Silicon Image, Inc. (NASDAQ:SIMG)
Financial Analyst Day Conference Call
November 13, 2012, 09:00 am ET
Noland Granberry - CFO
Camillo Martino - CEO
Dave Pederson - VP of Strategic & Corporate Marketing
Jeff Gilbert - CTO
Tim Vehling - VP. Product Marketing & GM of Wireless Business
Tim Bajarin - President, Creative Strategies
Ron Louks - Mobile Executive, HTC & Sony Ericsson
Tom Wheeler - Mobile Industry Executive, Managing Director, Core Capital Partners, Former President CTIA & Former President, National Cable Television Association
Adam Sutherland - SVP, Corporate Strategy & Business Development, National Geographic
Bill Weiss - Chairman and CEO, The Promar Group LLC, Board Member/Executive Advisor for Telecom, Media and Technology Companies
Good morning. Welcome to Silicon Image’s 2012 Investor Day. In case we haven't had the chance to meet, I am Noland Granberry, the company's Chief Financial Officer. I definitely appreciate, the team definitely appreciates you joining us here at the Grand Hyatt and those of you who are joining via webcast I would like to say we appreciate you joining us, taking time out of your day to join us as well. On behalf of the entire Silicon Image team, we appreciate your interest in the company.
We have put together a special presentation for you today. We will start out with company presentations presented by the executives. We've set aside some time for you to visit our demo area in the back of the room to see our technology and solutions at work and we also at the lunch hour have a lunch panel for you where there will be a discussion with industry experts discussing driving the future of mobile video and interactivity. I think that will be an interesting informative session.
We have put the program together for today, we thought about what do we want to accomplish? And we actually have one primary objective, that is to present to you our compelling story in a simple and digestible way, so you can understand what Silicon Image is all about and how we are going about creating shareholder value.
And that there were three key takeaways that I hope you are able to do and that would be that our mobile business has a lot of runway for continued growth, its not just about the phone to the TV, there's a lot of things happening in that space. We have opportunities within our CE space that we are anticipating and very confident about returning in 2013. And lastly, our Wireless HD, our 60 gigahertz solution. We will talk with you today about how that will, our advantage is around that.
Now Camillo and I have met with many of you, but I would like to take a moment to introduce you to the other speakers today. First, VP of Strategic Marketing, Dave Pederson; our Chief Technical Officer, Jeff Gilbert and many have also met our VP of Product Marketing and GM of our wireless business unit, Tim Vehling.
Let's take a look at the agenda. Camillo our CEO will start off and give you an overview and vision of the company, about Silicon Image today and tomorrow. Dave Peterson will follow-up with HD connectivity that just works. Jeff will follow-up with a more deeper dive into our 60 gigahertz solution and really show you why we believe we have an advantage with the technology.
We will take about a 10 minute break and then Tim will come back and talk about our products, the market and how we are going to drive revenue growth and I'll come up and conclude with a tie up of everything that's been discussed and talk about how we are looking to enhance shareholder value. And it will be a lot of information shared today so, and I'm sure you will have questions, but what I would like to ask is that you hold your questions till the end. We will have a Q&A session and then we will go into the demo session.
So let's get started with the program and first I would like to bring up our CEO, Camillo. I have worked with Camillo for the better part of two years, but one thing I can say that I appreciate most is he has been really driving the team to think and push forward the long-term success of Silicon Image.
With that, welcome Camillo Martino.
Thanks Noland. Good morning everybody.
We don’t want you to get in trouble.
I am glad that you are going to cover this slide, very good.
So before we do that, let me cover Safe Harbor. We will make forward-looking statements today. And I am sure you have read this many times, but those statements may involve risk and uncertainties and we just want to make sure you are aware of that and we have identified risk in our 10-Q and our 10-K. We're not under any obligations to provide any update for any of the forward-looking statements that we're making.
And with that, I would like to provide Camillo Martino.
Good morning everybody. By the way, when you say bit of part of two years, we are roughly six weeks or so shy of three specifically. So the anniversary is coming up. Okay, so lets, we got a full agenda today. Lets go through some of you know our story very well and there are others who doesn’t know our story well. So just add a glance. This is who we are. A NASDAQ listed company, just last quarter where our financials were probably the strongest they’ve been in many, many years. We're just a little bit shy of $74 million revenue, and 17% operating profit which Noland will go into in a lot more detail a little bit later.
Worldwide our employee base has grown dramatically in particular in the two design centers both in Shanghai, as well as Hyderabad. I mean, they are two big additions in the last three years. Those two design centers and our patent portfolio has been growing significantly. That’s really the lifeblood of our company driving standards, filing patents and we've done a pretty good job within the last three years in particular.
Okay, you can see here a quarter-by-quarter snapshot of revenues over the last three years; we have shown pretty consistent growth very specifically, we recorded roughly $74 million revenue just last quarter and when I joined the company in Q1 of 2010, our revenues were actually little bit below $35 million. So we had a pretty significant improvement in the last few years.
A bunch of certain milestones during that period of time, firstly was the launch of the MHL Standard, I think was in June of 2010 and that’s been a catalyst for a lot of our revenue growth as we have seen. Secondly, was the acquisition of the wireless, the wireless group called SiBEAM that was that deal closed I believe in May of 2011 and Jeff Gilbert actually was the CTO of SiBEAM and he has joined us through that acquisition, now the CTO of the company.
And more recently, you can see here and I think it’s Q3 of 2011 that very first MHL smartphone that was shipped and since then it’s been after the race is relative to the penetration and adoption of MHL in the smartphone as we have seen.
But just to summarize, some of the points as we believe we have demonstrated in the last few years what is we have really repositioned the strategy for long-term growth. Secondly, we have expanded the product portfolio as we have seen in particular with the addition of wireless. Thirdly, we have restored the company back to profitability as we shown and we have delivered on whole of our promises honestly, every promise we have made we have delivered on. And finally, over the last 18 months we have taken a number of the actions to align the company and shareholder interest and Noland will summarize; there has been four or five different actions we have taken in the last 18 months to align our interest and we will go into details little bit later.
So this is a slide I think many of you may have seen if you have been come to other events, but many, many years ago, we were in the consumer electronics business first and foremost that really has been the heritage of the company. Today, our simple vision is, we see our IP, technology being not just in CE but in every mobile device as well as PC devices and it doesn’t matters whether it’s Silicon, whether its IP, whether its software, we have the bunch of technologies all available and our goal is to have one of these components into everyone of these products.
So these are the three primary markets that we are focused and we see here PC, these are stats by industry and industry sources 500 million units, this is recent I would say probably the last few months, frankly, I would probably question that today, just given what we know is happening out there is it really 500 million units, unless it’s to suite of five, maybe throw tablet into that category you may get to that corner. But I do have myself personally some questions on just the size of the PC market.
The CE market is probably in the 400 million unit, so plus by 2015 and the biggest opportunity that we are chasing as a company, as is now evidenced by the fact that over 60% of our product revenue is coming from the mobile sector today, and you know just two years ago it was a zero, that's been a pretty dramatic growth already. So these are the three primary markets that we are focused on as a company.
If we just look at mobile in particular this year you can see here that the size and it includes tablets as well, Smartphones and tablets 750 million units probably broken down at 650 Smartphones perhaps a 100 million tablets there about and this year growing to the 1.3 billion in 2015.
So that's a very significant opportunity and one that we are investing heavily not both in the wired technologies that we offer in the form of whether it be HDMI or MHL but also the wireless technology as well and you are going to hear a lot about that today, some of the developments and products that we have announced and what's on horizon.
So this is an interesting statistic and the reason why we are picking, we are highlighting game is here today is this is really one of the applications not the only applications but one of the applications that plays into our strength and plays into the investments that we are making both in the wired area but in particular in the wireless.
The wireless investment really is going to leverage a lot of the activities going on the gaming community. So there are 1.5 billion gamers today across various products, whole host of new products, just in particular if we see 50% of gamers use mobile devices as their primary gaming platform.
In fact, there are some industry analysts that are predicting that the traditional gaming console such as the Xbox, such as the Nintendo or the PlayStation, those types of products, it’s a question mark today as to what is the use five years from today, is that the primary gaming platform, or is it in fact the tablet or the phone, are they the new gaming console of the future.
Suddenly, if that transition occurs where the new gaming console is your mobile device that is going to play right into both in the wired and wireless technologies that we are promoting, right into that trend. This is another interesting statistic here but just a volume of internet video by 2015, the HD, everything is HD so today most of I'll go back to gaming again, most of the games today that are played on your phone in low resolution because people are only, you have a three inch, four inch display experience, there's only so much you can do with the three to four inch game experience but if game, if content companies are aware that the content that's viewed on the phone can be viewed on a 50 inch, 60 inch, 80 inch display; I think you are going to get a totally, totally different experience in terms of requirements and in particular in terms of connectivity requirements, again that just plays right into our strength.
And let's look at these HD progress that's going on the phone, many of you or not many of you I'm sure I would say 100% of you have a Smartphone and you can probably attest to this just in the last three-four-five year progress, you know what the phones were back then in terms of capability, performance, resolution, compared to where we are today, just HD screens today on your Smartphone moving on to 4G and we are only in 2012.
This game hasn't even started yet. Again this just plays right into our strength all of the technology that we are developing as a company.
Some other interesting pictures here. You can see here connectivity is, the mobile product is driving the connectivity requirements and technology roadmap for each of these devices and there are a number of these different devices here. Of course we talk about the television. There is a PC monitor where you can hook up your mobile device. We're actually doing that today. We have many customers today shipping PC monitors with MHL and some with HDMI as well; just they can hook up a smaller display.
We have the automobile. We will get in to a little bit later through the various presentations but we're providing a mean of hooking up your smaller display on to a larger display in the vehicle, whether it be in the front seat or the rear seat in both cases, another example of the mobile device driving the connectivity needs in each of these display products.
So I think if you look at, really with Silicon Image is solving I would say an HD connectivity problem here and if you look at everything we do, every investment we’ve made, these three things that we're delivering and it doesn’t matter whether it's a wired solution or it's a wireless solution, it's the same challenge, it's the same problem.
First and foremost, we're delivering the highest quality video. That's very distinguished we're delivering. Secondly, is the highest reliability and we’ll get into that and that means different things whether it's wired or wireless but if you look at wireless, in particular, we're referring to interference. If you look at what we do in the 60 GHz area versus a Wi-Fi, we don’t have the same interference challenge that Wi-Fi has and so depending on what you are doing, it really depends fundamentally what you are doing and you are going to hear later today, why not in anyway shape or form, saying get rid of Wi-Fi and use 60 GHz so that doesn’t make sense. However, for certain applications it absolutely makes sense and we are going for that in a lot of detail a little bit late as to why that make sense.
And thirdly is no latency again whether it’s wired or wireless everything we have focused on is a really a very, very low latency or no latency solutions to give that real time interactive experience, if you are again we will stick on gaming as an application if you are a hardcore gamer and you are playing a game, you don’t want to have to wait half a second or second to get a response from the actions you are initiating that is a no just non-starter.
So some of the other technologies that is such as USB they are more data centric, I mean that is really what that connectivity solution is focused on and Wi-Fi is very similar as well. So both of these the two technologies are going to be in mobile devices, absolutely they are going to be but they are more data centric, we had much more than video centric solution and that’s what we are focused on.
So these are the three primary standards that we are driving, we are fond of each of these things, each of these technologies and organization and we are actively driving each of them. So you have heard from many years that progress that we have made in HDMI, everyone is very familiar with that in fact I think there is a lot of statistics that we have been saying for the last few months that by the end of this year or early next year it’s expected that there is an installed base of approximately 3 billion units in the HDMI [camera] that's a very, very significant number that we have worked that for eight, nine and 10 years now, its been a long time.
MHL is up coming and I will show you statistic, on the next slide I will show you MHL is comparing to HDMI the same point in time but MHL started as the mobile connectivity solution but we are starting to see MHL now branch out into other product categories and we have mentioned on the last call, in particularly that we expect one of the catalysts for our CE growth in the future is going to come from MHL eventually on the TV device, so we are going to see a lot about that and you are going to hear lot about the wireless HD as well from the various speakers. So these are the three standards that we are driving quite aggressively as a company.
So I have one slide here that shows the adoption of MHL versus HDMI, so the bottom line or the blue line I should say is adoption of HDMI based on a number of years since launch. So if I overlay MHL, so this is where we are let's say by the end of 2012, so this is an actually solid line is an actual, the dash line is obviously is projected this is (inaudible) we expected the total industry this is not necessarily a Silicon Image chipset I have revenue guidance here but this is an industry penetration based on what we see, based on the visibility that we have, this is what we are expecting.
So, if you want to just pick one statistic that compels the two, it’s basically taken half the time to get to the same point comparing MHL and HDMI just in terms of units shipped, its quite dramatic and its quite impressive result overall. So I just want to have roughly summarize five keys to what we believe are our success to date as a company, and firstly you know driving the standards that we talked about, the three standards HDMI, MHL as well as wireless HD and creating converged ecosystem.
In the past we keep talking about the CE ecosystem for HDMI, but with the mobile phone and its associated accessories we are converging the mobile phone as well as the CE ecosystem. So this is very important to our success moving forward. Secondly we are delivering solutions that meet consumers content consumption patent. Thirdly, we are aligning with the priorities of the OEM customers. You know we have built I would say over the last 10 plus years very, very close relationships with many of the tier ones and customers as well as industry partners that enable the businesses well. I think this is very important for our long term success. Fourthly, we are leveraging our technology really through products and core licensing. Sometimes some people may think it’s a complicated business model, its not just chips or its not just IP, but we have found that its really helped us to be able to offer both a silicon solution as well as an IP solution.
And lastly leading the 60 gigahertz wireless connectivity technology, we really believe that the long term opportunity for 60 gigahertz is very, very material, it’s a huge opportunity. ASP is significantly higher than where we are today, and you are going to hear a bit more about that later. But this is the reason why we’ve made a conscious decision to invest in this area as dilutive as it was and we will know that's been very painful year and a half. It was a dilutive acquisition, but we fundamentally believe that this is an investment that's very important, that's going to carry us from the end of ’13 all the way through the ’15 and ’16 for many years to come. This is a fundamental investment for us as a company.
And this is the my final slide, just a few points we wanted to wrap us. Just looking ahead in the next year or two what are we focused on, what can we expect to see. Firstly we are going to continue our mobile revenue growth. We think this is still very early, very early in the process, very early from a number of standpoints, one from the standpoint of just sheer penetration, if you just look at the percentage of our market share, I think we've talked about one in five smartphones, there's plenty of room for growth there, that's one dimension, two is the technology itself where we have MHL only for the 2.0 standard today, we have, we are hoping we are only one of five founding members but Silicon Image is into the consortium. We have lots of ideas and lots of technology that we have on the roadmap that will materialize hopefully in MHL 3.0 next year and then 4.0 after that. So this has a long way to go.
