Welcome to WordPress.com. This is your first post. Edit or delete it and start blogging!
Natural gas engines, in the emerging business environment, have a chance to displace diesel engines. The emission standards that will be implemented in 2010 will increase the relative cost of diesel engines. Natural gas supply in the USA and the imports of Liquefied Natural Gas (LNG) have increased dramatically in recent years and their prices have dropped. The fuel efficiency of natural gas engines has increased and is comparable to that of diesel engines. Diesel engines still have formidable advantages–their prices are lower and the fuel is available more widely. With higher scales of production, natural gas engines could well tip the balance in their favor.
Natural Gas Engines
Currently, natural gas vehicles are predominantly used in the public sector, 20% of the 80,000 municipality buses use them. In the trucking industry, less than 1% of the 200,000 trucks have natural gas engines. They have also have found niche applications in refuse trucks (2,500), shuttle buses and delivery trucks (10-20,000), school buses (3,000) and light vehicle fleets (20,000).
Natural gas engines are expected to gain wider acceptance towards 2010 when their fuel efficiency is expected to rise to 95% of diesel engines. The newer engines increase the combustion efficiency by a richer mix of oxygen and fuel and by compressing the mixture before it is burnt. More air in the mix also reduces the NOx emitted after the gas is burnt. Diesel engines will emit 6 times more NOx than natural engines.
Emission Standards and Cost of Engines
By 2010, the emission standards for heavy and medium-duty diesel engines are slated to be far more stringent. Fleets are switching to natural gas engines to avoid the higher costs of environmental compliance required of diesel engines. According to Dee Kapur, the President of the International Truck and Engine, the cost of a medium-duty truck will rise by $5,000 to $6,000 to meet the 2007 emission standards and as yet an undetermined figure to comply with the 2010 standards. The cost of heavy-duty trucks will rise by $10,000. The ultra low-sulfur that would have to be used is reported to cost an additional 14-16 cents for every gallon.
Supply of Natural Gas
In the USA, the supply of domestically extracted natural gas is increasing and will encourage its use in transportation. According to a recent study of Navigant Consulting, supply of natural gas is increasing as unconventional sources of natural gas, shale gas, coal bed methane and tight gas, are developed. Navigant’s estimates show that unconventional natural gas supply increased by 65% to 8.9 Tcf per year in 2007 from 5.4 Tcf per year in 1998 while its share increased from 28% of total supply to 46% in 2007.
More recently, production has surged especially in Texas and Wyoming. The production increase is likely to be sustained because it is propelled by successful implementation of new technologies, i.e., horizontal drilling which is able to draw on natural gas deposits in shale. These technologies can tap into the large reserves of natural gas available in Barnett Shale deposits which were previously inaccessible.
In addition, supplies of liquefied natural gas are increasing dramatically. The USA is expected to increase its imports from 2.1 Bcf / day in 2007 to 12.8 Bcf / day in 2016. While in the past natural gas as a by-product of oil extraction was burnt, it is now stored as liquefied natural gas and increased transported and traded across the world.
At a time stock markets in the USA are expected to move sideways throughout 2010, the companies that have invested in their future and are poised to reap the benefits in the near term are most likely to see their stocks gain. Westport Innovations, a Vancouver based manufacturer of natural gas engines, fits the profile. It has gained market share in the market for natural gas engines in the size range of 5.9 and 8.9 liter. Over the last three years, it reinvested its profits to develop a market for heavy duty natural gas engines. Profits could rise sharply as expenses on market development decline and revenues from heavy duty vehicles increase.
The surpluses from CWI helped to fund the expenses for the development of heavy duty vehicles. In fiscal 2007 (ending March 31st), the operating margin was $8.7 million (after deducting $ 8 million in R&D which were expensed to comply with US Accounting rules) on sales of $58 million or 29% on sales (excluding the R&D expenses). The margin at $21 million (after excluding R&D expenses) dropped to 19% in 2009 with sales of $110 million. The company began offering a LNG solution for 15 liter engines in early 2007 through Westport Power Inc. The expenses incurred for development of the market for heavy-duty trucks led to an increase in losses from $10.3 million or $0.41 per share in 2008 to $24.4 million or $0.81 per share in 2009, expenses for heavy duty trucks increased by $12.6 million.
