The WAVE Report
Issue #0234------------------9/16/02

The WAVE Report archive is available on http://www.wave-report.com

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0234.1 Hot Topics

0234.2 Story of the Issue

0234.3 3D

0234.4 Wireless


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0234.1 Hot Topics

***September 11, One Year Later
by James Sneeringer

A cloud of smoke over the Pentagon in the rear view mirror, driving
through Alexandria in the morning. Driving to a local cafe with a cable
connection to watch CNN for hours. Driving home in the evening, the
electronic highway signs read "Major Incident in DC; Avoid Metro Area."
These are some of our personal memories of September 11 here at the WAVE
Report, several among the millions in the hearts and minds of our country
and around the world.

Today is a day to pause our lives and reflect on the attacks of one year
ago, and the events that have transpired since. The fall of the Taliban,
the anthrax scares, the deepening rift in Israel, passage of the American
Patriot Act, and the proposed reorganization of the Executive Branch are
just some of stories that have shaped our world today. Despite calls to
return to life as normal, there is no denying that the world we live in
now is very different from the world one year and one day ago.

Today the WAVE Report looks back at our coverage of the attacks of
September 11, 2001. In the first WAVE following the attacks,
Editor-in-Chief John Latta reflected on their import and where the
aftermath might lead:

We Know Not Where The Path Leads
http://www.wave-report.com/2001%20Wave%20Issues/wave0141.htm#We

On September 23, he visited the Pentagon site and compiled a photolog:

Pentagon 9-11-01
http://www.fourthwave.com/photolog/pentagon911/

Finally, in July of this year I attended a conference a New York and took
the opportunity to visit the World Trade Center site, known as Ground
Zero. On this anniversary the photolog from that trip is now up on our
site:

Ground Zero, New York, July 2002
http://www.fourthwave.com/photolog/groundzero2002/

We welcome your comments.

***Growthink Research Releases 2002 Semi-Annual Wireless Venture Capital
Report
(September 10)

Growthink Research announced today the release of their 2002 Semi-Annual
Wireless Venture Capital Report. This report is the result of over 2,500
recent surveys of venture capital firms and emerging wireless ventures.

Growthink Research's 2002 Semi-Annual Wireless Venture Capital Report
offers a review of venture funding in the wireless sector, profiling the
135 wireless companies that received venture capital investments in the
first half of 2002 (representing $1.4 billion) and the 265 investors that
backed them. All company and investor profiles include complete contact
information.

The Report also contains roundtables of executives who have successfully
raised venture capital (Brad Walters, CEO of MaxStream; Robert Moss, CEO
of Mobitrac; and Arun Kant, COO of Transtech Networks) and top investors
that have funded wireless ventures (Amerindo Investment Advisors, Mission
Ventures, Redpoint Ventures).

The report is segmented by the following wireless sectors:

Wireless Applications - Products & Devices
Wireless Applications - Software
Wireless Applications - Solutions & Services
Wireless Content & Entertainment
Wireless Consulting & Professional Services
Wireless Infrastructure - Networking Equipment
Wireless Infrastructure - Networking Software
Wireless Infr. - Components & Semiconductors
Wireless Service Providers - Internet Access
Wireless Service Providers - Mobile Communications

http://www.growthinkresearch.com

***NComm and Dallas Semiconductor Announce T3/E3 Interface Solution
(September 10)

NComm, Inc. and Dallas Semiconductor, a wholly owned subsidiary of Maxim
Integrated Products, today announced a hardware/software solution for
T3/E3 WAN interfaces. The joint solution provides communications equipment
developers with a turnkey product for adding T3 and/or E3 transmission
interface capabilities to telecommunications and data communications
platforms. It enables the equipment maker to add functionality to its
systems with standards-compliant WAN interfaces. With common hardware and
multifunctional software for both T3 and E3, this single product can have
access to the worldwide market, achieving economies in development,
manufacturing and inventory expense.

T3/E3 carries both voice and data traffic, aggregates the T1/E1
transports, and fits with legacy- as well as packet- based technologies.
It can be either channelized or unchannelized, giving the retail carrier
the option to address both the mid-size and large business markets
economically.

