8x8 1998 Annual Report Download - page 25

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ViaTV product line. The Company also has introduced versions of its ViaTV videophones designed for European and Asian markets.
The Company is marketing its VideoCommunicators through retail channels, catalogs and original equipment manufacturers (OEMs) as well as
through direct marketing efforts utilizing a combination of advertising, toll-free telemarketing and direct mail supported by co-marketing
arrangements with third parties. The Company sells its video communication semiconductors and related software to OEMs and distributors.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's Consolidated Statements of Operations and the notes thereto:
Revenues
Total revenues were $49.8 million, $19.1 million and $28.8 million for the fiscal years ended March 31, 1998, 1997 and 1996, respectively.
Total revenues for fiscal 1998 were divided among video communication semiconductors (44%), videophone systems (27%) and nonrecurring
license and other revenues (29%). In fiscal 1997, total revenues were divided between semiconductors (80%) and nonrecurring license and
other revenues (20%). In fiscal 1996, total revenues were divided between semiconductors (69%) and nonrecurring license and other revenues
(31%).
Product revenues were $35.3 million in fiscal 1998, an increase of $20.1 million above the $15.2 million reported in fiscal 1997, and $15.5
million above the $19.8 million reported in fiscal 1996. The increase in product revenues is primarily due to sales generated from the
Company's ViaTV products, combined with an increase in sales of the Company's video communication semiconductors, offset by a decrease
in both MPEG semiconductor and math co-processor sales due to the discontinuation of such product lines in fiscal 1997.
License and other revenues consist of technology licenses, including royalties required under such licenses, and nonrecurring engineering fees
for services performed by the Company for its customers. License and other revenues were $14.5 million in fiscal 1998, an increase of $10.6
million above the $3.9 million reported in fiscal 1997, and $5.5 million above the $9.0 million reported in fiscal 1996. In fiscal 1998, license
and other revenues included approximately $5.3 million paid by 3Com for a license to substantially all of the Company's technology underlying
its video communicators. There can be no assurance that the Company will receive any revenues from licensing or other such arrangements in
the future.* See "Factors That May Affect Future Results -- No Assurance of Future License and Other Revenues" and "Factors That May
Affect Future Results -- Dependence on Key Customers."
Product sales and license and other revenues derived from 3Com represented approximately 20% of total revenues for the fiscal year ended
March 31, 1998. Product sales to ASCII, the Company's former distributor in Japan (the Company terminated its distribution relationship with
ASCII effective June 30, 1997), represented approximately 13% of total revenues for the fiscal year ended March 31, 1997. License and other
revenues derived from ESS Technology represented approximately 24% of total revenues for the fiscal year ended March 31, 1996.
Dependence on significant customers entails certain risks.* See "Factors That May
* This statement is a forward looking statement reflecting current expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations. See "Manufacturing" commencing on page 10, "Competition" on page 13 "Factors
That May Affect Future Results" commencing on page 14 for a discussion of certain factors that could affect future performance.
21
YEAR ENDED MARCH 31,
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
(IN MILLIONS)
Product revenues..................... $35.3 71% $15.2 80% $19.8 69%
License and other revenues........... 14.5 29% 3.9 20% 9.0 31%
----- --- ----- --- ----- ---
$49.8 100% $19.1 100% $28.8 100%
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