Overall, the market for heavy duty trucks plummeted from a peak of 284,000 units in North America in 2006 to 145,000 units in 2008. Westport’s own sales of heavy duty vehicles dropped from 69 in fiscal Q2 2009 to 14 in 2010 and the YTD from 70 to 28. Due to a weak economic recovery, overall heavy duty truck sales are unlikely to recover significantly. Westport, however, will benefit from the purchase by the Long Beach and Los Angeles ports, a market it has been able to enter, of 8000 natural gas trucks that will be purchased over the next five years. The DOE has also allocated funds for the purchase of 2800 vehicles for the Clean City program. The cost differential between diesel and natural gas engines will narrow as owners of diesel engine trucks comply with more stringent emission regulations in 2010 and the Natural Gas Act, currently under consideration in the Senate, doubles the tax credit to $64,000. Surging supply of natural gas within the USA and imported LNG has increased the relative cost of diesel which now sells in the range of $5 a gallon in Southern California compared to $3.20 for natural gas.
 Quoted from, “The promise of natural gas as a transportation fuel”, Investor presentation, Westport Innovations Inc, 2008.
 The data is cited from “The compelling case for natural gas vehicles in public and private fleet applications”, by Mark Bentley, NGVAmerica.
 “Comparative costs of 2010 Heavy Duty Diesel and Natural Gas Engines”, California Natural Gas Vehicle Partnership”, July 2005.
 The figures were quoted in “The Great Discontinuity: Why Historical Studies are not a useful guide in making current and future heavy duty purchase decisions”, NGVAmerica, May 2006.
 “North American Natural Gas Supply Assessment”, Navigant Consulting, July 4th 2008.
 “After 9 years of no net growth through 2006, an upward trend began that generated 3% growth between first-quarter 2006 and first-quarter 2007, followed by an exceptionally large 9% increase between first-quarter 2007 and first-quarter 2008…..between the first quarter of 2007 and the first quarter of 2008,… supplies ( from Texas ) grew by an exceptionally high 15%. Other contributing regions included Wyoming with growth of 9%, Oklahoma with 6% growth, and Louisiana with 4% growth”, quoted from EIA
 In the late 1990s, about 40 drilling rigs, or 6%, were drilling horizontally. As of May 2008, the number of rigs drilling horizontal wells has grown to 519 rigs, or 28% of the total
 Natural gas reserves in the USA are now estimated at 211 trillion cubic feet up 27% over the last decade according to the data quoted in “Ability of the USA to compete in the Global LNG Marketplace”, American Gas Foundation, October 2008
 EIA, op cit
 Based on the construction of existing facilities for the construction of LNG plants, the world’s production of LNG is expected to double from 22.4 Bcf / day in 2007 to 49.4 Bcf / day in 2016 according to the report prepared by the American Gas Foundation, October 2008.
 American Gas Foundation, op cit
Digital signage, which in essence is out-of-home TV, brings media content and advertising to viewers—to
their retail stores, taxi cabs, buses, trucks, airports, parks and conference centers. The large LED or plasma
screens are familiar to buyers at retail stores like Best Buy. Content streaming on these TVs in stores,
sports stadiums or conference halls are going to become a lot more familiar. The content does not have to
come from a broadcasting station; it can be drawn from video content sites, user-generated, on the Internet.
Narrowcasting, one of the buzzwords in the industry suggests that the content and the advertisements can
be customized to appeal to the specific audience being served.
The users of digital signage technologies can apply them in a variety of creative ways. Imagine somebody
window-shopping while waiting for a friend to arrive. He could look at a LED screen at a real-estate broker’s
office after hours. The screen could be showing pictures of properties for sale in the neighborhood. If the
shopper likes one, he could pull out his mobile phone and use the code on the screen to request detailed
information on the listing. Instead of wasting time, this person has completed a chore and the real estate
broker did business at home!
Broadcast or cable TV is one of the most expensive means to advertise. According to the 2007 figures from
Media Dynamics, the cost of a single impression of an advertisement on TV is $15.20 compared to $5.20 for
newspapers. Billboards, on the other hand, cost as low as $2.15. However, outdoor advertising accounts for
one of the lowest shares of advertising expenditure. According to figures of TNS Media Intelligence,
expenditure on outdoor advertising in the first half of 2007 was $1.9 billion out of a total of $72.5 billion on
all types of advertising. By contrast, a total of $31.6 billion were spent on all kinds of TV media.