Pricing for the Dallas Semiconductor DS3112 T3/E3 Framer starts at $71.56
(resale, 1000 pieces, FOB USA). Pricing for the NComm T3/E3 software
license starts at $20,000.

http://www.ncomm.com
http://www.maxim-ic.com/telecom


0234.2 Story of the Issue

***Anoto V2.0
by John Latta

The WAVE Report has long held a strong interest in the company Anoto. This
is a small Swedish firm, which spun out from Ericsson, with unique pen
technology. It is based on a special dot pattern printed on paper that
allows the pen to know where it is over a very large area. Thus, the
technology is unique in that it allows for absolute pen tracking. Any
Anoto pen can determine where it is in the Anoto addressable paper space.
There is a critical factor to accomplishing this feat – the need to go to
an Anoto server to decode the location. Another contribution of Anoto was
to suggest one of the first uses of Bluetooth, which was the means
proposed to link the Anoto pen to a cell phone so that the pen could talk
with the Anoto servers. It also helped that the founders of Anoto were
closely tied to the Bluetooth proposal, which originated at Ericsson. But
in spite of impressive technology and a quality management team it seemed
that Anoto services were slow to roll out. Over the span of about 4 weeks
I was able to speak with both the President/CEO and the Chairman of the
Board of Anoto. The company has had both significant advances in the
technology and changes in their business model. We call this Anoto V 2.0.

For additional background the reader should look at:

Logitech and Anoto Join Forces to Introduce Pen and Paper to the PC
Platform
http://www.wave-report.com/2002%20wave%20issues/wave0209.htm#logitech

CeBIT 2002
http://www.wave-report.com/2002%20wave%20issues/wave0212.htm#cebit

CeBIT 2001
http://www.wave-report.com/2001%20wave%20issues/wave0118.htm#Cebit

Bluetooth Developer's Conference 1999
http://www.wave-report.com/w%2Dreports/wave2059.htm#Bluetooth

Our first opportunity with Anoto happened at a Logitech press event in New
York prior to PC Expo. Logitech announced at CeBIT that it will be
licensing the Anoto pen and paper technology for PC applications. This
press event had multiple objectives, one of which was to provide an update
on Logitech’s efforts with Anoto. At the same time the President/CEO
Christer Fahraeus of Anoto was available. Unfortunately, Logitech would
only discuss their work with Anoto under NDA, which we skipped. Our
interview with Anoto netted the following:

The deal with Logitech is a joint project. Anoto gets royalties for pen
and paper. Logitech is fully responsible for pen manufacturing. The
development is joint effort with ½ Anoto and ½ Logitech. Anoto has no back
end services as we learned at the CeBIT announcement. Anoto calls this
model a “local” pen application where a segment of the Anoto address space
is licensed and the licensee is able to internally do the location
decoding and not resort to the Anoto servers.

When asked why abandon your prior business model the response was:

To build the market,
Set standards,
Get pens established.

The Logitech/Anoto pen works with the PC in a pure batch mode. The pen
will use USB or IRDa and possibly Bluetooth but this latter interface was
not implied for the first product. The write and dock model seems extant
but we could not confirm this with Logitech.

A reason that Anoto has shifted to be a PC peripheral is economics. They
estimate the volume to be 10X that which they could get in other markets.
(See the comments below from David Henry, VP Control Devices, Logitech.)

Pen prices today are at $200, will reach $149 in 2003 and $99 in 2004.

It is expected that AT&T will have an Anoto pen product available in its
cell phone shops this summer.

Anoto is currently working with FedEx on a pilot project which uses their
technology.

Anoto is also working with HP to create Anoto paper with ordinary LaserJet
600dpi printers. One nugget of news is that Anoto pens will now work on
printed pages from a traditional laser printer which also has printed
words. There are some issues in working with inkjet printers but the
details were not clear. We regard this as particulary important news for
Anoto, in that the local model, can now extend to paper created by the
user and not have to rely on special printed paper.

