technology reported net revenues of $52.3 million for the third quarter ended September 30, 1998. The company also announced a net loss of ($7.5) million, or ($0.18) per share for the third quarter of 1998, within the range the company publicly announced on October 13, 1998. The loss was greater than anticipated primarily due to non-cash adjustments for declining inventory value and a one-time charge for impaired technology and intangibles relating to previous acquisitions.
In the third quarter ended September 30, 1997, ESS reported net revenues of $52.2 million and a net profit of $1.7 million, or $0.04 per share."During the third quarter we focused the Company on execution. We accomplished many of our goals but recognize that we have several more challenges to address before we can return the company to profitability," said Fred Chan, Chairman and CEO. "We continue to target a return to profitability by the end of this year," he added.
ESS Technology, Inc. is a leading supplier of audio, modem and digital video solutions for the PC and consumer markets. ESS designs, develops and markets highly integrated mixed signal semiconductor and software solutions for multimedia applications.
***@Home Network reports subscriber base grows to 210K (October 13)
@Home Network reported revenue totaling $13.8 million for the third quarter ended September 30, 1998, a 50% increase over revenue of $9.2 million reported in the second quarter ended June 30, 1998. The net loss for the third quarter was approximately $9.7 million, or $0.08 per share, compared to $11.1 million, or $0.10 per share in the second quarter of 1998. The company reported a gross profit of $1.6 million for the third quarter of 1998. Revenue and net loss for the third quarter of 1997 were $1.9 million and $11.9 million, respectively. Weighted average shares outstanding were 115.1 million for the quarter ended September 30, 1998, excluding shares reserved for outstanding warrants and employee stock options.
Revenue for the nine months ended September 30, 1998 was $28.8 million compared to revenue of $3.7 million for the nine months ended September 30, 1997. The net loss for the nine months ended September 30, 1998, before non-cash charges of $83.3 million taken in the first quarter of 1998, was $32.5 million, or $0.29 per share. This non-cash charge was related to the fair value of common stock warrants issued to cable system operators in connection with distribution agreements. Including this non-cash charge, the net loss for the nine-month period was $115.8 million, or $1.02 per share.
@Home's cable modem subscriber base has more than quadrupled since the beginning of 1998. At September 30, 1998, @Home served more than 210, 000 cable modem subscribers across North America, an increase of 43% from 147,000 subscribers reported at June 30, 1998. The base of homes with access to two-way upgraded plant increased to 10 million at September 30, 1998 from 7.9 million at June 30, 1998. These numbers include Internet service subscribers served by new @Home affiliates that are currently being converted to the @Home service, as well as these affiliates' upgraded homes passed. In addition, during the third quarter of 1998, the @Home service was expanded in 13 new markets, raising the total number of active U.S. and Canadian markets to 44.
Based on @Home's 10 million upgraded homes passed, @Home reported an overall penetration rate of 2.1% at September 30, 1998. In many established markets penetration exceeds 5% and @Home is the second largest Internet/online service provider.
Commenting on the company's results, Tom Jermoluk, chairman, president and CEO of @Home Network, said, "We have long believed cable is the best broadband medium for residential Internet services, given its inherent high-speed, 'always-on' attributes. @Home is uniquely positioned to benefit from and drive market momentum as our 18 cable partners upgrade their networks and more consumers are able to enjoy our compelling, content-rich '@Home Experience'."
@Home commenced innovative marketing initiatives and programs to expand distribution, enhance market awareness and drive penetration during the third quarter. Significantly, @Home and Dell Computer Corporation announced an agreement in principle to integrate @Home's broadband Internet service experience with cable-ready Dell Dimension desktop PCs. Additionally, @Home launched a retail merchandising program that will make its high-speed Internet services available via authorized CompUSA outlets throughout North America.
@Home also initiated a unique traveling marketing event dubbed "The Cable Internet Revolution Expo," targeting local @Home markets in 12 cities with hands-on demonstrations to promote and sell broadband Internet services. @Home also signed an exclusive affiliate agreement with Midcontinent Cable Co. to distribute high-speed cable Internet services to communities in North and South Dakota.
@Work continued to be a key contributor to @Home Network, ending the third quarter of 1998 with more than 1250 installed accounts, up 24% from the end of the prior quarter. Driving this growth, @Work made significant progress in expanding its broad array of Internet/Intranet related services which include Web hosting, server collocation, out-sourced email services, and multi-homing solutions.