Outdoor advertising has always been seen as a means to increase awareness of a brand instead as a
method of promotion. The inability to measure the impact of outdoor advertising, or out-of-home advertising
in general, was the major barrier to higher allocations of ad dollars. Digital signage, combined with GPS
technologies or tracking by time-of-day, can help to measure the impact of out-of-home advertising. Retail
stores, for example, keep track of the time period over which an advertisement was displayed and correlate
it with the subsequent sales at the counter. Citi-mobile, which specializes in truck side advertising, uses GPS
devices to keep track of the locations that vehicles pass. Typically, the advertisements displayed are
sponsored by local merchants; the GPS data helps to determine the neighborhoods which responded well to
the commercial. The growth of digital signage in USA and throughout the world confirms that outdoor
advertising is gaining traction. Expenditures on alternative out-of-home advertising in USA, according to Leo
Kivijarv of PQ Media, increased by 25.6% in 2005 and by 27% in 2006. Digital billboards and displays
increased by 55.4% in 2006 at $233.2 million.
Out-of-home TV has an edge in the display of short-form content such as breaking news, highlights of
sporting events, and local events such as a fire in the vicinity. It also has an edge in context TV. For
example, an expo can use digital signage for keeping participants informed about important personalities at
While sorting potential companies for investment, we came across two types of them. A few, like Focus
Media (Nasdaq: FMCN), Lamar Advertising (NasdaqGR: LAMR) and Daktronics (Nadaq:DAKT) are already
successful and their stocks fully priced. Focus Media, a Chinese company, which recently floated an ADR,
has appreciated 100% at a peak of $60 over the last year. Lamar Advertising peaked at a five year high of
$70 dollars in January ‘07 and has been range bound since then and Daktronics appreciated 400% at $40
between December 2005 and December 2006 and has been range bound since then. These companies can
be considered if their prices consolidate at lower levels.
The other choices are among a number of penny stocks much harder to figure out. We found Data Call
Technologies (OTC: DCLT.OB), a digital signage software company, an attractive possibility. Its 52 week
price range has been $0.04 and $1.05. Currently, it trades at about $0.08. Revenue numbers currently are
modest at $58,000 in 2006 and are expected to be $162,425 in 2007. According to an analyst Kris Gupta, the
revenues are expected to leap by 460% in 2008.What lends credibility to these estimates is Data Call’s
collaboration with 3M, a long-standing leader in static outdoor advertising and NEC Display Solutions which is
building a digital signage ecology. In addition, Data Call has tied up with important networks to get access to
customers. It has collaboration with Arena Media Networks, a sports and entertainment TV network. With
its collaboration with AdTekMedia, it has access to digital signage at gas stations on top of pumps.
Wireless networking technologies, in the past, had trouble making headway because very few applications,
especially multi-media applications, could be supported with their bandwidth. Consumer frustration was
aggravated by spotty coverage of the networks and the consequent interruptions in signal transmission. WiMAX,
or broadband wireless which matches or exceeds the bandwidth of available DSL services, can support
multi-media applications better than the current 3G technologies. In addition, WiMAX can transmit signals over
much longer distances where neither cell phones nor hotspots can reach.
Mobile broadband is most valuable when Internet applications can be accessed anywhere. In the current
environment, consumers have to instead look for hotspots. WiMAX, by contrast, has no such limitation as it has
a range of 3-10 miles in densely populated metropolitan areas. Its many base stations can also route traffic
around obstacles, such as buildings, before they hand over data to national networks. Consumers could be
watching their favorite TV programs in a park; devices and software from Sling Media allows customers to
access video content when they want it. They could be listening to traffic reports while they are driving a car.
Alternatively, they could catch up with the latest in baseball from mlb.com.
Sprint’s (NYSE: S) business model for WiMAX is counting on revenues from consumer and enterprise
applications for success. The recent agreement between Google and Sprint to offer location based services on
WiMAX is a pointer to developments in this space. A growing number of portable consumer devices for music,
video, GPS and gaming could be more valuable if they could access content from anywhere.