Anoto is a pure notes play. Christer did not quite like this
characterization. His spin is that Anoto enables messaging. One of the
examples he gave combined both:

A user would print out the day’s e-mail on Anoto paper,

At the top of the page is the e-mail message and the lower part is a blank
space for the hand written message response.

In the lower corner of the page is a send box--when tapped with the pen,
the sheet is sent.

The usage profile Christer was advocating is where the day’s e-mail is
printed out, the user marks up the response with the pen which is done
below the text of the message; and

The reply message is sent when the user checks the send box in the lower
right.

Anoto began its flagship application in Sweden this April. This service
works as follows:
A user can write on an Anoto paper pad, for either e-mail transmission or
SMS. In the case of e-mail, the writing is transmitted via the pen to the
cellular network, to the Anoto servers for address decoding, and then to
the Internet for delivery to the e-mail address given in the address block
on the sheet.

Question: “Is not this a difficult proposition for a cellular phone user?
The cell phone can be used at practically any time by a user in most any
circumstance. Now to send a message using the Anoto technology the user
needs the cell phone, a pen and special paper to generate the message. Is
this not inconvenient?”

Response: “Most individuals carry a pen already so having a pen is nothing
new. Likewise for paper. Thus, what Anoto brings is a new way to look at
pen and paper. Paper is now a client.”


David Henry, Logitech, VP Control Devices, provided some additional
comments on Anoto.

When Logitech first dealt with Anoto they were very reluctant towards the
PC. It took considerable work and we have turned them to believe that the
PC is a viable platform. The key is the size of the installed base. We
believe this represents a major opportunity beyond the cell phone business
which Anoto originally targeted.

Next, the WAVE Report had an opportunity to interview Chairman of Anoto,
Orjan Johansson at his offices in Oslo, Sweden.

Anoto Group is made up of three companies. WeSpot, C Technologies and
Anoto. The number of employees is 300.

WeSpot is making an IR camera based on the Anoto technologies. It is 54%
owned by the Anoto Group. This camera is targeted for security monitoring
applications. Compared to typical video surveillance cameras this camera
has only a ok – not ok response. The intelligence is in the camera. It is
intended to be very low cost and have wide application for monitoring.
There are 20 employees

C Technologies has the product C-pen, which combines a mouse with an
optical reader. It can read, store, and translate text. There are 50
employees.

Anoto is the company responsible for the pen technology, services and
licensing. It has 230 employees.

The picture of the Anoto business is quite broad. Orjan claimed that this
has been a part of the plan as he outlined these:

Mobil
The Sony Ericsson phone currently being used by Vodafone is at the center
of this business. The addressable Anoto space, on paper, is complete,
i.e., the full address space. Anoto has the servers which lie behind this
and this is the key to the technology and revenue model. It is important
to note that today’s mobil expression is only a public product which uses
the total chain from pen to output. However, the cellular network
including the Anoto servers can fulfill many other applications where the
network is only an access portal. This is described in more detail below.

PC
Logitech forms the basis for this market entry. It is important to note
that Anoto calls this a local Anoto product. That is, the address space
for the pen is restricted to less than the full space. Logitech has a
portion of this space which it has licensed for the PC. This explains why
Logitech calls this a Pen and Paper product. Logitech has paper companies
which implement its address space. For this reason one must assume that if
the Logitech pen sees the paper used on the phone, such as the Post It
Notes, it will not recognize where it is.

Enterprise
These are vertical market applications. It is integrating the pen with
forms and remote usage. Orjan spoke of the power of forms to enable
enterprises to construct solutions unique to their needs. This market is
just emerging.

It was interesting that the budgets for the developing these markets was
set out this year at 1/3 each but in reality it has been 20%, 40% and 40%.

I asked if the development of local applications, in terms of the Anoto
address space, is a significant shift from the original plans which Anoto
described several years ago. Although the response was placed in terms of
the three markets above, my sense is that the shift to local is a matter
of market necessity. A very important point is that the local address
space issue need not be permanent. That is, with connectivity over the
Internet, any Anoto pen can have access to the full address space.
Certainly this is what Anoto would like in that once these servers owned
by Anoto are accesses it is another revenue stream for them.