Secondly we expect to drive CE growth again through MHL as well as HDMI, and we've talked about MHL as well HDMI. We talked about MHL being a catalyst for CE revenue growth in the coming years ahead. So you know, the CE business for us over the last year or two has been a little bit disappointing and we all know that, but we've been making investments in these areas and that gives us the expectation that CE will start to grow again. And thirdly, the 60 gigahertz story and you are going to hear more about that later today. We expect to, first of all say, right now we're on track. All the milestones that we’ve talked about were on track to deliver our handheld 60 gigahertz chipset by the end of this year to our key customers who will be unveiling it in Q1 next year publicly and all the major trade shows. So we're quite excited about that.
So that concludes my section. And now we're going to hand over to Dave. Dave Pederson who is going to talk about some of the strategic, more than strategic review of some of the products, some markets that (inaudible)
Thank you, Camillo. I would like to just take a little higher level of view of where we are going and why and some of the things that are driving us from our business model standpoint and just go back to the simple connectivity vision and what does it really mean when you say you want to connect or have a piece of technology in every one of these platforms. There is a couple of things you have to do there is some imperative. You have to be able to create something that creates a common language. You can’t just go plug a phone in to a TV and expect it to work. You have to have a standard for that. We have MHL or we have wireless HD or we have HDMI.
But the idea is you create a baseline that you can propagate through an ecosystem. But you also have to make it relevant; you have to have a connectivity technology that allows the content you want to be put from one device to another. In other words if you go back to few years HDMI, it’s big claim the thing was you can get that Hollywood movie from that DVD on to that TV or from that Blu-ray on to the TV in a format that made content owners and content producers comfortable with what you were doing.
So you have this idea of a common language plus something that allows a premium content to be displayed upon a device. And the other thing that you have to do with this type of ecosystem is you can’t leave anything behind. One of the key success to HDMI is you can go all the way back to one of the first HDMI devices; you can go to the store today and pick up a brand new HDMI device, grab a cable and the two things will work they will talk to each other you can’t disenfranchise the marketplace if you look particularly in CE because of lifecycles and times, people aren’t going to go buy a brand new TV everything a spec changes. They are not going to buy a new Blu-ray player every time a spec changes.
So when you look at how do you get this vision out there, you have to allow to evolve it has to be able to support the content you want and it has to be pretty much standardized in order to create this kind of ecosystem. So what do we have going on right now, delivering room from a few years ago, pretty simple set top box, theatres, simple HDMI connection, today mobiles entered and quite frankly we are in the infant stages of what this means with mobility in the living room whether it’s a TV channel guide or whether it’s actually I want to share a simple piece of YouTube content up on the screen, its just beginning with what's going on with these multiple screens and connecting and just using the living room is an example.
What that also means is these new device is also required different types of connectivity. For example if you want to watch a long tale piece of content on a mobile phone, you probably going to want to power the thing. If you want to do something simple like a simple video, hey have you seen this YouTube up on the TV, you probably going to want to use a wireless connection just for the simplicity of moving forward, so different kind of ecosystem.
But the other thing to note is the connectivity standards are replacing each other, they are complementing each other as you go forward. HDMI is not going to disappear, the one I mentioned three billion installed based that's not going to change. It’s probably the ultimately complement that some of the retailers and others called HDMI legacy connector, that says you are kind of in the stay for a while.
But MHL and wireless HD kind of add of top of that in this conversed platform, so what does that means from an opportunity standpoint. Since we are introducing in to the ecosystem new connectivity standards, you are getting a chance to go back to the installed base again. For example in 2012 the opportunity for all the connectivity standards overall opportunity is about 1.2, 1.3 billion device across all of these market spaces, and its kind of grow over 2 billion devices in three or four years time.
And that's for all of these standards. HDMI will probably still be predominate and most of the CE that will be complimented by MHL, it will be complimented by wireless HD out in time, and you’ll say well what about something like a Blue-ray player where does that fit in that. Well if you go actually look the Blue-ray players for example with MHL lockup ports on them. Why? Plug your phone in, share the latest movie from the soccer game, show the latest photo up there and charge your phone at the same time, oh yeah, and control your phone from the Blu-ray player’s remote. So MHL is prorogating their cost and we will see how wireless HD goes since it creates a similar type of ecosystem and architecture, but still fits in with the overall plan.
The other thing to note going overtime where is MHL wireless HD and opportunity in the mobile space in particular, we get asked about well, you are not an Apple, so where are you? Well, we are everywhere else which is roughly 80% of the blue bars at the bottom that represents the 650 million units going over a billion overtime. Latest industry reports says Android is probably 60% of that market even projected out to 2015; Windows, and who knows what else will take the other 20% of that market, so the opportunity is still huge for the mobile space and MHL. And you can note that the biggest growth is probably in the tablet space.
We will have to see how that market plays out and as Camillo mentioned, the PC space is a question mark. One of the conferences I went to a couple of weeks ago said 10% of the devices, mobile devices in 2015 are going to be something we don't know what they are right now. It’s a new form factor, a new user interface that says this mobility PC thing is going to get a little blurry over the next few years, ultrabooks, arm base, Intel base, its going to change, its going to more; reemphasizing the point it’s a new space, we are just in the beginning of the curve.
But I think the one thing we can all walk away from is this mobile platform has become the real PC. It’s the thing you don't share, it’s the thing you drive back to the house to get when you have forgotten. It’s the thing in the developing world that's probably the one device they have that connects them, gives them information. Its the one device that kind of coalesced a lot of the thoughts that have gone before where you have this idea of a true personal computer. If you think of the raw performance you are holding in your hand, its not unlikely that this will be the platform of choice going forward for most people, as these single point convergence device, its kind of the converging platform of choice with mobile.
But I think if you look at the landscape, the fact that people are zeroing in on the mobility platform means that its creating a lot of diverse opportunities. You can see some of the creative ways people are using it in the back in the demos that how mobile is changing and changing the landscape for the connectivity as well.
So let's look at some of the used cases. There’s the simple obvious one which is just entertainment. I want to share the latest video. I want to show a picture. I want to play a movie and charge my phone or as Camillo mentioned gaming, 1.5 billion mobile gamers today, that's 1.5 billion, by the way the statistics show its not just teenagers that 46% of smartphone owners that are 55 or older, oh yeah, the casual gamers, so its not just kids, its everybody is getting into this space.
The other thing to note and I will give you a little bit more detail in a minute, gaming is starting to take note of the fact that you have the opportunity to get to a bigger display and you are actually adapting the games to provide a different experience when you are on the big screen, so that you can actually take your phone, it becomes the controller. The big screen becomes the display and this higher resolution content being display than what you get on the phone and I will show you there is about 15 or 16 games out there already where the developers have said, hey we can take MHL, put a game up on the big screen, do something different, give a better experience.
Well, if it's your PC, then shouldn't you be able to do something productive with it? We got a few examples of productivity back there. You see Microsoft is announcing, they're going to put offers on Android sometime next year. Well, that also means it's going to drive connectivity, because I don’t think on a three-inch screen you are going to one other than a casual add on an excel spread sheet. You are actually going to want that environment with a mouse and the keyboard to really be productive. But the other statistic of note that about 25% of work that used to be done on a PC is now being done by the smartphone or the tablet. Some form of mobile device; it’s just a natural progression.
And lastly, automotive. This, we actually have an example of an automotive application in the back as well, where your phone becomes the head unit. It's got the latest and greatest traffic weather, GPS software on it. The car companies can’t keep up. it's a natural progression. It's going to take time. That industry is quite a bit slower than CE or mobile, but the other opportunity there is it also gives you the same experience you are used to on the phone and the only requirement there is you need a touch screen and a connection to your phone. So the automotive aspect is still waiting to be explored in the connectivity space.
So as I mentioned on gaming, there is a website out there called Meet MHL and it’s a consumer facing website that the consortium put together to show consumers how to best take advantage of the experience they have in an MHL phone, whether it’s games, whether it’s videos, activities and things that are going on, so just to brief the site, take a look there if you want to know more about MHL from a consumer perspective.
Let’s talk about connectivity, back to the connectivity again. One of the things I mentioned in the beginning was it evolves with time; HDMI is a good example. When HDMI was founded I don’t think they thought about doing 3D on HDMI. It just wasn’t part of the original specification; overtime they realized content producers, Hollywood wanted to do 3D. This specification of all created a whole new opportunity for us in the process, so the specifications aren’t static because of the environment in there. We started with just video and we went to full HD.
Now we are faced with Ultra HD and 4K in other words the standards are moving forward and by the way that’s all of our standards are moving forward, HDMI and MHL and the wireless, because just simply, we want higher resolution. We also seen because of some of these other applications and used cases consumer still want that simplicity of a single cable or single connection, but they want to add data to that. So if you can think of in the productivity case, well I may want to store something off my phone on the offline storage, I am going to want to have data in that same connection that my video is with or in the case of the car where you need the touch and the information to come back to the device that’s there.
So the standards aren’t just audio and video anymore, they are progressing to encompass data and at the same time if you look full HD, ultra HD, they are becoming more and more difficult to implement because in the mobile arena for example they still expect you to do that over three to five tenths. So the technology challenge is that this evolution continue and of course looking forward we still ready to go and even more date. And the other underpinning of all this, the device that users, that’s standard on the right, still means to be able to talk. So the first device that you put out there, so you can't distant franchise going backwards, you may not have all capability, but you still need to be able to communicate with each other.
So what about wired and wireless, does wireless replaced wired? No, I don't believe so. I think they very complementary technologies. Just take two simple examples, the productivity and the casual; on the productivity side, having your phone or mobile device plugged in and powered while you are doing a spread sheet or PowerPoint probably makes a lot of sense. Sitting on accounts for that casual YouTube, the wireless, hey take a look at this, it makes a lot of sense, but one doesn't necessarily replace the other. They do tend to coexist going forward. There has been a long term example of this going in the PC space, most notebooks up to recently shift with both the internet port and WiFi why? Because depending on the use case you may want to be wired or you want to be mobile.
So there is plenty of room for these standards to complement each other. And the nice thing is with our technology base, our wireless standard actually complements both, you will see examples of mobile version in the back which would complement the MHL and you’ll see a Blu-ray player to a TV that's basically a wireless HDMI type of solution. So wired and wireless are going to peaceably coexist for quite some time.
And last just to kind of circle all the way back around. It just needs to work. I mean your expectation when you go pick up one of these connectivity solutions as you go home you plug it in, you don't call anybody, it just works. One of the key underpinnings of HDMI all along has been it just works. MHL is the same way. You can grab a phone from one of the MHL adopters and a TV from another one and plug them together. It just works. You can have that same expectation from wireless going forward as well.
So it’s going to be simple. It needs to support premium content. Hollywood needs to be happy and you will notice the Blu-ray playing in the back, that's a protected link. There's no difference between a wired or a wired link in this particular case. It needs to continue to evolve and this is where the big opportunity comes for us. These connectivity means aren't static. MHL1 didn't solve all of the things that our customers want to do or all the things that you want to do with your mobile. But in the end [it] all has to talk to each other and the best way to do that we found is through standards. So thank you. Jeff?
Thanks so much. So I'm Jeff Gilbert, I'm the CTO at Silicon Image as Camillo mentioned; I was actually a part of SiBEAM and SiBEAM wireless acquisition that Silicon Image acquired. So it’s a pleasure to be able to tell you about actually the wireless technology developed at SiBEAM, now a core part of Silicon Image.
The technology that we've now been working on is actually eight years now. And there's a lot of things are actually different about the 60 GHz technology a lot of benefits, a lot of different challenges, a lot of things we've had to learn along the way, it will be a pleasure to tell you about those.
So first I'll talk about how our 60 GHz wireless solves some key consumer problems essentially giving you the wired quality and wired reliability without the wire. So you can be fully mobile but have that some quality that you are used to with an HDMI or an MHL connection and this is leveraging some of the unique properties of the 60 GHz and I will take you through some of the fundamental reasons why 60 GHz is different from WiFi.
Then I will talk a bit about Silicon Image and how we've pioneered 60 GHz, how that's different, how there was a number of challenges that we had to overcome and how we've overcome those, some key first, how we've developed a full CMOS implementation for low power, good manufacturability, good time to market.
We've actually perfected using standard packaging processes to manufacture 60 GHz systems. We've not only been able to package we've antennas built right into the package which I'll tell you about and also testing, we've had good ways to test in a very manufacture-able manner, through all of this we've been able to have a broad range of 60 GHz patterns along the way by being one of these first movers. Then I will wrap up talking about how we are well positioned in these markets and actually some really cool related technology markets that we are well positioned in.
Let me start by talking about 60 GHz and how it’s different, what is it enable that Wi-Fi today doesn't. So imagine as that you are at the airport, you’ve got your phone, you are about to hop on that Transatlantic flight, and you want to grab one of the latest blockbuster film. Of course you come up, there is a video kiosk by the gate. You want to download that movie from the video kiosk to your phone. Well you could do it wirelessly. If you do that wireless with a Wi-Fi, you probably can be sitting there for about five minutes and I know you may have seen on TV that you just touch things instantly over there. Well, there is a little bit of artistic license involved, let’s just say, with Wi-Fi, full length movie is going to take you five minutes on a good day. So what if you want to get that done a little bit faster, actually make your [plane], that’s where 60 GHz comes in. So with 60 GHz, we fundamentally have higher speed, greater reliability, so we can literally take this from five minutes, down to 10 seconds and I will tell you about how that’s possible.
These high speeds not only help fast file transfer, it also helps streaming video and that’s really been the core focus of our 60 GHz efforts initially. So with Wi-Fi, you can do some wireless display. If I’ve seen that I will show you some clips but it's typically fairly blurry and a bit jerky. With 60 GHz, thanks to the same physics, thanks to the same high data rates and high reliability, you really got this wired quality, vivid, highly reactive picture and I will tell you how that’s possible.
To some of the applications that are best 60 GHz, as Dave and Camillo have both talked about, a lot of these interactive mobile applications really call out for this wired quality, wireless link. So gaming and web surfing, things like that where you really wanted to do something and see it immediately. There is another set of applications which 60 GHz really is very well suited for and that is cable free TV elegance. So essentially, these TVs are getting bigger and bigger and thinner and thinner. It's really more beautiful they are almost like artwork.
So people want to put those up on their wall but you really want to have a (inaudible) HDMI cables hanging off of with. So with 60 GHz you get the same quality picture as if you had an HDMI cable but wirelessly and in our demos back there actually we will show you both of these with a wireless tablet showing how 60 GHz is great for mobility as well as an adaptor pair showing how you can unwire that TV.
The 60 GHz enables superior wireless display in a few different ways and I will dive through some of the fundamentals of why. First, we will talk about the high image quality and ultra low latency, due to some of the unique processing of 60 GHz it really enables us wired quality and a very, very low latency and sub frame latency its really as if it’s not there it’s just not perceptible.
A key part is reliability as Camillo has mentioned reliability and robustness is absolutely critical, when you are streaming video you really don’t want it to be cutting out because your neighbor turned on their equipment and 60 GHz to the number of fundamental reasons why it’s more reliable which I will step through in detail.