Increasing use of sensors, such as RFIDs, for gathering data and its aggregation at a central point requires the
seamless hauling of data best achieved with high bandwidth networks. WiMAX gains an edge over 3G for data
rich applications; its chipsets for consumer devices like MP3 players would be $3 compared to $30 for 3G
devices for comparable scales of production according to estimates of Diamond, a management and technology
Successful deployment of mobile broadband applications depends critically on integrating software with
telecommunications networks and the devices that receive the signals. Consequently, specialists in WiMAX
technology, such as Airspan and Alvarion will succeed when they work with companies like IBM to set-up
Alvarion (Nasdaq: ALVR), an Israeli company, is focused on supplying equipment not only for WiMAX networks
(basestations) but also a platform to integrate applications for handheld devices including consumer devices. Its
open architecture allows network providers to choose their preferred vendors for devices for applications.
Alvarion’s 4Motion package is meant to get networks ready to offer mobile TV, online gaming, video
conferencing, virtual private networks, location based services, etc. MobiTV, for example, offers video content
by leveraging the 4Motion platform. Till date, much of its revenue gains have been from networking WiMAX
product called BreezeMax. Future growth depends critically on the success of 4Motion. Alvarion’s recent alliances
with IBM and Hitachi, for their system integration skills, suggest where it is going in the future.
Location based services, such as a 3D map and traffic information, made a fitful start in the Internet bubble
days. These services were not well received then because customers found mobile phones were too slow in
displaying information from the Internet, their screens were too small and the images blurry. Location based
services have now gotten a break with the advent of smart phones which have larger screens, the images have
a better resolution and broadband wireless networks enable faster downloads.
Increasingly, location based services mean more than a map and driving directions. NavTech (Nasdaq: NVT), for
example, has a product Discover Cities which correlates location information with places of interest such as
shopping malls, gas stations, restaurants, businesses, parks, etc. Users of mobile phones can receive alerts
about the source of the cheapest gas in their vicinity, discount offers when they are passing a mall, turn-by-turn
routing directions to the nearest business or news about an event at the nearest theater.
Vendors are finding new ways to make geographical information valuable for consumers and businesses.
Companies like Inrix and traffic.com collect real time data from sensors or other means and feed them back to
drivers who view snapshots of the traffic situation visually displayed on maps and find the best means to
navigate. Inrix also does forecasts of traffic volumes and helps drivers determine the time it would take them to
move from one point to another.
The location based version of social networking helps mobile phone users locate friends and when they are
traveling using services such as those provided by Loopt. Tourists can find information on events and look at
reviews of restaurants and places of interest from other travelers.
Businesses use location based services to recover from disasters such as Katrina. Maptuit offers software that
has helped retail giants like Wal-mart reroute trucks to alternative distribution centers when storms like Katrina
damage the normal destination points.
TeleCommunications Systems (TCS), Inc (Nasdaq: TSYS) provides the backend software and the data
telecommunications service providers need to offer location based services. TCS’s software helps to pinpoint the
co-ordinates of the location of a mobile device user when a 911 call is made. In addition, its Rand McNally Traffic
application is a tool for navigation which helps drivers with turn-by-turn directions to reach their destination.
Users can also obtain real time information on traffic volumes on specific routes and places of interest on their
route. TCS has a wealth of technology, 52 patents and 150 applications, which it can leverage.
Despite its strength in technology and marquee clients (Verizon with 20% of the sales and Cingular Wireless
10%), the financial performance of TCS thus far has been mediocre. Overall revenues barely grew from $97
million dollars in financial year 2004 to 102 million in 2005 and to 125 million in 2006. In all these years, it also
incurred losses of $19 million in 2004, 12 million in 2005 and 22 million in 2006. It has since sold its enterprise
applications division which accounted for losses of $24 million in 2006. The poor performance is accounted by
the slow rate of adoption of location based services so far.
The prospects are likely to change in 2007 when adoption of location based services is expected to accelerate.
In the first quarter ending 31st March 2007, TCS realized revenue of $34 million up 8% compared to 32 million
in the first quarter of 2006. The discontinuation of unprofitable businesses in 2006 led to an increase in profits;
net income in first quarter of 2007 was $0.6 million compared to a loss of $1.7 million in the first quarter of
2006. The improvement of profitability is reflected in a steady increase in stock price from a bottom of $2 in
August of 2006 to a peak of $4.5 in May 2007. Further upside is likely with large sales of software to telecom
LoJack Corporation (Nasdaq:LOJN) uses location technology to track down stolen vehicles and is extending its
applications to cargo and lap tops. It takes advantage of the tiny size of Radio Frequency Identification (RFID) to
prevent a thief from finding the tracking sensor.