We also backed into the business models of the company which have been
refined over the years. Orjan saw these as well defined business elements.

IP Licensing
Anoto claims over 300 patents and that they could exist alone on just the
licensing.
Pen Technology
It is clear that WeSpot is doing this, by using the imaging technology in
the pen in their product. More importantly, when Logitech creates a pen it
not only licenses the technology but buys the ASIC. Basically each new pen
generation is based on a new ASIC. The royalty and AISC(?) costs from $10
to $20 per pen. Anoto is on the third generation of the ASIC and the first
spins of this part are coming back.
Paper Technology
This is about printing dots on paper and is the second part of the
tracking technology which combines the pen and paper.
Services
The mobil business is based on this revenue stream which is per usage
based. Note that the enterprise model, described below, has a component of
this with the time based charges.

Thus, at the core of their business is selling lots of pens. Why? This
drives the cost of the pens down and more importantly creates a channel
for pens to get to market across many applications. Specifically, if
Logitech is successful in creating a large PC Anoto pen business the
enterprise buyers need only buy Logitech pens, assumed at low cost, for
their enterprise applications. Further, since Anoto has the ASICs for the
pens they also make money.

Orjan described an announcement that just came out. Anoto has licensed its
technology to another mobil phone company and pen company. This is seen as
large as or larger than the original Ericsson deal. Due to the terms of
the deal he could not say who this was and the specifics will be out
sometime the next 6 months. However, he gave me a list of candidates:
Motorola, Nokia, Siemens or Samsung. He was explicit that the deal
included a pen company. With this deal was an order for 20,000 pens and a
payment of $250,000. It was also stated that this pen would be a part of a
kit which could be sold worldwide to many operators. Note also that this
is a local application pen. In another words, the operators can implement
local applications using the address space they are allocated and can use
this within their own system and not have to access the Anoto servers.
With this model they increasingly see that the mobil space will become
more local. Again this represents a major shift in the Anoto orientation
to the mobil business.

At the center of this deal is a 2nd generation Anoto pen. It was about 30%
smaller and used plastic extensively. Orjan stated that the 3rd generation
pen, of which the first ASIC spin has come back from fab, will be slightly
larger that an ordinary ball point pen. Work is already underway on the
4th generation pen and its ASIC.

On the PC side, the Logitech deal is another beginning and certainly not
an exclusive one. Logitech intends to make the pen valuable by its
integration with applications. That is, Logitech will provide plug-ins for
Microsoft software including Word, Outlook and Powerpoint.

Orjan also gave a preview of directions for the PC usage. I suggested
Adobe and he responded about the integration of the pen with pdf and
Acrobat. His suggestion of another partner was HP and the use of the pen
in print on demand. My sense from that meeting is that we could see an HP
announcement in the not too distant future.

Orjan sees that the broad availability of pen support across all Microsoft
products would do much for Anoto. There is little doubt that Anoto would
like the broadest support for pen technologies in all Microsoft OS
products. Pen support drives pen usage and this is very consistent with
their PC strategy and selling more pens.

Certainly Orjan was most effusive about the enterprise market potential.
There are a number of advantages to this market:

It is not price sensitive but productivity sensitive. Anoto feels there it
can enhance existing applications, especially those that use forms, with
its ability to work anyplace. Note that these applications are almost all
local.

Form fill-out does not require an ICR, Intelligent Character Recognition,
for many input blocks. There may be some need for ICR but the constrained
nature of the input makes it relatively easy to do corrections. For
example in a date block the range of permitted characters limits what can
be accepted.

There will be many applications that use a stored content model for the
pen or wireless connectivity. With 1MB of storage there would be very few
vertical applications that cannot go all day without downloading. This is
equivalent of 40 pages on A4 paper full of text. The store and dump model
fits very well with the Logitech pen, which could then be sold to
enterprise customers. Yet, mobil customers could also be supported with
the mobil phones which connect to the cellular network. In each case, if
the enterprise wanted to enable the pen to operate in a non-local mode it
can send e-mails and the like. Again Anoto benefits because its servers
get used.