Lastly, small form factor, so mobile is becoming increasingly important and in order to get into mobile and you personally got to be pretty small these devices are fairly cramp and 60 GHz due to the higher frequencies that I will show you fundamentally makes it well to mobile fundamentally small sizes and we have done a lot to get high integration.
So let met talk about some of the different options and then I will dive into some of the details of 60 GHz and what we have gone through as we have designed our 60 GHz system. So if you want to connect things HDAV well you could start with Wi-Fi as Camillo mentioned really why it’s great for a lot of things, it’s great for internet connectivity, it’s great to just put your whole network, put your whole home online what is surely not so good for though is wireless display and the benefits you do have multi room range, you can use single access point to cover multiple rooms at greater area but as many of you who’ve used Wi-Fi I have seen this really interference is a real issue, you turn on your phone, you look at the access points around, literally there is going to be dozens and dozens and dozens all of those potentially interfering with you.
Because of this is also latency and quality issues just because of limited bandwidth which I will talk about. So the better solutions for the wireless AV is 60 GHz, is wireless HD as I will tell about why and through this we can have the highest quality in years to go latency.
60 GHz is an in-room technology, it’s not a small room it’s really any typical room, this room, your home rooms, any typical room where we work very well and very robustly and you are not going to use it to go across your home or across your neighbors home is really well designed for in room.
The benefits actually is this is in-room is really what helps us to keep interference down to and I will talk about that in some following slides. So there is really the range and interference are very tightly coupled, by having in-room solutions it becomes much more robust and reliable, you don't have to worry about what your neighbors are doing.
So the only other way to really get this highest quality audio and video and the highest reliability is through wired solutions. MHL and HDMI also provide this high quality, with MHL in particular you can have charging pin provided also as Dave and Camillo both mentioned, really we believe that the combination of 60 GHz wireless and MHL and HDMI wired solutions really the very complimentary, if you want a quick interaction to our mobile wires pre interaction 60 GHz wireless HD is the way to go, if you want to sit down and really use something for hours at a time and have it charged well MHL is really a good solution there.
So a picture is worth a thousand words. I've been talking about quality and quality differences. Many of you have probably seen demonstrations of WiFi based display systems, but let me just show you some pictures to compare wireless HD and MHL with a WiFi system. So what we've done is we have a video clip. We actually took a video clip that has a gaming sequence. We played it on a TV using wireless HD and MHL and captured that with a camera and then we did the same thing with WiFi; so you can actually what the difference is.
So with wireless HD and MHL you can see pretty crystal clear image, good for gaming, good for seeing your photos, good for reading web content, very clear. Now we did that very same clip with WiFi and as you can see clear is probably not the first word that would jump to your mind. Now this is typically due to and this actually this message is the same message the equipment actually popped up and said WiFi connections unstable reconnecting may improve your quality. This, you are not always going to get something this fast, I'll be the first to mention that but it is a very common experience. And as you know interference is a common experience with WiFi and these types of results are actually fairly common.
So really we are looking at something like this, highest quality interference free or some of the interference that can happen. And even if you are at home and you don't, and you are lucky enough to have a free channel, you will still see some quality degradation but anybody who has turned on and looked around to the access points they know interference is fairly common.
Okay so let me dive down into some of the fundamentals about why 60 gigahertz is lower interference, more reliable higher quality. There's really some physics that I can tell you about why it is better. So 60 gigahertz here that shows a typical home use of 60 gigahertz. You have somebody sitting on a couch streaming video to a TV wirelessly, similar to our demo back there and one of the new things about 60 gigahertz is instead of sending the wireless transmission everywhere like WiFi does, we do a focused beam, sending really from the tablet base to your TV, its really like a focus, its like a flash light really.
So you can think of 60 gigahertz through the beam forming technologies like shining a flash light from your device to where you want it to go. WiFi on the other hand is more like holding up a light bulb where the light goes everywhere, the energy goes everywhere, it’s not a focused beam and they just work fundamentally differently due to the differences in the antenna technology. So here you can see here's a 60 gigahertz focused beam, WiFi, another important point is that WiFi 2.4 and 5 gigahertz are completely different channels than 60 gigahertz. So there's absolutely no interference that you can have. I mean that's just in different frequencies they will not interfere.
So as we mention WiFi is great for internet connectivity, it’s great for a lot of things, go ahead and use that. We expect that to flourish and to continue. 60 gigahertz is really great for these video connections and for high speed data, and so in this typical home you would have WiFi covering the home giving internet connectivity and the 60 gigahertz really give this focused display. Now another benefit of 60 gigahertz is due to the higher frequency it actually doesn't penetrate walls as much.
So you can go through a small equipment, you know cabinet but really as you are going through multiple walls in a home you start to attenuate more than 2.4 and 5 gigahertz and that's why its really interim solution and we covered inter-room well, but if you have a some other systems operating in another room or your neighbors are operating in other room, as you start to go through many walls, you are going to attenuate more and that will lessen your interference, improve your reliability and that’s just due to the physic of the different frequency.
We also have smart internet technology. You probably heard of smart antennas or MIMO or beams steering, all those word apply what we are doing in 60 gigahertz, and I will tell you about why that’s possible in 60 gigahertz in a couple of slides. So with these smart antennas, as I mentioned, we form the focus beam, really from the center to the receiver. It's actually a fairly complex operation to get right. Luckily it's very easy for consumers.
They don’t even have to know about it, but when we're designing this, we actually have to make these systems that look around when you turn them on, they look at all directions. Your transmitters is looking around, your receiver looks around and they find the best path from the transmitter and the receiver and set their beams electronically to send them in that direction and this might be a line of sight connection, they might send directly to you or it might be off a wall, if you are say, you are underneath the table, I can’t shoot directly but I might go off the ceiling and then indirectly and our systems will automatically find this in a matter of milliseconds.
So in a thousands of second, less than a thousands of second, we will automatically find the best path and just beam directly. When we designed our 60 gigahertz technology and our wireless technology, we had video streaming in mind from day one, and that was really important because we knew that high-quality of service, high robustness in tough consumer cases was critical. So for instance, you might be streaming a video from your pad to your TV and then your friend might walk right in front of you. So this flash light beam is going to get cut off directly. So if we didn’t do anything, your screen will go black and it's really game over until they move.
But we have designed technology into our chips and into our standards that will actually detect when that path is locked immediately in less than a 1000th of a second, look around for another path, find that best path resumes without a single picture being dropped. So all of that complexity is built in to make the solution simple for the end consumer, they just now turn it on and it works, and that’s really part of the smart Internet.
So in terms of interference one of the nice things about the beam forming the smart antennas is you can actually have two beams in the same room on the same frequency at the same time without any interference and we have done this many times, it’s really similar again to that flash letting out is that if I am shining a flash light here and somebody shines a flash light perpendicular to that they are not going to interfere and that’s just like the 60 GHz wireless it really helps the low interference high reliability.
So the second fundamental advantage of 60 GHz over the Wi-Fi frequency is a 2.4 and 5 is more spectrum. So in order to understand what does it mean to have more spectrum it’s kind of interesting, transmitting things wirelessly is a lot like driving on a highway, so you got a really big highway you can drive really fast till the police comes and you can also have a lot of cars on that very big highway. So larger highway high speeds, lots of cars.
Similar to wireless, if you have a lot of spectrum you can send a lot of bits very fast, not much interference, multiple different network. But when you are driving on a very narrow road, you have to go very slow and you better hope that there is no other cars. Similarly, if you don’t have much spectrum you are going to be transmitting fairly slow and you are going to get significant interference if there are multiple users.
So let's look to scale and what kind of spectrum is available at 2.4 and 5 gigahertz for WiFi and 60 gigahertz for wireless HD. Okay this is all drawn to scale, here we’ve shown about 80 megahertz spectrum available in the 2.4 gigahertz band, the 5 gigahertz band has quite a bit more a 100 megahertz spectrum which certainly helps a little wider channels will quickly use that up.
In comparison 60 gigahertz band actually has 10 times more spectrum than the 2.4 and 5 gigahertz bans combined, and that's a big difference because all that add to spectrum allows you to send information very quickly, very reliably and actually with lower complex city. So as we have more and more spectrum available, you have to less complicated processing to get the best in there, whereas in with 2.4 and 5 gigahertz for WiFi there is some really fancy processing you have to do to pass all those bits into a small space.
By having this more spectrum also allow us to put more spectrum per channel, as you know there is multiple WiFi channels we have multiple 60 gigahertz channels with WiFi with 11 end, the channels were 20 to 40 megahertz, with 11 [AC] probably heard they go off to 160 megahertz, well in comparison at 60 gigahertz our channels are 2000 megahertz.
So its more than 10 times wider than, its about 10 to 100 times wider than in 2.4 and 5 gigahertz and this wider channels gives you a higher speeds and it also helps a lot of things like power consumption, it help us really to be efficient. So the third kind of fundamental advantage of 60 gigahertz and why we use that for mobile devices for a broad range of applications is the small size. Now through physics, as you get higher and higher frequencies the antennas fundamentally get smaller and smaller. The antenna size is inversely proportionally to the frequency. So if I double the frequency, if I go from 2.4 to 2.5 then the antenna size cuts in half; its just true physics, the wavelength cuts down.
So let's take a look at things relative, let's look at relative antenna sizes and drawn to scale there's a quarter. WiFi antenna at 2.4 gigahertz typically its going to be about 2 inches just looking at half of the wavelength, it comes to about 2 inches. You know its possible to fit it into a phone, not easy, its certainly been commonly done. As you go to 5 gigahertz now that we've doubled the frequency the antenna size cuts in half, kind of nice, we are down to 1 inch, but again its fairly challenging to fit one of those in and as you want to fit multiple antennas that becomes even more and more challenging to fit in, because they can't be right next to each other.
But with 60 gigahertz now that we bumped that up by another factor of 12, you see your antenna size is down to about 0.1 inch, there really is a few millimeters on a side, making it very friendly for mobile devices and not only can you very easily fit one of these in, you can fit a whole array of antennas. So we can put a whole array of 60 gigahertz antennas on a small package in a mobile device and those demonstrations that you've seen there and our boards which are out there show you we are actually able to put, we've put actually in our first generation 36 antennas on the small chip, our third generation which you will see there has 24 antennas on a given chip, we pack it very efficiently and it makes it very amenable for mobile integration. The small size also helps with mobile’s low power consumption due to the CMOS due to some of the smart antenna technology also makes it very suitable for mobile device operations.
Now that was really 60 gigahertz. Let me tell you a little bit about Silicon Image and what we've been doing in the 60 gigahertz and how we are a leader there. So the 60 gigahertz technology that was from SiBEAM now part of Silicon Image started at UC Berkley at the UC Berkley Wireless Research Center back in the early 2000s and there were some core circuit research on how to do 60 gigahertz in CMOS. Before that it had all been exotic semiconductors which really weren't suitable for high integration, high volume consumer applications. At the Berkley Research through the founders of SiBEAM who are now a part of Silicon Image, they really perfected how to do this all in standard CMOS for a high volume low cost.
At Silicon Image, we are the first really and only to develop a complete 60 gigahertz streaming AV solution; the only 60 gigahertz solution of its type on the market today. We do expect others to be, we've certainly heard that they are marching along that way, but we do have a good lead based on the many, many years of work and perfecting that we've had. This includes the integrated smart antenna technology that I told you about, that automatically finds that best themes, starts streaming; when you step in front of that and find another beam and start streaming all of this is really core technology that's the part of Silicon Image.
When we designed our 60 gigahertz solutions we really focused on consumer applications and making it easy to integrate into consumer applications. So this shows you here a board, our third generation board and what it would take essentially to integrate a full streaming AV solution into a device and this small board can hold up on the scale there is some in the back table. This is really all it takes to go from HDMI to 60 gigahertz air out. We've done very high integration. So we have really a two chip solution here. This is our base fan chip. It takes HDMI in, does all the radio processing.
This chip right here with those rectangles. That’s our radio chip and antennas and package, all in one. So this has the 60 gigahertz CMOS in that chip on the right with all those rectangles that does the 60 gigahertz modulation as well as then using our packaged technology, using standard package technology with our special design, we actually integrated the antennas in to the package. So all you have to do is place this chip and you’ve got the radios, the antennas, the package, all in one and you are ready to go, makes it much easier to integrate and having to run special 60 gigahertz wires for antennas. Through this of course, we've developed a lot of new technology and we have a broad range of patents in these different areas that we are really getting first.
So as I mentioned, we are really focused on manufacturing, we're not a manufacturing company, but we’re focused on really design for manufacture ability on the 60 gigahertz. So we looked at several areas where we focus to make the system low cost and low time to market, highly manufactur-able. The first area was the standard CMOS processes. So we use the same processes that we use for microprocessors, for WiFi for anything just standard, but now with CMOS we've actually used multiple different foundries, have a very repeatable methodology.
And one of the things actually that pleasantly surprised me that most at SiBEAM was the methodology that the founders developed to get these 60 gigahertz circuits working in standard CMOS. I have worked at other wireless LAN companies, it’s not an easy thing to get 2.4 and 5 gigahertz to work reliably; usually it takes a couple of spends. At SiBEAM and now at Silicon Image we have got a special methodology that we make our own models, we have our own test structures, our own ways of doing this and we have had very consistent first silicon success. So they take something out of 60 gigahertz and it comes back at 60 gigahertz, not at 65, not at 50, but at 60 working well, it’s really a lot of work really about this methodology for 60 gigahertz making it reliable, making it repeatable.
At 60 gigahertz, it’s both a challenge and an opportunity in terms of antennas; if we didn’t make our own antennas then you have to run these 60 gigahertz wires out to antennas and that’s pretty challenging; that’s not an easy feat. So what we have done is integrated those antennas on to the package, so now it’s actually easier. So you just place that chip down that radio and you got your antennas, your all in one and we’ve used this using standard packaging processes; we have used different types of packaging processes, ceramic, organic, using multiple different foundries, again a very portable process helping us with low costs and good manufacturability.
Lastly, test is very important, making it easy to test these in high volume, not just on a lab bench and we have done work such that we can leverage standard high volume chip testers to test our 60 gigahertz circuit in high volume. And this has allowed the lower cost and faster time to market.
So this technology as we have motioned, we really focused initially on wireless AV and giving you those wired quality and reliability in AV wirelessly. There are a number of exciting adjacent markets and technologies that will well position for us. As I mentioned at the beginning data, it’s a very natural thing for us to add and for us to be working on, so that we can use this types of application like video kiosk application, do a very quick thing, so we can do docking, so we can do a lot of these data type applications.
A little related, but little bit further out is a wireless back haul, so how do you connect up the cellular infrastructure and 60 gigahertz is actually very well suited for that as are some bands around 60 gigahertz, so we are well positioned for that market.
A related one is actually automotive radar, this is pretty cool, they have as many of you may know there is actually radars now in many of the cars for collusion avoidance, the early detection of collusion, so instead of waiting until you hit the car, they can actually detect that you are getting close to the car, you got to deploy airbag sooner, you brake assist, it’s also for adaptive cruise control, so you use the 60 gigahertz rate or 76 gigahertz actually it was used for automotive to tell how far you are and maintain a distance.
