8x8 1999 Annual Report Download - page 20

is developing new form factors, network topologies and embedded systems that are designed to comply with new and emerging IP telephony
standards.*
The Company also intends to commit significant research and development resources to developing additional products for Video Monitoring
applications, including the addition of IP communications components such as streaming video over the Internet.*
If the Company is unable to develop and introduce new or enhanced products in a timely manner, or if such new or enhanced products do not
achieve sufficient market acceptance, it would have a material adverse effect on the Company's business and operating results.
LICENSING AND DEVELOPMENT ARRANGEMENTS
The Company has entered into licensing and development arrangements with its customers to promote the design, development, manufacture
and sale of the Company's products. In order to encourage the use of its semiconductors, the Company has licensed portions of its systems
technology and software object code for its semiconductors to virtually all of its semiconductor customers. Moreover, many of the Company's
OEM customers have licensed portions of the source code to its software for its semiconductors. The Company intends to continue to license
its semiconductor, software and systems technology to other companies, many of which are current or potential competitors of the Company.*
Such arrangements may enable these companies to use the Company's technology to produce products that compete with the Company's
Broadband Telephony and Video Monitoring products.
The Company has also licensed the right to manufacture certain of its multimedia communication semiconductors, subject to payment of
royalties, to several videoconferencing systems manufacturers. In addition, the Company has licensed portions of its multimedia
communication semiconductor technology to ESS Technology. Of these licensees, ESS Technology may sell semiconductors based on the
licensed technology to third parties, while the other licensees are limited to sale of such semiconductors as part of multimedia communication
systems or sub-
systems. The obligation of ESS Technology to pay royalties to the Company with regard to the sale of semiconductors based on
the licensed technology will expire in October 2000.
In the years ended March 31, 1999, 1998 and 1997, technology licensing revenues (all of which were nonrecurring) were $5.5 million, $14.5
million and $3.9 million, respectively. There can be no assurance that the Company will receive such licensing revenues in the future.
The Company has in the past licensed and in the future expects to continuing licensing its technology to others, many of whom are located or
may be located abroad.* There are no assurances that such licensees will protect the Company's technology from misappropriation.
In addition to licensing its technology to others, the Company from time to time will take a license to others' technology. The Company relies
upon certain technology, including hardware and software, licensed from third parties. The loss of, or inability to maintain, existing licenses
could have a material adverse effect on the Company's business and operating results.
EMPLOYEES
As of March 31, 1999, the Company employed a total of 146 people, including 29 in manufacturing operations, 51 in research and
development, 47 in sales and marketing and 19 in general and administrative capacities. In April 1999, the Company announced that it would
cease production of the ViaTV product line.
* 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 15, "Competition" commencing on
page 13 and "Factors That May Affect Future Results" commencing on page 17 for a discussion of certain factors that could affect future
performance.
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