There are several ways to get to the enterprise market. What I found most
interesting was the role that Oracle plays. Virtually all major
corporations have Oracle back ends for management of the business, be it
in inventory or supply chain management or operations. Orjan sees the
ultimate value of being fully integrated into Oracle. In the meantime,
getting to market involves three approaches.

Reference Implementations
The early enterprise uses of the pen will be done by Anoto. This will
establish credibility for the pen and allow Anoto to gain experience in
this market.
Systems Integrators
There are many companies in this area including Accenture, EDS and others.
Enterprise Computing
IBM, Oracle, Microsoft and more.

The revenue models include the following:

Royalties from the pens;
Per time usage as per the following:
$20/month
$250/year or
$600/3 year (indefinite period)

This is a gutsy model where pen usage is charged and the enterprise is
responsible for the application and all the use is local.

At the end our discussion shifted to the business side.

Anoto expects to be cash flow positive by 1H 03.

The company has $22m in cash;

With 230 employees it is burning cash at the rate of $25m/year

The market cap is $150m; and

If the company needs additional financing it has no doubt it will be able
to secure it.

***WAVE Comments

Anoto is an e-pen company where handwriting recognition plays a minor
role. Its technology, the paper and pen, is fundamentally a tracking
technology. That is, it is able to precisely locate where the pen is on
paper using only the pen and paper. But, there are many other ways to
accomplish this, and for most applications the tracking technology is not
where the technical issues are. Yet, Anoto has made their tracking
technology the foundation for the business. What is most significant is
that the global scale of the tracking technology, i.e., its large address
space, is being shifted aside for local address spaces. This undermines
the original service model for the Anoto servers, but as the model for the
business shifted, it now is about pens and licensing the technology. Anoto
has shifted the business to chase perceived income streams.

The enterprise business makes a lot of sense and it is not hard to
understand why this is a priority at Anoto. The application is the
responsibility of the enterprise or its support organizations. Yet, as
Anoto is proposing the revenue model they gain significantly with the
usage costs on a per pen usage model. This can be seen as just another
form of licensing fee. However, the willingness of corporations to pay
this is directly related to the productivity gains. It is here where the
Anoto tracking technology makes a lot of sense – paper, forms and actions
on the paper. Be it inventory tracking, logistics support and many other
applications, Anoto can do much with very little reliance on handwriting
recognition. The applications become the wrapper around the pen and paper
technology. As long as the applications are of high value, the costs of
the underlying technology are much less important.

It is clear that Anoto sees the PC as an enabler for widespread deployment
of pens, especially those that go into enterprises. The hints that Anoto
dropped indicate where they would like to see the pen play a larger role
on the PC. Yet, there are many factors outside of their control including:
Logitech’s success including what and how they support PC applications,
Microsoft’s extension of pen technology beyond the Tablet PC and the use
of Anoto pens in other PC applications, such as what was suggested with
HP. These are all critical factors in making the Anoto pen an important PC
peripheral.

Anoto deserves a lot of credit, not only with impressive technology, but
being very creative in its application. We see the shifting business
models, which they described during the meeting, as coming from necessity
– the old business model was just not successful in generating adequate
revenue. However, it remains to be seen if the company can build on the PC
and enterprise space to make the company successful. In today’s
hypercritical investment environment, being cash flow positive is what
will make the company successful or doom it.


0234.3 3D

***StageTools Releases MovingPicture v3.09
(September 16)

StageTools has released version 3.09 of its MovingPicture image pan and
zoom software. New features include support of native Photoshop PSD files,
image preparation options, adjustable eases, and batch rendering.
StageTools also announced Mac OS X support for all Macintosh editors,
including Avid, After Effects, Final Cut Pro, Media100 and Premiere, as
well as Apple iMovie compatibility.

MovingPicture is a tool for documentary and industrial filmmakers to pan
and zoom on high-resolution images. It takes scanned images up to 4,000
pixels and allows for repeatable pans and zooms directly from a Windows or
Macintosh computer or as a plug-in to most nonlinear editors.