We are very well positioned for that because the bands are similar at the 60 and 76 and actually our smart antenna technology while is not identical is a very related to what’s used in automotive radar, so we’re well positioned to have a good solution for this.
Lastly, as you have been to airports, you’ve probably seen 60 gigahertz scanning as you walk through, looking for things you shouldn't be carrying on a plane, it’s also used in something related frequencies and used for medical imaging. So we will see these areas really emerging overtime.
So to summarize, we have talked about how the 60 gigahertz wireless technology solved the key consumer problem and having your wired quality and the wired reliability without a wire. We talked about how Silicon Image is well positioned and how we pioneered the 60 GHz work and how we’ve looked at really how to make it low cost and highly manufacture-able and lastly, how we are well positioned to succeed in these adjacent future markets and how that gives us a good expansion overtime.
With that, we will give a 10 minute break. Thank you.
So thank you, Jeff. And Jeff didn’t mention in his bio, he actually spent the number of years with a [FARO] so he has got that a lot of that WiFi experience that he has brought over the Silicon Image which he does appreciate. So we will give take a 10 minute break. I know many of you when you saw that slide on the wireless model, the radar there you probably thinking of it, so you could see the (inaudible) instead of the (inaudible) for collision. Refreshments are right here at the back, restrooms are out to the right and up the stairs and we will you see in about 10 minutes.
Alright, next step we will have Tim Vehling. Our VP of product marketing and GM Wireless business, talk about driving our revenue growth. Tim?
Thanks, Noland. Good morning. I think earlier today you heard Dave and Camillo both explained our vision of the company and also of the markets for the next five years. Jeff gave a great talk on 60 gigahertz technology and how we have the advantage in our technology over the years of development study in that (inaudible) and going through the citing. So I am going to expand on that and bring that down how we are going drive revenue over the next couple of years.
So MHL you have heard about MHL many times this morning, you have probably heard about it in the press a number of times. I think MHL is definitely a global hit at this point. It started out a few years ago, not that long ago actually. It has seen very strong growth and started out in one phone manufacturer and one smartphone model and since then it has grown rapidly across countries, across manufacturers and has adopted a base, in fact you can see representation of all the smartphone manufacturers on here that have incorporated MHL into their phones. And we have got manufacturers in Taiwan like HTC or Asus or Acer, Japan with Fujitsu and Sony. We have got companies in China like Huawei and (inaudible) and of course Samsung and LG in Korea.
And we see there is a broad range of suppliers, broad range of manufacturers all over the world targeting global market such as the US market. In addition you see phones ranging from the high end Samsung Galaxy S3 which is very popular worldwide. One of the hottest phones in the world right now, all the way down to phones like [PCL] recent introduction of a $200 smartphone in China. So you see MHL not only in the high-end phones, not only in one model but in multiple manufacturers, multiple regions and some high-end all the way down the mainstream.
As Camillo highlighted earlier, we see that by the end of this year almost 190 million smartphones and tablets will have sold into the global market. That’s a very fast number, a very faster adoption rate for the HDMI experience a number of years ago. So very, very strong success but then it’s shorter to date.
And just kind of remind you, you have heard MHL a number of times today and MHL is the mobile connectivity standard. We start this in a standard couple of years ago with four other companies and it was envisioned to provide mobile phone users mechanism to or means to connect their phone to a larger screen. If you look at your phone, every generation you get more processing power, you get better graphics, you get more memory, you get more core and you get higher resolution. But at the end of the day it’s a four or five inch screen device its not going to go beyond that, it’s a pocket able device.
Tablets maybe a little different, but phones fundamentally are not going to get that much bigger. As some point they don’t become phones they become tablet. So phone is got a limit where you can experienced on this device and there is processing power in the inside of these phones to get more powerful and more effective, you are going to have the experienced to the big screen and that's how MHL came about to take that experienced from that small device to the big screen.
There is the couple of things MHL brings to the user and what is this bigger screen experience. You get full HD of (inaudible), it gives you one 3D content you get 3D content, if you have the strong phone system and you want to watch full movie and full terms on environment MHL enables that, your MHL players is basically your (inaudible) player in your pocket so that's one other things that you get with MHL standard with MHL devices.
In addition an MHL display powers your phone, power is mandatory for any display, any model, any think device we call it that’s MHL compatible that means that you know that if you plug in your MHL phone into an MHL display, you are going to get power, you will get charge for your phone. Let's get to limitations of a smartphone, the battery has a limitation it’s a battery power device, but you do look for charging whenever possible.
So the second thing that MHL does bring to the consumer and to the smartphone. So things we have experienced display charge of phone and then finally if you want to do the lean back experienced where you phone is and your set top box or Blu-ray player or equivalent, your TV remote control as your phone. There's a protocol that's part of the standard that let's you do that. You use your TV remote, your Blu-ray remote to navigate your phone, lets your content in and this is a demonstration that you can see in the back of the room. We have various MHL demo set up and you can see all those in action in the back of the room, later on after the presentations.
I talked about the MHL being a global head, its also four of the top five smartphone manufacturers. This is the recent report out of ABI Research. These are the third quarter 2012 smartphone numbers. You can see how the top five vendors including Samsung, Apple, ZTE, Huawei, LG, you see that MHL is being deployed in four of the top five, 80% of the top five vendors. This represents about two-thirds of all the smartphones in the industry. So two-thirds of the smartphones are in the top five, 80% four to five are deploying MHL with the exception of Apple. Of course Samsung is the largest at this point, but you do see up comers like ZTE and Huawei who are Chinese smartphone manufacturers growing in ranking and of course there's a number of other vendors in the others category, but its not just a Samsung only phenomenon, it’s a top smartphone OEM phenomenon and we see it continuing into 2013 as well.
Dave kind of went through it a little bit, but MHL when it was first developed, when it was first envisioned it was to do this big screen experience, home entertainment option. And that's where this started out MHL1 was really focused on enabling the use case, but as time has gone, its gone forward and we look at other products coming out and various companies have developed MHL products, we've seen these used case expanding beyond the home entertainment used case. Productivity, gaming, automotive, we covered this a little bit. Let me give you a little more example.
On the productivity for example, if your phone is your one device that becomes your computer and we are starting to see that in a lot of emerging markets where the phone is your one device and in that case you do want to have productivity as part of your application and we are seeing examples of those kind of products going into the market and I'll show you some examples in a little bit.
Gaming, we talked about gaming extensively today, 1.5 billion gamers and we see MHL as a key enabler for the gaming application on phones and also on automotive side where your phone does have the latest navigation. It does have the latest application, it has your music, it has your video, it has everything that you carry with you that's important to you, I mean how many times you pull your phone out to listen to your music, to pop a message to see where you are in New York City walking in front of a restaurant. You use your phone for a lot of things that you often didn't use in the car.
Cars have an interesting challenge. They have a seven to 10 year lifecycle. Its very hard for car manufacturers designing not only the seven to 10 year lifecycle, but three years ahead of that lifecycle to design the electronics, so you have to kind of think 13 years out what's been going on in the cars from a navigation, from an electronics point of view, MHL enables that to be vastly shortened and has a car where you basically have the latest and greatest electronics in your pocket, plug it in by MHL and navigate all this information to your touch screen on your car, so we feel that going forward MHL in the automotive space is very compelling and is going to expand nicely over the years.
And productivity, I'll show you a couple of examples, productivity, we think also with the power of the phone and a simple keyboard and a screen you can replicate almost any office environment. In fact if you look at what Microsoft is targeting, they are going to introduce office shortly an Android, on iOS, so Office is coming to these mobile devices as well. So pretty soon you are going to be able to leave your notebooks behind, that's coming up next. But these are new used cases that came about after the original envision of MHL.
And with this we've seen some really interesting products coming to the markets, very innovative products that are not your standard smartphone to display and we had a couple of these in the back for demo. You can take a look later, but let walk you through some of these. ASUS introduced a product recently called the PadFone 2. The PadFone is very unique and the fact that it has a smartphone which is not unique, but it docks in to, lets called like a dumb tablet. The tablet is basically a battery and a touchscreen. There is no CPU, there is no radio in there, there is no electronic. It's actually a screen.
You dock your phone in there. You really have a large screen, tablet experience with all of your information staying the same, all your contacts are the same, your phone information, your radios are same, your data plans are the same. It's basically two devices in one, leveraging MHL to do this docking technique, but MHL is out at the bottom of the phone. Of course the phone plugs into any MHL TV in the market, but also if you dock into the tablet, you get a tablet. We have this product in the back of the room, I encourage you to take a look at it. it's a very compelling product, much more interesting in person than on the slide.
The one on the bottom is Korea Telecom. So this is a part of ,what they call the spider of laptops and then a similar concept, the phone is providing the horsepower of your screen experience. The laptop itself is really a screen, a keyboard, a battery and an MHL interface. That's the basics of that laptop. There is no CPU in there, there is no memory in there, there is no extra processing in your radio. It's a screen, battery and keyboard and all the applications, all the power run off the phone. So that you plug in your MHL phone. In this case, if the Samsung Galaxy SIII, you plug it in and that transfers all the experience to the keyboard, to the laptop and you have a productivity environment. It's very, very slim and light laptop, very, very compliant product.
The third one on the right is another variation of the theme where the tablet is MHL enabled tablet, called the MediaPad from Huawei, a Chinese company. And they also offer a dock that you plug into, that converts this product into a portable notebook computer. So you see a lot of very interesting applications that frankly we want really think it of many years ago when MHL was put together, but electronics to come together and drive very compliant products for productivity for entertainment etcetera and like I said we have the ASUS PadFone and also the Huawei MediaPad for demonstration in the back room.
In addition to mobile products, MHL is enabling kind of new product categories and the one of the key things of MHL, one of the key features as I mentioned is the fact that it displays and MHL displays must have power, it must provide power to a device to that port and the fact of that there is powering on this port it’s kind of unique to the industry; I think we used to having USB, for example have power when you plug in your memory stick or you plug in your WiFi adaptor there is always power in USB, but on the video port hasn’t been to-date; it should might have power, a display port there is no power, there is really no other way to get power to a video device except for a power adapter or though a USB power as an example.
So with that in mind, we came up with this product called the Streaming Stick and it leverages MHL port on MHL enabled TVs and because of the power port this sort of products now has no cables, there is no video cable, there is no power cable, it just plugs right into that port; it’s a very, very elegant and very, very simple. And using the MHL port remote, it also uses the TV remote so doesn’t have to come with the remote control either, so in the box you get a little fit and that’s your whole set top box really; it’s got a WiFi built into it and you stream all your content over that stick and it goes really into your TV, so really, really elegant really, really simple solution enabled with MHL technology. We also have this product in the back as well for demonstration.
But really interesting about this is that not only was there a new innovative product, but the work is Streaming Stick, it then set into another product from 3M called the streaming projector and this was actually a PICO projector from 3M that was recently introduced that fix the work of Streaming Stick and combined together makes a streaming projector, I mean that's thoughtfully in the back for demonstration. The work that Streaming Stick provides are services, the PICO projector provides a power for the end of display for the stick, if you a portable set top box, you can take any where you wants to whether its in your bedroom, your living room, your dorm room whatever you want to do, and can seriously and quite possibly in the college crowd because of the portability of this product, very interesting product, very unique.
And these are things like I said, MHL started mobile video, mobile smartphone to TV and its really starting to expand and drive for new product categories and new innovations in the industry market. And there are ongoing number of TVs and monitors in fact we are seeing TVs from number of the top manufactures and in fact the top TV manufacturers now pretty much have a series of miles with MHL, with Samsung and LG and Sony and Sharp and Toshiba; we are now starting to see TVs in China for example with HISUN and (inaudible) are Chinese brands that are including MHL as well, and then also PC monitors, Noland mentioned that we are starting to see PC monitors for productivity reasons including MHL as well Samsung and Philips and LG, so we are seeing PCs, monitors all over the world all in various market including MHL as a feature.
And at this point our estimations are that by the end of 2012, this total number of displays, monitors and even accessories at around 30 million, so that’s actually a sizeable number for the second year of standard, you combined that with the 190 million smartphones and tablets that’s 220 million units of MHL product in the market; it’s a very healthy ecosystem for the second year of the standard and we expect it to continue to grow going forward.
Switching gears a little bit, so that was our MHL, we see a strong attraction with MHL. Another technology that we've introduced is a technology called InstaPrevue. Many of you in this room or on the call have maybe heard or aware of our InstaPort technology. InstaPort is a technology that Silicon Image developed to enable the fast switching of your HDMI TVs. If you don't have InstaPort you are going to realize that it takes five seconds to go between your Blu-ray player and your PS3 or your set-top boxes, it’s kind of painful actually.
Its kind of an inherent feature if you want to call it a feature of HDMI, its very smooth switching, so we figured out a way to make that go faster, and by one second, InstaPort many of top TV manufacturers in the world have incorporated InstaPort as part of their standard offering and what we do is we took that one step further, we said well that's great, we can switch video, one second very fast, let's go one step further and let's add video switching, so now if you have a TV with InstaPort has a normal switch you have to kind of know what's connected to HDMI1, HDMI2, HDMI3, it’s a kind of guess on time, if you maybe remember maybe you don't, you don't remember where the set-top box was.
With InstaPrevue you actually have a visual preview of this feature. Every connection is sampled. You can see actually the little video and video running. You can see the movie running on whatever channel is on. You don't have to remember about HDMI2, you just look at the screen and go oh there it is my Blu-ray starting up, pick back and off you go. So that's a cool feature and in fact we are starting to see it deployed in some of the products in the market and one recent review of this from a home theater magazine basically call this feature one of the coolest things this reviewer had ever seen some time, there was another review from an online magazine gives the motto of your (inaudible) gives motto, called it a genius feature, if its one of the, why haven't other people view this feature as pure genius. So we have genius, coolest, these are the pretty high praise for our technology and so we think going forward this will be another driver as we develop our CE product portfolio. So InstaPrevue and MHL.
So talking about our CE growth drivers. We had a little bit of revenue challenges over the last couple of years in our CE and Camillo and Noland have mentioned we do expect that starting to stabilize and start to grow again, starting in 2013 and there are three basic drivers that are going to kick off this revenue in ’13.
One is as we talked about MHL, the predominant, the growing strength of MHL ecosystem. We see an increasingly large number of TVs and monitors and home theater equipment including MHL as a key feature as the standard feature. This number is going to grow strongly in 2013. We also see continued adoption of our InstaPrevue technology, really especially in the home theater environment, EV receivers, home theater products, even in the custom installer channels this is a very attractive feature.
And finally, Dave touched on a bit in his presentation about the fact that there is always evolution of technology and standards and one of the things that the industry is really starting to move towards and I think you are going to see a lot of this at the upcoming CE show in Las Vegas is ultra HD or if you just recall 4K resolution but it’s ultra HD resolution displays, ultra HD ready Blu-ray players, set-top boxes, so this can be a whole new round of the CE industry trying to encourage consumers like you and like me to upgrade our equipment to 4K or ultra HD and that’s could mean new connections, higher speed connections, video scaling and recently we introduced a couple of products basically its specifically for this transaction.