The current business model is looking to expand revenues by expanding markets in Canada, China and Italy.
Increasingly, LoJack is also entering into bulk installation programs, with lower per unit revenues, which
accounted for 24% of all installations in financial year 2006. With bulk installations, LoJack is also looking to
improve manufacturing efficiencies to maintain margins. After a 31% increase in revenues between 2004 and
2005, LoJack’s growth fell to a rate of 12% between 2005 and 2006. Net income peaked at $18 million in 2005
and then fell to $16 million in 2006. In the first quarter of 2007 ending 31st March, the revenue growth slowed
further to 7% as compared to the first quarter of 2006. On the other hand, net income increased from $6 million
up from $3 million. The higher profitability came from unchanged cost of goods while revenues increased. The
stock price is up 20% YTD at 20.52. The stock is still below the 2 year high of 29 and is a buy.
Robots, till recently, had limited applications, largely confined to the automobile industry, for materials handling
and for welding; in all these cases robots perform fixed functions for repetitive tasks. A new generation of
robots has vision capabilities and is more mobile which enables flexible automation. Industrial applications have
expanded into packaging of food items, painting in automotive and non-automotive industries and for
compliance with FDA regulations in pharmaceutical manufacturing.
The sales figures for fourth quarter of 2006, ending 31st December, revealed an increasing trend towards the
growth of the non-automotive market for robotics. According to statistics published by the Robotics Industries
Association, a total of 12,765 robots worth $904.2 million were sold in North America in 2006, a decline of 30%
in unit sales and 22% in dollar value from 2005. The worldwide sales of North American robotics companies’
were 13,791 robots worth $958.4 million, down 29% in units and 22% in revenue. Non-automotive orders
accounted for 44% of total orders in 2006, compared with just 30% in 2005.
A pre-requisite for the mass deployment of robotics in industry is the availability of a broad range of software
applications for robotics. In the past, this could not be done rapidly in the absence of a common platform,
similar to the Windows operating systems available for PCs, as the bedrock for the development of new
applications. Microsoft has launched Robotics Studio which provides programming tools to facilitate the
development of new applications.
Two companies, iRobot and Braintech, look promising as they have products that have been accepted in the
market and are poised to scale up. iRobot (Nasdaq: IRBT), a spin-off from MIT, manufactures consumers
robots. Its Roomba model is used for floor vacuming and Scooba for floor washing. It also manufactures military
robots. PackBot, is used for reconnaissance such as detecting lurking dangers in urban warfare and for bomb
disposal. More advanced applications in the military market, unmanned ground vehicles for combating terrorism,
are in advanced stages of development and are expected to be substantial contributors to its future growth.
iRobot entered into a partnership with Boeing to accelerate the commercialization of its unmanned vehicle
products which is expected to be reflected in higher profits in the coming quarters.
Revenues from military robots have grown faster than home robots over the last year. For the quarter ending
31st March, revenues from military robots increased by $5 million in 2007 as compared to 2006 or by 33.6%
while they decreased $3.8 million or by 16% for home robots. Total revenues grew marginally to $39 million
from $38 million in 2006 or by 3.3%. The decline in sales of home robots was due to decline in sales of Scooba
floor washing robots which also have a higher unit sales price. Net loss increased from $3 million in 2006 to $6
million in 2007 as gross margins on military contracts are lower and research and development costs are higher.
For the year ending 31st December, net income increased to $3.5 million in 2006 from $1.5 million in 2005 and
to $0.15 per share in 2006 from $0.13 in 2005. The stock price declined from a peak of $25 in October 2006 to
its current level of $16 which has created a buying opportunity for long-term investors.