MovingPicture is used by broadcasters, documentarians, schools, corporate
and event videographers, including: ABC, CBS, FOX, NBC, BBC, PBS, NOB,
MSNBC, Discovery, LifeTime, A&E, Harvard, Yale, Tufts, Apple, Microsoft,
the New York Mets, Crawford Communications, Henninger Media, Foote Cone
and Belding, DDB and MatchFrame Video.

When using MovingPicture, the original image appears on the screen.
Dragging and sizing a framing box icon on top of it changes the view,
adding key frames onto the timeline. Editors can preview the motion in
real time without any rendering. The moves can be previewed in real time,
and finally rendered in high quality without leaving the editor's
timeline. Motion is field-rendered at sub-pixel accuracy, so motion is
smooth, and in 32-bit color. MovingPicture can also create Macromedia
Flash files.

MovingPicture is available for Windows-based editors including After
Effects, Avid, dpsVelocity, Discreet edit, FASTStudio Premiere, RexEdit
and SpeedRazor. Macintosh versions are available for After Effects, Avid,
Final Cut Pro, Media 100, and Premiere. The MovingPicture Plug-In is
priced at $199. Registered users can upgrade at no charge, and a full
evaluation copy can be downloaded from the StageTools Web site.

http://www.stagetools.com


0234.4 Wireless

***Broadcom Announces Forward-Compatible Access Point/Router Platform
(September 10)

Broadcom Corporation, a provider of integrated circuits enabling broadband
communications, today announced that the Broadcom AirForce BCM4702 network
processor chip and the Wi-Fi compliant BCM94702AP reference design
platform now support next generation wireless LAN technologies. Broadcom's
complete reference design package enables manufacturers to build wireless
local area network (WLAN) access points and routers on a platform that
supports the IEEE 802.11a, 802.11b and 802.11a/b standards today and will
also support IEEE 802.11g when it is available.

Broadcom also announced today that Linksys is the first vendor to ship
dual-band wireless LAN access points based on Broadcom's chip.

The reference design platform includes Broadcom's AirForce OneDriver
software, BSP code and residential gateway application code. The OneDriver
software allows a single version of the driver software to support
multiple current and future wireless LAN standards. This is intended to
allow OEMs to use Broadcom's software development platform to design a
single implementation of their wireless technologies. They can then
leverage their software development investment across multiple generations
of products, including cable and DSL modems.

The BCM4702 system-on-a-chip product features a powerful MIPS32 processor
for performing data processing, routing, security, network management and
communications controller functions for wireless access points and
wireless routers. The performance claimed for the BCM4702-based platform
stems from the MIPS32 processor, the network processor architecture that
includes data plane acceleration capability, Broadcom's efficient IEEE
802.11 medium access controller (MAC), and optimized software designed to
support single-copy packet forwarding. In addition to an integrated
processor, the BCM4702 includes two 10/100 Ethernet MACs, a PCI/Cardbus
host controller, a USB controller and a PCMCIA host.

Broadcom's AirForce product line includes the BCM2051 2.4GHz radio and the
BCM430X baseband/MAC family for 802.11b connectivity, the BCM2060 5GHz
radio and BCM4308 baseband/MAC for 802.11a connectivity, and the BCM2050
2.4GHz radio, BCM2060 5GHz radio and BCM4309 baseband/MAC for dual-band
connectivity.

In addition to the AirForce BCM4702 network processor IC, Broadcom offers
the BCM4710 network processor, which is pin-compatible and
software-compatible with the BCM4702 and adds integrated HomePNA 2.0
functionality.

All of Broadcom's components, including radio chips, are manufactured
using bulk CMOS process technology, which will enable future integration
of single-chip access points and wireless routers.

The BCM4702 and BCM4710 are currently in volume production. The complete
system reference designs, the BCM94702AP and BCM94710AP, are currently
available. These reference designs include Broadcom's BCM5325 5-port
switch IC and the AC101L Ethernet physical layer IC, which is also in
volume production by from Broadcom's Altima Communications, for a
comprehensive, low cost 5-port router solution.

http://www.broadcom.com

--------------------------------------

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