We have a couple of video processors that we announced that upscale very cost effectively HD content to ultra HD that to kind of enable the industry to transition smoothly. So these are the three things we think are going to drive our CE revenue going forward. Just a few examples of the AVR products. These are all three that have already incorporated InstaPrevue technology Onkyo, Denon, Pioneer and they’ve also, some of these also included MHL as the feature as well. So InstaPrevue MHL or both, these are already in the market. We also have Onkyo units in the back as a demonstration. You can check out after the presentation as well. So these are real products really shipping right now with all these features going into 2013.
So if you look into 2013 and beyond, what is the revenue opportunity? I think Dave kind of showed this slide before about the opportunity and it's a large opportunity. By 2015, it's a 2 billion unit opportunity. Even in ‘12, it's a 1.2 billion plus opportunities. So over the next three to four years, the overall (inaudible) grow, MHL is going to grow, HDMI continue to be a strong factor. So we expect that, we're going to grow with this market. It’s a huge opportunity we have activity in all these markets, Smartphones, tablets, TVs Blu-rays, etcetera.
So we have products for these markets, both MHL and HDMI and we expect that we have healthy growth in front of us. In fact, we think that in 2013, based on our current estimations, up to 30% of all Smartphones and up to 30% of all DTVs worldwide will have MHL in the next year, that’s a very nice growth rate from 2012. So 30%, up to 30% of all Smartphones and up to 30% of all TVs, we expect to have MHL as a key feature, standard feature in 2013 and growing beyond that in ‘14 and ‘15. So a good starting point for this revenue opportunity.
Switching gears to the wireless video, Jeff gave a great talk on how 60 GHz is wireless that you have never seen before and how we have a key advantage in this area. Kind of remind you, this is kind of the application, it's not going to be just gaming but gaming is going to be one of the drivers of wireless HD in the mobile market, you walk in that’s your gaming console through that a wire it’s very fast, it’s interactive, it works great. As a reminder kind of the three things that we are leveraging with our technology. It is the highest quality video as Jeff mentioned very low latency and no Wi-Fi interference.
Wi-Fi will be in these devices, Wi-Fi is going to be your internet access, it’s going to be your data access, it’s going to be your way to talk to the network in your home, but as you go the last leg between your device and the bigger screen we think that’s a 60 GHz and initially while it’s the HD is going to be the way to go. So that’s kind of a target at, some of the vision where we are taking our wireless solution. That’s where our vision is, but actually we do have products in the market today, there are a number of products in the market, it’s still not huge volumes yet, not driving large amounts of revenues but they are real products and as part of the whole ecosystems as Dave mentioned we want to have ecosystems around our standards where there is a mobile device or screen device, these are real products to market, you can order a Dell laptop that’s focused on gaming, (inaudible) is a sub brand of Dell which is focused on kind of the enthusiast crowd and they have gaming as a focus and they have a wireless HD option for those that want to sit in there sofa and play games wirelessly with their large screen TV, it’s the key option.
(inaudible) has a number of projectors that include wireless HD as well and these are targeted for home stereo installations, comp instrument installations where you have a ceiling mounted projector and it’s either impossible or very expensive to run that cable all the way down around the walls down the under the table under the floors into wherever your source device is, so you just have a lot of HD receiver in there and you basically quite have a wireless links from the ground or the table, or the conference room up to your projector on the ceiling. This is actually very nice feature and that’s very key feature of this projector actually.
DVDO is a brand it’s a product channel that’s targeted for the installer markets similar accounts that where may be you install a large home theater and you don’t want to run wires, you just came out running wires from the screen or from the screen to the your Blu-ray. So this DVDO area and adaptor that replaces that issue (inaudible). DVDO also had product that’s more consumer focused. And recently the latest product this Sharp adaptor, this is hold in Japan, there is a wireless HD adaptor that allows you to connect your in this case Blu-ray player into your large screen TV, your large screen LCD TV. So we have demonstration of this adaptor as well in the back room, we have that slide, you can check it out in addition to some other wireless HD demonstrations.
Let’s go to mobile, we have been talking about we really think that the next opportunity for 60 GHz is mobile. And that is going to be the growth for the technology. We have an ecosystem build up for products in the CE channel, in the display but mobile is where we really think that this technology as Jeff really explained clearly why we think we are going into Smartphone, it has the lowest power, it has the right capabilities from the size point of view and low latency point of view, its ideal solution for the mobile space.
But you might be wondering how do you a new technology into a mobile device. Just think about your mobile device, it didn’t always have all the technology or the radios in it, if you think about it at one point it only had a 2G radio but somewhere along the line it added a 3G radio and it added 4G radio. At some point there was no Bluetooth in a phone or a tablet, it was added at some point for some reason and not at a very low price. GPS, most phones didn’t have GPS a few years back, now almost every phone has a GPS radio. Wi-Fi I can remember when Wi-Fi first came into this phone, it was lively criticized by the operators, they didn’t want anybody to go after their network. (inaudible) you must be on my network, Wi-Fi is a bad feature, now they welcome because it helps them offload their network.
So WiFi now has become even though its relatively expensive product to add into a phone it has become a key feature of a mobile device, and now we are looking at 2.4 gig and also 5 gig and finally newer sales. And these were not even not $1.50 solutions that (inaudible) mobile devices. In fact I think WiFi when I first went into mobile devices its probably in the $10 to $15 range for that module and even today its still dollars, not $1, or some dollars it’s a pretty relatively expensive value proposition.
If you don't look at radio, if you look at even camera modules. When the first camera went into a phone, most people were kind of questioning why is there a camera module in my phone, what am I going to use it for, why am I, why do I have a camera module in my phone and that was not a free add to the phone. So there is a history of mobile manufacturers looking ahead and seeing the value of adding new technologies, new features at a relatively high price and especially in the radio there's already a number of radios in your phone. And we think that with the applications we are targeting and the demand of mobile devices with increased profitable performance, higher speed graphics, more video, more interactivity that its natural that applications that consume bandwidth, that want more bandwidth, that have more power will demand and will lead to 50 gigahertz being radio being added to their phone.
So the value proposition here is that we are not going to replace the radios, we are going to be added as another radio into the phone. It doesn't interfere with WiFi. It’s an additive radio and that's why we think of the huge opportunity in front of us. It’s not to take out WiFi, its to add to WiFi, to add to 4G. It’s an additive feature into the phone going forward based on consumers and mobile phone operators trying to enhance the product. And it’s a big opportunity. Now we show you the chart. We think its actually the same opportunity that MHL presents to us. MHL is $2 billion in opportunity. If you look at smartphones, tablets, displays that they talk to, automotive, other product, it’s a $2 billion market opportunity and we believe the 50 gigahertz is same opportunity just shifted by a couple of years. But it’s the same opportunity, the same target devices of MHL and very large opportunity in front of us. But what's more interesting about the 50 gigahertz opportunity is that, what we are seeing you know dollarish ASPs with the MHL products, we think that we are going to have 5x to 10x ASPs with our mobile solutions. So we think that it’s a $2 billion opportunity, but it could be up to 5 to 10 times of revenue opportunity that what MHL is providing to us. We see this as a real major growth opportunity for us in the coming years.
So where are we with the solution? Camillo kind of mentioned that we are on track more or less and we are on track. We made some, we set some milestones that we are tracking today. You can also track to see how we are doing and getting this technology, this product deployed into the mobile market. And we laid out a couple of key milestones, and I can tell you today that we are absolutely on track. You know we are a month away from sampling, we are in track to sample multiple key mobile OEMs with our solution in December, that's next month. We if you come see us in CES in Las Vegas we will have a demo for you to see and if you come see us in Barcelona at Mobile World Congress we'll also have further demonstrations and further progress of our products and assuming that we can convert some of these key mobile OEMs to real product designs, real models, multiple models in the second half we expect to have revenue ramp in the second half of 2013 and I can say honestly we are on track to all these key milestones at this point.
So with that I will turn it back over to Noland to kind of take you through the enhancing shareholders value section of our presentation. Thank you.
Thanks Tim. So I'm actually the last piece to this morning agenda and you have been presented with a lot of information. Camillo started out talking about how we focused the company, kind of gave you a view of, a high level view of the trend, including how MHL is on a much faster track in this adoption phase than HDMI was. Dave followed up with a good discussion of all the connectivity, trends and how that benefiting our opportunity; and Jeff did an excellent job of describing the 60 gigahertz opportunity and the advantages we have with that.
Lastly, Tim painted a great picture of our opportunity, not just as we exit this year but particularly as we move in to next year. What I would like to do is just sort of frame that up and some of the things that we talk about is as far as how we're going about enhancing shareholder value. When we look at shareholder value, we think of it in four parts. Our strategic focus, our financial performance, operational effectiveness, as well as our alignment with our shareholders.
Now I will talk about each one of these points. I will start with a strategic focus. Camillo and Dave highlighted our standard approach, how we focus on standards. It allows us to drive technology in to a market, a dry broad market adoption. It gives us the chance to be a leader in that space and take advantage of the opportunity by being one of the leaders in that space. So we're focused on driving the standards, evolving the standards, continuing to keep them relevant. We're focused on growing, be involved with growing markets, whether it's mobile, which is growing leaps and bounds. The CE space which, while it's not growing as fast, it is a big market, as well as the PC space which is a been influx but it's still is a good opportunity and as we see the PC and the CE business sort of converge, it is an opportunity for us to continue to take advantage and all of the presenters mentioned there $2 billion unit tab, it’s bringing you to (inaudible) that we can take advantage of.
We are also focused on leveraging our technology, and by that I mean our investments in our R&D is not just for one off projects or whatever. We try to take advantage of that as we move and create that technology to drive a standard. That will allow us to take advantage of that same technology and sell products as well as take that same technology in our licensing core licensing arrangement. So our focus is take an advantage of really our R&D efforts, design efforts and drive to multiple revenues, have multiple revenue drivers and many of you have seen this slide.
Well we have a product line, we have a product business and we also have a licensing business. Our product business which is our key focus generally 80% to 85% of our overall revenues, licensing business generally 15% to 20% and I will talk a little bit more about the licensing side, but I think Tim did a good job of highlighting what our opportunities are on the product side, whether it’s the mobile opportunity, how we see CE recovery as well as what we can do as part of the overall picture including the PC.
Little bit deeper in the license side of thing, because I think when we talk with some of you there are some questions around what goes into the licensing side of things and it’s really made up of two pieces, our core licensing is services side as well as our IP and standard side. Although we don’t split out or break them out in any details, we talk about it being 15% to 20%. If you go back overtime, we are generally in that range and there is various reasons why we don’t split it out. But when you dive into each of those components; the core licensing side consist of our taking our standard course and well you might have a potential customer was interested in using whether its HDMI or MHL technology for some solution they can utilize our standard cores to get their product designs faster.
As a part of that we also have implementation services, we provide support services and in general we look to get a royalty from that. On the IP standard side of things, as we participated in this standard, we drive the adoption and go out and get focused on the technology excited about the technology, we signed up adopters we get adopt fee which is a source of revenue for us and as that technology focused out throughout the market and units of ship we drive royalties from that and also there is opportunity for us to sell certain patent technology as well certain of our patent as well.
The best part of this about this is usually 95% to 99% revenue the more we signed pressures to get to a 100% we are trying to work on that but 99% is pretty good. The next area of focus is our capital allocations strategy. Really we take, we really focused on our resources back into the business whether its R&D efforts we talk about, whether its our marketing campaigns we talk about, and we talk about the beginning of the year we decided that we are going to spin more money around MHL to drive more branding around that, whether its our CapEx and our CapEx is a big piece of our business.
We probably spend about $7 million to $9 million a year on capital type items not a big piece of but it is we are focused on investing in the business and many of you may have seen today we announced an 8K where were up our end as far as the share repurchase plan that we put in place earlier this year. As a part of that plan we decided to accelerate the amount of shares that we are looking to buy, I know we previously talked about just doing that plan to offset dilution, but at the current price and the opportunities we see with the company we feel that our price is at a point where we should take advantage of that. So we've executed our ASR to take advantage of that.
And lastly, we will continue, we talk about always looking for new technologies as we look to continue to expand our product portfolio. We will continue to look for opportunities to license technology or find a tuck-in or what have you. And that's really to define how we are allocating our capital. That will continue to happen as we continue to generate more and more cash over the course of time.
The next area that we point to for enhancing shareholder value is our financial performance. One key to that is increasing our revenue. And before I talk a little bit about this what I really want to point out in making clear is that our business is very seasonal. If you look at our business and you go back overtime Q1 is generally our lowest revenue quarter, Q3 is generally our highest revenue quarter. Q2 would be if you follow how we track Q1 as I said the lowest quarter, Q2 is generally higher, Q3 again is our highest quarter and Q4 generally trends down and in most cases will trend down and the slide here really presents that.
The one thing about as far as when you look at our revenue, we've been able to grow our revenue year-over-year consistently for nine out of the 10 quarters and I would say 10 out of 10 quarters if you pull out the one-time catch up we had in 2010, in Q3 of 2010.
Our revenues have evolved; I think Dave highlighted there's this evolution in how video content is being consumed and we've grown with that or we've revolved with that. If you go back a number of years CE was over 80% of our business. And while we've seen that decline quite a bit, we really had our eyes settled on mobile opportunity and we talked about it over and over again as it was coming around. Mobile now represents 60% of our business and we expect it to continue to be at that level. CE will continue to be an important part of our business as we believe in the whole ecosystem and its necessary for us to win. We will win on the mobile side by also winning on the CE side. But there has been an evolution. There has been a shift.
Bringing value to the market, most of you recognize that if you are in a business and you are bringing value, you should be able to get reasonable margins. As a semiconductor company with an IP business, we feel very proud of the fact that we are able to drive better than 55% margins and we've done so on a consistent basis over the last 11 or 12 quarters. If you compare us on a product side, where 50% is generally for semiconductor from product standpoint, we are very comparable on that side as well. We drive 45% to 50% margins on our product side as well.
Also relative to financial performance to enhance shareholder value you have to generate some profit, right and this slide here really is indicative of what we talk about as far as our ability to improve our profitability and make investments to continue to grow in the future. If you look at the numbers here and you see the shaded area and from Q2 that represents the time when we acquired our wireless, we completed our wireless acquisition. And the resulting spend related to that. We talked about how that’s been dilutive to the company, but at the end of the day, when you look deeper, you can see that absent that or excluded that, our core business continue to grow year-over-year, quite nicely.
And even if you at Q3 of this year and then it's something that we are really proud of the fact that we're able to drive ourselves to a 17%, over 17% op profit with the wireless business and that is the process around that’s talking about, how we're able to leverage our current spend while as we are growing our revenue, we actually able to include the wireless spend as part of and it continue to still drive good profits.
