Exhibit 99.1
Aware, Inc. logo
On our October 27, 2005 earnings release conference call, we invited investors
to email questions to us. The following list of questions and answers represents
a selection of questions that we believe serves our intended purpose of
furthering the understanding of Aware by our investor base.
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How quickly do you think VDSL2 will deploy? Will it be used to replace installed
ADSL lines?
VDSL2 provides significant performance improvements over ADSL at distances below
9000 feet and ADSL2+ at distances less than 4500 feet. It outperforms bonded
ADSL2+ at distances less than about 2000 feet, however, Bonded ADSL2+ requires a
second phone line. Reach charts for these standards can be found in our VDSL2
and Bonded ADSL2+ white papers, which are available at www.aware.com.
What this means is that phone companies can benefit from transitioning to VDSL2
as they deliver fiber deeper in their networks. But, we don't think that all
phone companies will deliver fiber to within less than 2000 feet of each of
their subscribers, and therefore, we expect to see deployments utilize a
combination of ADSL, ADSL2, ADSL2+, Bonded ADSL2+ and VDSL2.
Infonetics Research estimates that the 5-year market for VDSL chipsets will be
about 73 million at the CO (central office) and 14 million (M) at the CPE
(customer premises equipment). Shipment forecasts from 2004 to 2008 are as
follows:
- 3.75M CO and 0.7M CPE in 2004
- 7.5M CO and 1.5M CPE in 2005
- 13M CO and 2.4M CPE in 2006
- 21M CO and 3.7M CPE in 2007
- 28M CO and 6M CPE in 2008
How rapidly VDSL2 deploys will depend upon a number of factors, including:
- How rapidly phone companies deploy fiber deeper into their networks
- The cost benefit analysis of the speeds enabled by ADSL2+ versus VDSL2
- The success of IPTV and triple-play as entertainment services
We expect to see aggressive but small pockets of deployments in the next 12-18
months and a larger scale set of deployments during 2007.
Pockets of deployments or planned deployments that we believe are important
today can be found in Japan, Belgium, and Germany.
What is the difference between VDSL1 and VDSL2? Why would anyone deploy VDSL1?
The main difference is that VDSL2 delivers higher speeds than VDSL1 at any
distance. Also, VDSL1 was targeted only at very short distances, and VDSL2 is an
improvement by providing reach out to about 9000 feet. In addition, VDSL2 has a
number of important features that are similar to features used in ADSL2+ that
VDSL1 does not support, such as upstream 0 support (for greater reach), impulse
noise protection and advanced diagnostics capabilities. Please see our VDSL2
white paper for a comprehensive description of VDSL2.
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AWARE, INC. - 40 MIDDLESEX TURNPIKE - BEDFORD, MA USA 01730-1432
TEL: (781) 276-4000 - FAX: (781) 276-4001 - E-MAIL: AWARE@AWARE.COM
Some equipment companies have already integrated VDSL1 chipsets into their
equipment and are deploying (primarily in Asia) in apartment building-type
settings. For this type of situation, continued VDSL1-based deployments are
likely for some period of time.
However, with the availability of standard-compliant VDSL2 silicon, VDSL2-based
equipment is widely expected to rapidly obsolete older VDSL1 models due to the
fundamental advantages discussed above. A service provider who is currently
planning a VDSL deployment will, we believe, choose VDSL2 and, in large
deployments planned for 2006, VDSL2 has emerged as a requirement. An example of
this is Deutsche Telecom who recently announced that they will use VDSL2 in a
deployment that will begin in 2006.
Our StratiPHY3TM product supports all modes of operation of VDSL1 as well as
VDSL2 and functions as a CO or CPE solution. Infineon has licensed many
generations of DSL technology from Aware and has a product that supports all of
the modes of operation of VDSL2. This solution, called VINAX, is a higher
performance, richer feature set solution than VDSL1 solutions.
How many licensees does Aware have?
There are six companies who have licensed StratiPHY2+TM, our ADSL/ADSL2/ADSL2+
CPE solution. These are Analog Devices, Infineon, Thomson, Atmel and two others
that have not been announced.
There are two companies who have licensed StratiPHY3, our ADSL/ADSL2/ADSL2+/
VDSL1/VDSL2 solution that can support CPE and CO. These are Infineon and one
unannounced.
Some of our customers have multiple chipsets in the market or in development
based upon our licensed technology.
Please provide more details on the revenue model for the biometric sales
business. Is it a one-time unit license price per station? Or is there a
renewable license payment every year? Any further details on this front are
helpful.
Our most widely sold biometrics products are software components for enrollment
stations used in fingerprint systems for performing background checks and
related applications. We sell our software components on a per-seat basis and
sometimes there is a maintenance component associated with that, but not always.
Our software performs compression and biometric transaction processing functions
(e.g. formatting, editing, validating, storing, printing). Our customers are
automatic fingerprint identification companies (AFIS) suppliers, Livescan
vendors, systems integrators and others. Their customers are primarily law
enforcement agencies and government agencies. The use of fingerprint systems for
international applications and for civil background check applications is on the
rise.
I believe you stated in your Q2 report that the analog addition to your
StratiPHY products would be available somewhere in January 2006. Is this
timetable still accurate?
We stated that adding analog functionality to our StratiPHY product was under
development and that we expected to have products in early 2006. We are still on
track with those developments.
We believe that the addition of analog functionality will make it easier for
companies to add a DSL interface capability to their product portfolio.
Does Aware currently have or does Aware have in development, products that work
with or enhance wireless applications?
We are currently focused on building profitability in our DSL licensing
products, expanding the reach of our biometrics and medical imaging products,
and getting market traction with our test and diagnostics products.
While there are other applications of our core technologies, including wireless,
they are not our current focus.
How does Aware compare or compete with Ikanos?
Ikanos is a fabless semiconductor company with a presence in today's VDSL1
deployments. Ikanos has announced that they have also developed VDSL2 and
ADSL/ADSL2/ADSL2+ products.
Aware DSL products are licensed to companies that compete with Ikanos in all
areas of DSL.
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SAFE HARBOR WARNING
Portions of this Form 8-K contain forward-looking statements regarding future
events and are subject to risks and uncertainties, such as estimates or
projections of future revenue and earnings and the growth of the DSL and/or the
biometrics market. Aware wishes to caution you that there are factors that could
cause actual results to differ materially from the results indicated by such
statements. These factors include, but are not limited to: we have a unique
business model, our quarterly results are difficult to predict, we depend on a
limited number of licensees, we derive a significant amount of revenue from a
small number of customers, we depend on equipment companies to incorporate our
technology into their products, we face intense competition from other DSL
vendors, DSL technology competes with other technologies for broadband access,
and our business is subject to rapid technological change. We refer you to the
documents Aware files from time to time with the Securities and Exchange
Commission, specifically the section titled Risk Factors in our quarterly report
on Form 10-Q for the quarter ended June 30, 2005 and other reports and filings
made with the Securities and Exchange Commission.