@Media broadened its offerings to users, advertisers, retailers and consumers during the quarter. Through agreements with Intel, AT&T, Bank of America, Johnson & Johnson, Levi Strauss, First USA and Toys-R-Us, @Home launched a program to create and define the next generation of online advertising. The program will measure and evaluate audience responsiveness with regard to brand recall, purchase Intent, and acceptance of new broadband ad models. Additionally, @Media announced it teamed with Intel to develop "Making Pictures," a broadband portal to digital imaging, photography tools and educational resources. The division also expanded its content offerings during the quarter through agreements with providers such as The Weather Channel, WeatherLabs and Autoconnect.
***Aureal announces third quarter operating results (October 20)
Aureal Semiconductor announced its financial results for its third fiscal quarter ended September 27, 1998. Sales of $7.5 million for the quarter more than doubled from the $3.4 million recorded in the second quarter. Year-to-date revenues were $14.6 million compared to $1.5 million for the same period in 1997, an increase of over 850%.
The net loss from operations of $4.1 million declined from both the loss of $5.4 million in the second quarter of this year and $4.8 million in the third quarter of 1997. Continued investments in R&D over recent months have contributed heavily toward the announcements of the Vortex 2 processor, A3D 2.0 and Aureal's commencement of audio board sales to partner Diamond Multimedia Systems, Inc.
Operating expenses for the quarter totaled $5.7 million, just up from $5.4 million in the second quarter. Increases in both R&D and general and administrative expenses were primarily related to new business related to Vortex 2 and A3D rollouts as well as the commencement of audio board sales as the quarter closed. In addition, Aureal continues to work to expand its product offerings for future quarters.
Basic and diluted loss per common share was $0.14 per share for the third quarter, compared to $0.42 per share in the second quarter. In addition to operating losses, $1.9 million of non-cash charges for accretion and dividends on preferred stock increased the loss attributable to common shareholders for the third quarter.
***STMicroelectronics Reports 4% Increases in Third Quarter Net Revenues and Net Income (October 20)
STMicroelectronics reported financial results for the third quarter and nine months ended October 3, 1998.
Net revenues for the third quarter were $1,039.4 million, a 4% increase over last year's third quarter revenues of $1,000.1 million.Operating income for the third quarter was $129.0 million, up 4% from the $123.7 million reported for last year's third quarter and a 3% sequential increase over the prior quarter's $124.8 million. Operating income in the 1998 third quarter benefited from other income of $21.4 million, which resulted from a decline in start-up costs similar to that of the prior quarter.
Net income for the third quarter was $101.6 million, up 4% from both the $97.6 million earned in last year's third quarter and the $97.5 million earned in the prior quarter. Diluted earnings per share were $0.70, flat with last year's third quarter, calculated on 147.3 million weighted average number of shares outstanding or a 5.2% greater number than in the 1997 period. In the second quarter of 1998, diluted earnings per share were $0.69 based on 141.9 million weighted average shares outstanding. The tax rate for the 1998 third quarter was 24.2% compared to 21.5% in last year's third quarter and 21.4% in the second quarter of 1998.
Gross profit for the 1998 third quarter was $395.7 million, compared to last year's third quarter gross profit of $391.9 million. The gross margin was 38.1% compared to 38.3% (net of licensing fees) in last year's third quarter and 38.3% in the second quarter of 1998.
· Revenues from strategic customer alliances up 27.8%
· Gross Margin was 38.1% for the quarter, similar to the 38.3% reported in last year's third quarter and in the prior 1998 quarter.
· Earnings per share of $0.70 equal to those of year-ago third quarter on a 5.2% increase in shares outstanding.In the third quarter, revenues from differentiated products reached $650.7 million, or 62.6% of net revenues.
Selling, general and administrative expenses were $120.1 million in the third quarter, up from the comparable period in 1997, but down sequentially from the $126.2 million reported in the second quarter.Research and development costs were $168.0 million in the third quarter, up 10.9% from the $151.5 million reported in last year's third quarter and 4.7% below the $176.2 million reported in the 1998 second quarter.
***Adobe and Quantel resolve Patent Infringement lawsuit (October 13)
Adobe Systems has disclosed that it had resolved a patent infringement case initially filed by Quantel, Inc. in January 1996. Neither party has paid any money in connection with the resolution of the case.
Last Fall, a jury in federal court in Delaware found that Adobe PhotoShop software, the world's leading image-editing software, did not infringe five patents held by Quantel, Inc., a U.K. based company and that the five patents were invalid. Both companies appealed various aspects of the decision and recently, Adobe and Quantel agreed not to continue the appeals.
"Adobe has successfully defended itself in two major patent infringement cases in just the last few years. This demonstrates the fact that you don't have to settle claims that are not meritorious," said Colleen Pouliot, senior vice president and general counsel of Adobe.
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