Moving to operational effectiveness; we shipped over 62 million parts this last quarter. That averages out about 5 million parts per week. That's a lot of unit shipping and I think it's important to mention, because you're dealing with large companies, the Tier-1 customers, they want to know this when they are looking for parts, they are going to be able to get parts. We hear conversations around certain competitors jump into a space or whatever. We think this is one of our advantages and we have demonstrate of practice of being able deliver when a customer is looking for parts, we're able to deliver. And if you look overtime, we talk about how we've been effective with this, we've been able to grow our shipping more than four times for every units shipped, we've been able to grow our unit shipped four times for every dollar of manufacturing overhead spend. So we have been able to increase our shipping without really increasing our overhead spend.
Investing for R&D growth. We talk about leveraging and leveraging our technology, and talked about that driving multiple revenue sources and what we see here is that when you look at this year, we have been able to reduce our R&D as a percentage of sales because we have been able to leverage our revenue growth and we have managed our spend, we have managed spend in the course of time. We are continuing to grow our R&D year-over-year, but we are also enhancing it, we are doing more projects every year also that same spend or that increasing spend, but we are also able to drive down where we are able to drive down the spend as the percentage of revenue.
Similar on this SG&A side; we are leveraging that spend as well and you can see over the course of time, this has not fluctuated much over the course of last 11 quarters. We also measure our performance from a financial perspective in a number of other areas as well including DSOs, inventory turn, EBITDA and operating cash flow, we focus on this as it allow to start focusing or continue to focus on our cash generation activities.
The last area to speak to of have shareholder value is our alignment with our shareholders. Camillo mentioned earlier that we have done a number of things over the last 18 months to and as part of this particular objective. Included in that is the implementation of our board and executive team share ownership requirement. We are each required to own X percent of our current salary in stock. Also as we get equity grant, there is a performance requirement behind those. This year with the grant for those shares divest at the exec levels, we need to demonstrate improved share value year-over-year before they invest, so there is pay for performance criteria relative to our current investing.
We mentioned the share repurchase, we implemented a 50 million share repurchase plan in May and we began to make those purchases. And just recently our directive of ownership requirements was changed to where they increased the requirement from three times their annual retainer to five times annual retainer. And lastly I talked about the increasing ASR, the implementation of being ASR. If you look at today we have actually acquired over approximately $10 million of our shares today and then this will follow on behind that.
Let's look at our model out for 2013, many of you have seen our model, we look to grow our revenues 20% percent year-over-year, we have been able on a (inaudible) basis do to that over the last three years. Margins I talked about, being able to bring value of margin to 55% we have been able to demonstrate that for a period of time as well as strong product margins.
The idea is to we get ourselves to where we can be at 15% to 20% operating profit on the regular basis. We are able to step into that area in Q3, and we are focusing on trying to drive that on a more regular basis as we get in the ‘13 and ‘14.
So when we look at 2013, we believe we are well positioned for a strong year. I think Dave talk about it and Tim pointed out what our opportunities are in the mobile market; we think that will grow and penetration will increase from one and five to up to 30%. We see an improving CE ecosystem, Tim spent a lot of time talking about how we are moving forward with MHL, 4K and things happening in the CE space on TV side as well as the various things that are happening on the home theater side. Our 60 GHz opportunity, Jeff gave you the picture of why we think we have an advantage. Tim highlighted that opportunity that we have it is another chance for us to gain another, expand our footprint in the camera with which we play in and do so with a much higher ASP.
We will continue to focus on bringing that value, evolving the standard and allowing us to drive positive strong gross margins and keeping our costs under control as well as we will look to improve cash flows through continued expense management as well as working capital management.
With that I would like to move us to our Q&A section. Because we are being webcast to ask a question, we need to have you speak into the microphone, Mike, we will provide that and so if we have any questions and the entire executive team will look to respond. If you have any questions please raise your hand and Mike will address.
Thanks, just on the MHL, the profitability on MHL, so as you see kind ASP start to fall for MHL going forward, how do you look at the profitability per unit for MHL and actually driving kind of earnings to the bottom line as you start increasing the number of units?
So we really are focused on maintaining that 45% or better margins on the product side. We are doing a lot of things on our manufacturing cost side whether it’s testing activities, the increased volume allows us to go and seek some additional opportunities for pricing. It is our focus to manage and maintaining that higher than 45% margin which allow us to continue to drive profitability to the bottom line.
As long as you can maintain the margins for MHL as you increase the volume you will start to see incremental?
Then you will see incremental. Yes, so we are speaking of how we are, I think Q3 is a very good example of how our spent has not shifted much and as our revenue continues to grow. We are able to drive a lot more profitability to the bottom line.
The next question is on the competitive landscape on MHL. There was obviously a private company Analogics that's moving forward which is trying to be an alternative to MHL it essentially recycles the power you don't use extra force on the (inaudible) side but you need the power of the adaptor with MHL. So I am just wondering how do you look at competing alternatives to MHL as the market gets bigger and bigger?
I will try to take this question. So yeah there's always alternative companies and technologies for video connectivity even earlier in the days HDMI display was always option for connectivity and never really took over the CE space, HDMI has kind of won that, won that battle. I think if you look at MHL, we have kind of a two year run on other potential technologies. You know we are two years ahead. We have a huge installed base and I think you know there maybe other technologies; Apple has their own interface for example. That will come to the market but we think that MHL has already got a very, very good head start.
You know with some of the claims that you mentioned Analogics, I don't want to comment directly but I think some of those claims are yet to kind of take it with a grain of salt, you know HDMI does not provide power, if you look, even adaptors that Apple provides, other companies, they all require some level of plugging capability. There are s other things you can do even with MHL you can, the standard allows a phone to use a battery to power that adapter as well. So there are ways to make these solutions is working in many different ways. So you kind of feel that back. They are very similar but I think we have at least the two year head start alternative ways to connect your phone to a TV.
I think the other point to mention here is that the adoption on the TV side. It's going to take a long time for your competitor to get on the TV and we made a statement I think on the last call that probably up to 30% of all TVs will have MHL next year, including LG. So that’s very material as a key point.
Just a follow-up on the MHL front. You talked about 30% penetration into the mobile space, I just want to clarify is that your addressable market today as in Apple or is that the total Smartphone and tablet space in aggregate and maybe it's part of that when you are thinking about penetration and that level of penetration, obviously there is some component of deeper penetration into your existing customer accounts if you give us some idea how that’s going and maybe also China? It's starting to come on board now how big that would be for you for next year and on the 60 GHz front, it sounds like you are very enthusiastic about the opportunity getting much closer and tracking those timelines, you talked about previously the investment would either pay off in the second half of next year or would be terminated in the middle of next year. It sounds like; really you are excited about that opportunity. So should we read into the second half of 2013 as being profitability or breakeven, 60 GHz or too hard to forecast that in the future. Thanks
So you got six questions or 5.5. The second, with the market share item and I now hand over to Camillo. I think on market share that’s 30% of all Smartphones and tablets including (inaudible) so that’s not a ex-Apple number. I think ex-Apple it would be actually higher. Yes the China if you look at that AVI research chart that I presented was interesting and you see the emergence of two or three new names you have never seen before in the Smartphone segment at least in the US, Huawei, (inaudible) and then you starting to see some other brand names like (inaudible) who came out of nowhere, Lenovo and these are brands if you go to China you can buy that brands not so much in the US. I think they are going to be growing they are going to come fast, we have seen repeatedly in history that a Chinese manufacturers will have some share of the market. So we think as those brands gain strength as Smartphones start to grow more rapidly in China we think that MHL’s option will track with those manufacturers. So we are pretty optimistic about the reach of MHL into China via MHL via these Chinese brands in addition to the main brands also in China.
Yeah, absolutely if you can buy a Smartphone non-subsidized for 200 bucks, that’s actually a reasonable price even in China. So that’s what we are starting to see our Smartphones that are within reach for the average consumer whether that’s in the US or in China and I think that’s going to be continue to grow that trends. That trend is not (inaudible). So I will hand over to Camillo on may be the other questions.
Refresh some of those questions.
So I think what we have said pretty consistently is that of the sampling this product in the next one or three months for a variety of different companies, we expect the one or two or you are going to take a couple of customers with us to the production cycle in the second half next year that's our plan at this stage and we believe on track to achieving that.
As the profitability breakeven wireless we not really reported that on a segment basis. I think it’s fair to say the opportunity is very, very immaterial. If you would have capture one million hypothetically displays with wireless where that be a tablet or a Smartphone or some hybrid product in the middle that's a pretty immaterial jump on where wireless revenues are today and that's $1 million its probably represents a pretty lousy 1% or less than 1% market shares, so that is not very good I guess that’s what I am trying to say.
Our goal if you remember what Tim presented the opportunity on wireless is just as big on MHL. There is a time delay, probably if you use later that's true but the opportunity is so significant and we are going after it every thing, we are absolutely going after it. As time next year plays out, we will provide more updates related to how we are doing on the wireless progress, customer announcements and what have you but at this point we don't report out the segment P&L related to the wireless technology.
Just come back to the question that was asked about the competitive to that threat, thought that you read that announcement it does stay fit there is MHL technology, concerning but it is MHL’s base standards, can you possibly talk about how you are going to be possibly protect your patterns from the standpoint of having some type of royalty agreement with the company is in fact that's how the kind of the thing the product is MHL standard?
Sure, you know the MHL like HDMI, wireless HD, these are industry consortiums. So it’s our job to try and get the consortium to get everybody adopting the technology across 100% of the products, not just 5%, 10% but a whole 100%. In order to do that you need to open yourself up and allow lots of companies to join the consortium. You know if this is a Silicon Image only thing, its always going to be a 10% to 20% market share. That's the best case scenario and we want this to be 100% penetration. So as a result, you are going to have to open yourself up to other potential chip companies to go out there and either license the IP from us or develop it themselves or one of either of the two scenarios. That was true for HDMI and that's true for MHL.
Now with MHL as is true with HDMI, one of the key parts of the business model for our business model to be successful we need to make sure that we are continuously refreshing the standard on a regular cut. One of the challenges we have with HDMI and that's really one of the reasons why the CE business has been dragging for some time, is that the standard was not refreshed.
If you look at between 2009 and 2012, really there was no new HDMI 1.5 and that's a problem for the business model. So lots of reason as to why they never happened and probably not too long for this audience right now. But with MHL its going to happen we believe at a much regular clip, you know roughly every 18 months or so that's when you want to refresh your standard and that when you refresh your standard that always gives you the opportunity to refresh the silicon at the same time or shortly thereafter. And so that gives us the, we believe that gives us a competitive advantage relative to the competition.
The other thing is at the very low end at the entry level category whether it’s a TV or a smartphone, we are strongly encouraging the SoC chip vendors whether it would be a TV SoC chip vendor or a mobile phone chip vendor, those guys to integrate the basic form of MHL into the entry level product, its not reasonable, it is just not reasonable to expect that customers are going to pay it will be a $1 or less or more or even more for TV in the absolute entry level cost sensitive application and that's where integrating it into an SoC with not as many features makes sense and so that's how we attack a 100% of the time.
You have the entry level going in with an SoC integrated strategy and we have companies like us and competition at some time later coming in with a standalone solutions which are much more feature rich. Now customer relationships are going to become critical as well, and so we are going to have to continue working at the relationships as we've done for many years and we will continue to do for years to come. So it’s a multi faceted answer here. It’s not a one.
And just a quick follow-up I want to be sure I heard correctly, the accelerated share repurchase plan of $30 million is that just a creep that you are buying or is that now additional shares that are going to be repurchased.
If I understand your question it’s a part of the $50 million plan we have in place, so it’s not over and above that plan we have in place but we are looking to bring that in now. When we've talked about, we didn't have a timeline on the other plan and we are just looking off that dilution over time. This is a accelerated effort and to probably capture up to 10% of the share. So
And then just a quick follow up, as a matter of the capital structure of the company, I wonder recognizing that you are cash flowing and recognizing that this was use for creep rather than actual share repurchase, structurally where do you think the company from a capital standpoint, what's the right number for dollar (inaudible)?
We have a number of conversation with our Board on that, and we think somewhere in the 100 million to 120 million range is that number and we’ve been running it at a much higher level, the 150 level we’ve had as our plateau before, but we think all along we had a belief that a 100 to 120 was reasonable to be at.
Talk about your 60 gigahertz efforts versus [Y gig], how you see the competition there where you have advantages and then talk about purchasing of the solutions based vendors, kind of when you talk about the $4 to $5 whether that’s sort of whole solution and kind of if you have any thoughts how this whole thing evolves.
So we didn’t get a chance to talk about much today but we told primarily about 60 gigahertz versus WiFi today, we heard from various speakers. Now within 60 gigahertz, there are actually two camps. The wireless HD camps that we are aggressively driving and then there is another camp called [y-gig] and Y gig is today at least very much a more data centric, high-speed data, I would say application and it's kind of an extension to WiFi. Again high-speed data, just a lot more data.
Now, we have actually said publicly a few times, we are actually a member of the Y gigawatts, and as a result you can expect that at some point in time to introduce combo products which are both wireless HD and Y gig as well. So we believe that if we are too careful in making the successful arguments with all the customers and industry at large that 60 gigahertz is a necessary technology for certain applications then we believe we are going to win, absolutely we are going to win because there is not standard discussion any more, we will take it off the table. So really the biggest challenge is 5 gigahertz versus 60 that’s the big discussion here and if we can make that successful argument we are done, I think we are pretty happy about one.
So today we have a two chip solution. We have a baseband chip and I must say the radio chip and we in fact the early samples we have together in a module and we provide the module to customers. Some customers they want them separated etcetera. Now moving forward as the adoption of the standard becomes much stronger and the strategy is successful here then one of the logical steps is that the baseband function is that we are going to absolutely license it to all the key SoC chip manual, the mobile phone, the associate vendors and potentially the TV associate vendors as well as some point in time, so if you play out for the next five years let’s just fast forward to five years is that radio chip on its own let’s say is a standalone function it’s going to be on the $2 that’s where it’s going to be. But at that point in time you are talking about hundreds of millions of units this is not like a 10 million deal, I mean you know the 100 million of units, so its up to those we are pretty happy.
I had two questions, in the Chinese handset market how are you guys attacking that market. Are you partnering with the media text and spread into the world or do you see them as a potential competitor integrating some well? Okay.
So we guess, so I will take that one. We actually are partnering or looking closely with majority of the applications sponsor companies including the (inaudible), including Spectrum, including Qualcomm, Intel. I think there are a whole list of providers. So in China we are working as close as we can and treat, on obviously long term and maybe right technology but used foreseeable next couple of years that definitely we had partnership opportunities but definitely leveraging MediaTek, leveraging the Whitebox business is where to go in (inaudible).
And you not display any technology this is?
(inaudible) technology to the phone.
And is this the same ASP or is this a low rate?
I have seen pretty much the same where we are in the world. It just depends on which product, which version. But there is a standard what’s integrating the product. I think going to the product (inaudible) but we have a whole variety of products at different integration, levels different feature etcetera that we target for the different market segment but we don't have a China price versus the non-China price.
Okay, and on the wireless side, can you talk a little bit about the power traction and how you are dressing to that's you know that's part are going to be the biggest concerns as well price?