Briantech (OTC BB: BRHI.OB) specializes in the development of vision systems, the eyes of a robot, that help to
guide the movement of robots. It has developed 3D digital cameras which correlate pixel data of images with
physical location and help to drive the movement of robots. The data from images is processed by its
eVisionFactory software system which determines the position of an object of interest and facilitates its
manipulation by the robot. In addition, the eVisionFactory system will incorporate an Internet based technical
service and support system that will connect wirelessly with factory workers and managers to help them
communicate with the staff at Braintech. As part of its strategic alliance with ABB (NYSE:ABB), Braintech’s vision
guidance systems are incorporated in ABB’s hardware, the TrueView robotic system, for sale in the automotive
The agreement to exclusively use Braintech’s eVisionFactory for ABB’s TrueView in January 2005 was also the
time when mass deployment of these systems after the tentative launch in 2002 which stretched till 2005. The
revenues of the company jumped from $1.2 million in 2005 to $1.8 million in 2006 while gross profits increased
from $1.1 million to $1.7 million in the same period. Net loss, on the other hand, increased from $2.7 million to
In May 2006, Braintech signed a new global channel partner agreement with ABB which ensures minimum sales
of $10.5 million ($1.5 million in 2006, $3.5 million in 2007 and $5.5 million in 2008) which has helped the
company to earn operating profits in first quarter of 2007 and it expected to earn positive net profits for the
year 2007 and 2008. ABB is also investing $300,000 for the development of a bin picking robots. The benefits of
the expanded agreement with ABB is reflected in vastly improved financial performance in the first quarter of
2007 ending 31st March with revenues of $0.67 million compared to $0.23 million in the same quarter of 2006.
From an operating loss of $0.48 million in first quarter of 2006, Braintech was able to achieve an operating profit
of $0.05 million. The loss per share declined from $0.03 per share in 2006 to $0.02 per share in 2007. The stock
has moved from its one year low of $0.22 in August 2006 to a peak of $0.44 in May 2007. This is a high risk
stock and is recommended for those who have the stomach for exceptional risk. The technology story of the
company is compelling and it has a strong channel agreement with a guaranteed minimum level of revenues till
Disclosure: the author owns stock in Braintech.
In digital music, Steve Jobs found a rare opportunity to crack open a latent mass market that has become a
phenomenon of our times. It is possible to visualize a similar opportunity in digital video. Similar
inefficiencies are palpable in the movie industry as well. Those who are already owners of home theaters crave
for an opportunity to simply download a movie. DVD versions of movies from online or local stores are no
substitutes—not when many of them are damaged as is often the case. It is also harder to switch to a better
movie when you are using a DVD and are unable to download another one. Above all, the cost of distribution of
movies through the Internet is less than 25 cents while the traditional methods incur more than a dollar
according to estimates of Level 3.
The opportunity in digital videos is probably much larger than in music. For one, much more user-generated
video content is available and it’s not just the one you see on Youtube. Videos of live events, such as sports
events available from Major League Baseball (MLB.com), could well be watched in cars, trains or while walking
in a park. MLB.com today has 1 million paying subscribers and 6 million unique visitors per day according to
statistics quoted by a supplement issued with Level 3’s latest annual report. Portable broadband afforded by
WiMAX, with 12 Mbps of bandwidth, will improve the transmission efficiencies to wireless devices.
There are potentially other applications of digital video. Location technologies will allow personalization of
content; tourists, for example, could be served footage of sites they are visiting or even advertisements.
Multi-player games, with participants from a variety of locations, are already popular; World of Warcraft has 8
million subscribers worldwide.
The idea of digital video, served on devices other than television, is not far fetched. According to a survey by
E-Poll, 24% of males in the age-group of 13-34 frequently watch video on devices other than TV. Of these, 46%
watch digital video content on laptops and another 13% on cell phones and iPods. About 13% transfer video
content from their computer to a TV, 50% of them did not know that this is possible and one-third would like to
have the ability even if it involved a complicated installation process.
The macro case for investment in digital video is compelling but this can hardly be said of individual companies.
Level 3 was until recently presumed to be at the center of the Internet Video tsunami, to use a term from the
infamous Internet bubble days. In reality, Level 3 is grappling with the complex job of paying off its high cost
debt and integrating the several companies it has acquired. Companies like Clearwire want to offer digital
content on broadband wireless and have to acquire enough radio spectrum and pay for a nationwide network.
Other companies like JumpTV, which offers content from the around the world, have to invest large amounts of
money on marketing and sales. All of this is much too risky for individual investors.
The best bet at this point of time is to invest in companies supplying devices such as set-top boxes or even
mobile devices. One such company is the Chinese company Comtech Group (Nasdaq: COGO) which develops
encoding solutions for set-top boxes in collaboration with Microsoft. It has been experienced profit growth of
40% over the last two years and will be able to sustain or exceed this growth rate because digital media is
expected to realize margins of 20% compared to 18.7% in its existing product line according to estimates of W R
Hambrecht and Company.