I think Jeff went through why believe 60 gigahertz as a federal power of performance profile. We had really exposed and discussed our next generation product here but here today our Gen 3 solution fully owned, with the full solution for HD is around the 2.5 half watt solution that’s great for CE equipment maybe allocated for PC and tablets, its obviously too high for smartphones so obviously, as we go forward and push the technology into the smartphone we will be addressing and reducing that power substantially. I am not going to go into specific numbers today but most less in the current two to three and a half lots that we experienced.
So in general terms the reasons why we are so much lower power and very power efficient is to the smart antenna technology that informing that focuses again that actually really helps your power efficiency because we are not wasting energy by sending it everywhere. Additionally the CMOS technology really helps with the low power consumption as well?
We are just, this is Tim, we are very aware of the requirements than what some of the phone manufacturers are looking for both in terms of size, performance and power point of view. I mean obviously we are approaching standpoint that we are well on the path of implementation.
Two questions from me, first of all maybe Jeff just following on your commentary about beam forming you just talked about also in your prepared remarks; where is in terms of your patent portfolio you know big picture speaking between wireless HD and WiGig, are you assuming there can be a positive for you. Do you feel like you are well defended there, how does it look like versus what's in WiGig today?
Sure. We have a broad range of patents, some covering packaging and tests and so forth, it’s very broad. Some that are specific to wireless HD, some that would cover wireless HD and WiGig, so its really a broad coverage. We really like starting early, we wanted to cover as many different areas and broad and narrow ones as possible.
So do you think you are in a net positive position relative to your portfolio of 60 Gig?
I believe we are in a strong patent position.
Fair enough. Second question as you look at China as an opportunity for MHL big picture both in TVs and in mobile, where do your see tax rates in 2013 and how does the competitive environment look there relative to the other geographies like Japan and Korea and others?
We don't really break out our tax rate by country and I think what we are comfortable in saying now is that we believe that next year we expect that the 30% of all TVs worldwide regardless of regions could have MHL and an entertainment feature and you saw some of the brands starting I showed up like HISUN and TCO and what not, so you know I don't have any specific number to answer your question specifically but we do think that the MHL tax rate is going to go up substantially next year globally, not just in US or Europe.
We have till 11:30. We have time for maybe one more question.
So just two on MHL, you have been talking about up to 30% of smartphones, but you didn't talk about your market share. I just wonder if you can give any thoughts on your market share as you go up that penetration curve? And then also as you iterate MHL to the next standard what are going to be some of those standards plus features that can allow you to defend your market share, so that's MHL? And then I was also curious on WiSA because of the charge in the quarter related to the investment and the company related to that; I just wonder where does that go from here and you are sort of capitalizing your investments through a private company, do you have OpEx associated with that in driving WiSA?
So Tim you take the MHL, I will talk about the WiSA.
On MHL one, what was the first question sorry, I know the second one.
On market share.
Yes, on market share, on the market share you know I think its pretty clear that today we've been more or less the sole supplier of MHL product in the phone. As part of a global standard, we do expect other companies and there have been other companies that have announced products that will compete with our space. So you know we are not going to be 100% next year but I think we will have our fair share next year as well, but it won't be 100%. Most likely be not 100% but still very high percentage in that number without breaking out the exact number.
On the standards plus approach, we’ve actually already done quite a bit of that. If you look at the products we announced today, even already in last year and this year, we’ve included things like the USB MHL switch in a number of products. So in addition to just MHL function, we've added external component, the tip of year ago from $0.25 to $0.50 into our products as a value add. So we've had at least two different products now they have switch capability, built into our chips. So you can eliminate one extra component. So that’s one of our standard plus approach.
Another device we announced a while back was targeted for the China market actually, which is innovational and transform with built in scaler. So you can have MHL in phone that don’t necessarily have HD capability, but we provide a built-in video scaler that converts up the HD so that you can have HD output of a low-end smartphone. So we have added a couple of different things, video scaling capability, switch capability and as we go forward, we will be having some other things, especially around data, I think it's an area where we can add a lot of synergy plus innovations over and above standard MHL implementation.
I will let Camillo answer the other question.
I think it was about a year ago, we made a strategic investment in a smaller private company, which we did not disclosed and that was to go and pursue this the drive of WiSA status, Wireless Speaker Association status. This particular company, the revenue that they had achieved was I would say, materially lower than what the both of us, both companies had expected. And as a result, we felt it appropriate to write-down the investment. We still retain an equity position in that company and we will see how it plays out but at this point in time that’s just substantially lower than what both sides had expected and then so that’s the reason why we took that financial action at this point.
First of all thanks to all you guys for doing this, thanks for coming and having this day, I think it’s appreciated. If I can sneak in two questions…
Everyone has to sneak in more questions.
On the MHL component you guys talked about 2 billion plus units by 2013, ‘14, ‘15 in that area and then the same thing with the 60 gigahertz process; can you tell us how we should think about 2 billion units in force in terms of revenue trends, trends like net international revenues for the company, what’s the right framework to think about that? And then the second question relates to the repurchasing (inaudible) ultimately what is your goal for option ownership or option issuance of the company?
The first one again.
In terms of the 2 billion plus units in force in the ecosystem how should we do that in terms of potential revenue……
Yeah, I think the other day our target revenue model is to grow in the 20% range year-on-year, may be a little bit less, may be a little bit more but kind of in that ballpark and with wireless, as wireless start to kick in I think it will be a substantially more than 20%. Frankly, so I think that’s probably how you should look at it, I think trying to say 2 million units times 40% market share that’s you are going to get a little bit at this point in time and they should be looking at target revenue model on an annual basis, I think its like in the 15% 20% range wireless is going to go far north of 20% I think that's kind of the way to look at something coming two or three years, that’s the best proxy.
So dollars per unit, it’s different on category; if you look at the phone, I think two years ago, when we launch the standard we said its going to be a dollar trending down or two years post 200 million unit or so into this thing; it is down, it is trending down. So I think we are at blended average probably in the 80% 90% range and for mobile in that ballpark, we have products as Tim said, some of which are targeted even lower, we have some which are even higher than that, but on the blended average kind of in that ballpark today; TV is in $1 plus, probably in the $1.50 range as an average that's kind of where we are for those two product categories. Yeah, and wireless is much more than that.
So relative to I think I mentioned earlier that we are looking recapture about 10%, our annual grant rate. We look at our charge to the plan based on industry requirements. So if you are looking at over the last few years, we have been in the range of 3% to 5% of our charge relative to shares that we granted in the course of the year and our proxy highlights that this is across the company. We will look to continue to offset that dilution even longer term after we have kind of executed, right now that's our plan is to continue offset the dilution longer-term. So I'm not expecting to see the decrease we've had relative to the last several years when we executed our last line to come into play at this point in time.
So I would like to say thanks again for coming out and joining us. Those who are on the webcast thank you for joining us as well. Right now we will take a break and we've got the demos at the back for you to continue to look at and then we will have back at the lunch hour when you go close to 1 O'clock or 2 0'clock please come back or please come back to your seats as we will have the panel set up and we will go through the review with the panel. Thank you.
So how are we doing there? We are on the first course second or third course. Well, this is hard work. So while you are eating, I know you are all going to be extremely focused on the panel. All I want to do is introduce Tim Bajarin. Tim Bajarin is the President of Creative Strategies. I have worked with Tim for many, many years now. He is an industry expert. He is always sought after by many people in the industry including the press all the time to get an update on what's happening in the industry. So Tim will introduce each of the panel members. I think it’s going to be quite an interesting panel, each of the panel members bring a certain skill or expertise from a different part of the ecosystem that we are trying to sell products into as well. So Tim, why don't you take it from here?
Thank you very much. I have had the privilege of covering the industry for about 35 years and got to start really at the beginning with the original IBM PC and the original Mac and during, especially probably the first 25 years to 30 years the PC as we know it today was the dominant digital tool in business and in the homes.
But in the last two to three years the market has shifted dramatically and by now you are already probably seeing significant change in demand for PCs as a result of tablets. Now one of the things that I want to point out is that from our research we believe that PCs have hit a plateau that the sales of PCs from this point will decline. Some of my colleagues at IDC and other, kind of think we may have a bump in the numbers this next year. I don’t. I believe we will be up anywhere from 2% to 5% and that will be the same for 2014.
The number reason one is the tablet. The tablets are starting to shift people’s thinking about the digital experience and one metric that is very consistent in our consumer surveys that the consumers are saying that they can get, any percentage of what they use, usually use their laptop or their PC, they can now view on a tablet and as a result, they are looking differently at their laptop or PC and one really important piece and which is very time is that what consumers are also telling us that if they're going to, because the PC is designated to a lower dividend, they are either extending their laptop for another year or two or if they go to buy, they are buying cheaper laptops.
So this is a very disruptive time in the industry and mobile is playing a critical role. Camillo and many of the speakers originally earlier talked about the growth especially in Smartphone. And if you want, I can give you my tablet forecast later. I don’t want to take time here. We have a pretty good feel of what we think will be the tablet forecast for the next couple of years.
So the panel today is going to cover a couple of key areas. We got experts in for distinct realms of experience and in that context; I would start with Ron Louks. Ron used to be at HTC and Sony Ericsson. Tom Wheeler, he is at Core Capital now but I met him when he was the head of CTIA which is you know, one of the [trade] organizations in the world in cellular and wireless. Next one is Adam Sutherland from National Geographic, Vice President of Strategy and then Bill Weiss is one the end who is President of Promar.
Why don’t I start with you the devices themselves have actually changed the life over the last say three years, five years at the most, but more importantly it’s changing the way people use them you did a lot of research when you were at HTC, you saw a lot of change there as a result you were designing for those changes what do you see today and where do you see going forward?
(Inaudible) And I will go down this path with you a little bit, we don’t have time to go through the whole thing, but give you some snapshots of a typical storyboard that we would put together and then just both bringing the technologies to actually make it happen. We have always focused on technologies either, this development takes from zero to one year and then you have future technologies one to two and then two to five years.
So on the storyboard what we will typically do is take the parents, the father, the mother, the children and even the grandparents and how do they use technology and how do they use the device and an example of that is that as Camillo or Dave was talking about HD connectivity when you think a connected world together and you fit with a device that knows more about you than you and you add some analytics to it later on, so that it’s much more predictive you can get an idea where things would go and this is an example that being Canadian and actually being charged in, so I was first been operating right now unfortunately but and calling it from a (inaudible) point of view, if you are actually going out line on your mobile device and you are actually searching to see the scores and the leaders in different categories and what happened with the games that night and you take that and you experienced and when you wake up in the morning as a father and the householder the story for long (inaudible) our society which (inaudible) the mobile device that goes up.
I think he looks over of that mobile devise and see what happened last night with the game there is the West Coast games ran late, at the same time where we see sort of things is going from a strategic point of view and if you look at one of this frustrating parts for me if I give you example (inaudible) I am sure many are, I really like to see the office scores and the highlights, but the problem with these stand I never when Hockey is to come on, so an hour snapshot from Canada to where comes on stand 15 minutes all cover Hockey, he is going to never know where its going to be.
We are imaging the world that because of the predictiveness, you got set-top boxes, you got the content providers, they would actually know that is a consumer that's would I like to watch. So I can actually have my TV come on automatically and go to the Hockey highlights for me from a programming point of view.
So that's sort of something that we think about from the model point of view, then Dave was talking about even the hub and with the card a lot of people imaging today, for instance when you want to go meeting at another office or you have to go to doctors appointment. One of the things that we sort of see what the product is actually going out and doing that for you beforehand. So its much more predicted to say hey Ron, your doctor’s appointment that you have at 9:30 this morning, you need to leave 15 minutes early due to traffic and here is an alternative route, now that's great to get that on my phone but the same time we always experienced when I get in the automobile I want all that transition rate over the clock.
I got an old GPS in an older car; I want to actually use the mapping software, the navigation software, my choice is on the mobile device to take over the display in the car. Now that you are in that car for an hour as you are driving to your doctors appointment to work how many of us have had that same frustrating experience where like when it even comes to just reading email in the car right, and being able to respond back to the email you have so much waste of time there. So we've seen this whole experience and from connected world point of view of being able to take over the display in the vehicle and having a much better sort of consumer experience with that whole idea.
Also then you talk about connecting when you walk into the office, again as a father of the business leader. We are working on so many multiple devices today right, everyone’s got tablets, everyone’s got a PC or a Mac or everyone’s got their mobile phone, but one thing that's not there today with all others, is not all things together. How do I know which is the latest document and I think with cloud based services getting so much better to be able to have that type of content that's there, but so then when I walk in the office and I walk into a meeting room I want to automatically send the presentation whether its on my tablet, my phone or whatever to the other tablets that are in the room, so also the screen on front to be able to do the presentation and again you get the idea we store aboard every moment of the consumer’s life to be able to see where technology should go.
If I then go in the afternoon sort of as I am winding down my day, and I'm heading home one of the big things that we spend a lot of time thinking about the sort of family is I think most of you have kids and stuff like that, but one thing that's sort of missing is being more involved with the kid’s life. They are very digital; us older individuals in the room are much more analog and I think for them how do you share the experiences of their life and what I mean by that is that as a father you don't really know what's going on, on a day-to-day basis.
Well now imagine this world and most people when they get home and eat at the dinner table they don't even eat at the table, they all sit down in front of couch with a meal and they are watching TV or whatever like that. We've always had these ideas and if you look at displays and where they are going is why when you have these place mats sitting on your kitchen table, so actually you can have a place map that's a display on the kitchen table. But as part of sitting down on that display I can actually see what my kids were doing during the day. So I know from a Facebook point of view what photos they were taking from an Instagram, what tweet, now you would not want to know in some cases, but the good thing about that is you are going to have a much more engaging discussion with your children and be a much bigger part of their lives.
At the same time you also and back to these devices being predictive, it’s a struggle some times to know that you know your kids may like a different type of music that you don't like. But at the same time you may be able to find middle ground, right. If you want to watch a movie or you are doing a family movie night, I now have the tools that are going to be there to be able to let me know what my kids prefer so that we can have that experience in the house. So that its oh your children like Big Bang Theory, you can actually watch Big Bang Theory on multiple TVs in the room and not at the scheduled time on 8 o'clock on Thursday.
So whenever I want to. So as family dinner comes together I'm looking at their photos and seeing what they are doing much more engaged and then you spend quality time together, sit and talk and being able to talk about their day and what they are up to as well as going to be able to take that experience to the living room, to be able to watch things on TV. That's just a sort of small snapshot of the types of things that we do and then we look for the technology to be able to enable those types of experiences.
Very good. I met Tom when he was shepherding CCIA through probably one of its greatest growth periods at the time. And we've asked him to come and talk a little bit about, when we talked about connectivity the wireless and the wireless spectrum and its more important how the carriers are going to deal with this challenge and opportunity. Tom?
So thank you very much Tim and Camillo and everybody for inviting us. You know my good friend Ron painted you a great picture but that's ancillary. I mean the stock that counts is the network that enables it. And the single controlling force in our lives throughout history has been how we connect. We went through a period of time, 10 or 15 years ago where the buzz word was conversions. Oh, wow, these networks that use to be silos, you get the television network and the telephone network and you get the data network and they never talked to each other. All of a sudden, they converge. We have these [lingual franca] called internet protocol and everybody was all excited about how you could do all kinds of different things that use to require their own specific device on any kind of device.
We’ve moved so far beyond conversions now that the reality is that what conversions drive is diversions of effect. That we're now in a world where as the capabilities of the technology converge, the results that they generate disperse. Devices disperse, content disperses, multipliers like (inaudible), every individual becomes a content producer and can put whatever they want to say, out the same kind of way the New York Times puts what they want to say out. The delivery as we saw this morning, the delivery diversion and that in fact, delivery goes in to smaller and smaller and smaller kinds of networks or cells in the case of mobile.
So, the simple reality that we're dealing with right now is that every thing that we have known, literally since the beginning of history have had the role of a network as a centralizing force that was inherently a limiting force. Now we have gone from central networks to distributed network and as networks become distributed and the activity moves to the edges, there is no way to constraint in its content, in its platforms, in its devices, in its delivery and that’s the kind of thing that we are living through right now.
One of the first realizations of that and one of the enablers in that was the cellular our business and its ability to distribute activity away from the centralized point of having to go plug something into the wall. The challenge of that the cellular business is facing today is that in this distributed world it’s not the network, it’s multiple networks and how do you participate if you structured yourself as being a core pipe. So what we were hearing this morning about 60 gig and other kinds of pathways becomes critical of all of it. So Sam to go to the guts of your question, if we are dealing with the most defining force in human existence, how we connect and if the nature of that connection is changing to distribute itself in a manner in which we have never seen before in terms of all of the activity moving to the edge of the network. Then the kind of world, the kinds of connectivity opportunities that are going to exist are unprecedented and that the impact on economics and the impact on social fabric of those who are connected that way will be for every change.
Keep that on, I am coming back to you on a couple of more. Adam used to be at travel channel before he went to National Geographic. So he’s got a diverse background on content. And we’ve asked him to share a little bit about not only may be from his past a little bit, but especially what the National Geographic is doing in response to the demand of the consumers that has shifted dramatically probably started (inaudible).
Yes, thank you. Yes, previously I was with Discovery Channel and the travel channel working kind of strategies around media and technology and how to take events of that. National Geographic turns a 125 years old next year. and we’ve been able to be around that long because we have very good about I think mission resonates from the beginning it continues to resonate, but in terms of the media and what we produced, we’ve been feeling good about adopting new formats and also new distribution in our platform.
Currently National Geographic has a total new channel, we have a magazine that everybody knows. We do books, we have movies, we do games, we absolutely are creating a bunch of content for a bunch of different used cases as described earlier. What we have seen is that the content that people, so if you look at the bend diagram there is a - to Tom’s point about things being distributed but not converging, we see that most people want to access the content that we create on most of the devices they have. The single purpose device is pretty much non existent at this point. Xbox to give you an example and you guys probably already knows this. This March was the first time that video consumption on the Xbox surpassed game play. Game play is still increasing. This idea of using one device for one thing is going away and the connectivity that we were talking about today becomes crucial to success in that phase.
In fact going through the used cases described earlier, we are at the National Geographic, we are kind of at one and a half stage of our content development for new platforms. The first stage is taking the content that you have at internet available on all the new platforms that are out there. The second is to start to experiment with things like apps, with things like games and we are doing a lot in gaming as well. The third stage, I think is going to be, is very reliant on closing the loop that we discussed earlier which is understanding exactly how people are consuming our content and when. When these connectivity is there and when the consumer consented tracking is available that will actually start to affect our content development and our content strategy.
We think that's going to happen very soon. We are tracking what we stand now. This is the first time in our history, speaking of monumentous occasion where we can not only look at the content that we are producing and distributing in that vertical, we can now understand how many people are watching our channel and reading our magazine and buying your books and buying from our catalog. So the kind of solutions for consumer consumption patterns that you guys were discussing earlier, this is a huge initiative for us and it’s the first time that we are able to do it in a data driven way very effectively.
And the other thing that comes interesting is, I don't think that all of the activity will necessarily go to the fringes of the network, but we do understand that this idea of completely controlling your brand or your content development or anything, it’s a little bit antiquated. So we are adopting. We reform it as a society and actually member driven society. We are reinvigorating that concept and trying to create networks of people who are same, who are producers, who are explorers in their own right to try to create, to embrace this idea that we can let go of control a little bit.
The reason I say it is I don't think everything go to the fringes, there are still some skill sets and the knowledge base and stuff that brands represent and will continue to represent going forward. National Geographic, standing for exploration and very high quality, will continue to do so. But we are not going to be able to control the whole content ecosystem or distribution ecosystem going forward.
Alright. And Bill is the President of Promar or CEO of Promar and Bill I know you have a very diverse background in working with a lot of different companies and you've also done some work in media, maybe you can give us an understanding, especially as media becomes more data driven, more package, we discussed HD now up in demand and the data throughput. How do you see that technology evolving and more importantly the technology that's enabling it to be even more efficient and effective?
Several questions there I guess. So again my name is Bill Wise, I'm the Chairman and CEO of the Promar Group and as a quick background, about 37 years we have worked either with or on the boards of a lot of companies you would know around the world as well as we are investors on a number of venture funds and worked with sovereign funds, so we come out of from a point of view of all the different constituents and kind of the linear for these 30 years or where it’s evolved, what they are doing and more importantly what is happening there that they are going to catalyze.
To Tim's point, so actually video is, you need to break it down into a couple components and maybe a few things you didn’t know, you would find is interesting insights. So first of all, on a human layer, there is a thing called Essential Reflex which is it so happens as humans, we are more wired for video than any other sensory experience. It goes back to cavemen and hunting and things of that nature where the images and the movement of things in the field as they hunted was what the cortex would captured. So anything related to movement or video is what our cortex historically has been geared for, more so than oral or more so than spoken.
So when we talk about video in current day terms, one of the reasons important to know that is that people tend to attach or want to engage with anything that is video information more so than any other form. It takes more work to listen, it takes more work to speak, it takes almost no work for your cortex to process video.
So the reason why that’s important is especially in underdeveloped regions, we sort of infer here as North America. When you look at Africa, you look at Mid-East, you look at Latin America, especially with young people, the rate of adoption of video is off the charts and that’s important to note, because as we evolve today with a different forms of devices that are mobile oriented, whether they be a vehicle, a tablet, a phone, whatever develops next and the different ways you can connect, the root of all that is mostly video and category if you look at where software development is, it is to present things in a video oriented fashion. So one key thought would be pay attention to this idea, this essential reflex and video being the root.
Number two is, we tend to think about video as a static thing, whether it be the data part of it or the visual part and from our meeting experience with Liberty and with some of these colleagues at Discovery and New Corp. etcetera when a movie is released as an example, there is about 113 to 140 versions of that same movie distributed in the world, because they dynamically adjust it for the cultural sensitivities, whether it be a little bit of a trailer on the wind up like with Skyfall of if you had seen Iron Man and some of those movies the rendition of that movie they play in China and in Korea and Singapore was different than the rendition they played in Japan, Honk Kong and few of those other markets as an example.
So it’s important to realize when we say video, the ability now today to have metadata about the user, so we know which versions and in what context the thing, the package of video gets transmitted is increasingly important, because it means it’s a better experience for the user, it’s more relevant for the user and now with these enabling technologies that we actually have, not rolled out, but have, it allows for that user to continue to control what is best for them when they enjoy or produce a piece of content.
That’s on the theatrical side, on some of the shorter segments when you look at YouTube and some of the successes of that you may not realize that either, but the metadata they move with YouTube allows that clip to be slightly different depending which network it transits. So if you are on a high-speed wireless network the entire clip moves and you see it, if you are on a partially performing network, you may not get the full clip. So when it says a 2.3 minute the actual clip may be 2.5 minutes.
So it’s really important to understand that first of all video is the easiest thing for us to engage with and we will get more and more that way. Number two is because that network allow us to pass more information than just a video we can pass information about the use of the context, the geography, it is a custom experienced whether you realize or not. And the third is because the devices and the things you can do on these wide range portable devices, in our history it’s the first time to Tom’s point it’s the user of that really controls the experienced, the content providers can only get the core, not get build, but all the different renditions they have to make available for the user will require to be available is a really important thing, but that’s what drives up the adoption because we as customers find it to be a very pleasing custom experienced.
So if those present a challenge and that the networks and this connectivity Tom talks about have to be adapt and passing a lot of information quickly because it is metadata about the user and its also the video content. But again, at the root, it’s easiest for us to engage which is why the adoption rate is so high on mobile. And number two it is a very custom experience, so its not just a movie, its 113 versions of that movie across our networks to different users in different places.
Can I pick a fight with Adam?
Sure, bring it.
You made the point that the activity of a brand can't all moved to (inaudible) and I just don’t know what are you getting at? But here is an experience that my partner Mark Levine is sitting in the back and I had recently an activity of yours that was the ultimate edge which was you guys mounted an expedition to discover Genghis Khan (inaudible) and you cloud sourced the satellite imagery, so that people all over the world, out here on the edge could create the National Geographic product. And so I have ever seen the target which we are seeing about the brand, yes there will be this A brand it is your yellow rectangle. But the fact of the matter is that the network has changed entirely not only the delivery of your brand but the creation of the product in your brand.
Yes, but the ability to call those people together, just in regards, is everybody familiar with the study the search for extra customer intelligence that, so we did a similar thing, we are essentially we had a bunch of satellite photographs of Mongolia and they were X-ray photographs so they went you know kind of under subterranean and then we had these up on the web and people could come and look and say this looks like a structure that might be a tomb.
So instead of the actual researcher being the guy going through 5 million photographs yet 5 million people going through a photograph each and kind of using that to help, at the end of the day the researcher still had to go out and dig in these places that were identified as potentials but it was a great [processing] search model and we have changed the ability to get those people together, the ability to get the researcher who have the idea and then the ability to put that together into a media packaging that is consumable, entertaining, those are still feeling the brand is important for.
And its (inaudible) convener as often as an actual producer at this point. And that's why we have to let go a little bit on some stuff but it is, that's a great point that we have let go but without those other themes if I just get on the web and say hey guys help me find my dog, maybe it would work maybe it wouldn't but the brand has to be there to kind of help to push these things forward.
Thank you, you've heard from all of our speakers and you've got a perspective on what their expertise is. So I will open it up for questions. If you have one during the rest of our discussion but I want to go back to Tom a second you know I have worked with the carriers and I sit on one of their advisory group and this has got to be somewhat of a shock for them because while they played a really key role, it’s a sensor with all of the stuff the images distribute how do they change their business model, how do they respond to that opportunity?
Well, it depends on who they are. You know I think that the carrier world breaks down in three you know all goals divided in three parts, right? So there are three types. It appears that in Europe, the response of the carriers is I used to be a [PTT], it’s the job of the government to come in and protect me from competition. They ought to figure out a way that I can impose some kind of a tax on Google, Netflix and everybody else. That's one approach. The Asians seem to be going off and saying I want to have a piece of that content. I want to be able to deliver content that is disruptive on other people’s networks and so SK Telecomm and DOCOMO and others are focusing specifically on how do they grow by owning content. I think in the United States we are taking an approach that says okay, I have got a core network but that can't be my core business going forward.
I have to start and thinking in terms of the kind of things that Bill for instance was mentioning in so far as metadata. What's happening across that network? I know more about my network than anybody else. I have got to start thinking in terms of the network is a cloud and how do I facilitate things? How do I define different levels of service for instance by building my own CDN, my own Content Delivery Network that will deliver for a different price, a different experience and the consumer may not ever understand that but I've contracted with Netflix to give them precedence over somebody else.
So we have to think of an entirely new network models. The interesting thing about what we were talking about this morning is that it is less and less that the wireless connectivity is less and less about the spectrum that has been licensed by the federal government and increasingly about as we're hearing in the 60 GHz discussion this morning, unlicensed spectrum which enables this kind of creativity and then interestingly enough over in the license area, they are beginning to do to get spectral efficiency, they are doing the same kind of thing we're hearing about with room size, 60 GHz this morning by continually reducing cell site and able to reuse spectrum.
So on the network side, again our position as we look to the future, that’s going to be there and you figure out how is it happening versus guessing will I get there. This network area is very much like the video side but we tend to think of networks as static things, you send a signal down, it terminates at some point and even in the content side, delivery to the home, etcetera, that’s all changed and not in the US first, especially change in other markets first in the sense that it used to be the network that controlled everything from the initiation all the way to the termination of the content and the signal whether it be a video or piece of content or audio whatever, so that’s all gone.
So when you ask the question about what’s the model to the extent that network or that user or that operator let’s say Korea, they have been extremely clever about knowing if the majority of content is consumed and moved around the home it’s a whole different rate structure because they are moving the data around in the home, office cell tower and with the kind of technologies we saw this morning to the extent you can facilitate reasonably an expensive, highly mobile and very speedy networks. Now all these new used patterns in place is like a hotel, the hospitality experiments are going on with the company I can’t name we are looking at basic (inaudible) to traditional TV there will panels with antennas and you will basically do your visual work in your room or in your conference from a mobile device.
So the idea, the network still plays a role it would be a Verizon or an [NSK] but what they do in building versus cell tower and how smart the network sort to know what you are doing and where is a big part of that change. So the business model is tough because it isn’t just a family plan, one day your family afford, the next day family it depends who you are with as your family, the other girls that come with your daughter there is number of those new dimensions.
Yes and there will also be additional networks, not just additional license network but unlicensed network and we are going to see when we come back here in five years, there will be more network of choices available to anybody in their room by a significant percentage then there are available to any of us today.
One last point, so when we talk about that I agree with Tom and just a general premise all are seeing the same numbers we are doing mobile growth and that’s given the question is it’s exponential in terms of impact, if you got a billion devices that go on stream basically in other year and a half the number of uses of that device across these multiple networks the impact rate is explanation. So when you try to look at it financially can't look at the historical point of view of X number of units view and this is revenue path we have got, there is multiple revenue paths of that installation based, it’s a very impressive figure to study.
Yeah, and the super content is well. As we have all these different devices and all people consuming and all this different devices and we discussing earlier understanding how people are using this stuff or consuming a content I wanted to just make one point when you said earlier that knowledge does not educate the responsibility over content provider or program which actually create the experience, so it’s a customized experienced but there is just some responsibility on the content provider to create that experienced and program and in terms of day part or pass through it and there are completely different paradigm for us. We use it to make our content, put it out there and collect the money. Now we have to figure out which will possibly keep track of all the players that consumes, we have prioritize which knowledge is most important, which you get most information out, and then you actually have to program or create new content for that consumption pattern.
But there is a virtual circle is that is as real as this which is that as network capacity expands, content is created to fill it, as that content expands network capacity expands, devices for there is virtual circle in all of this that we can absolutely give you guarantee that all of those just not only the networks its the content, it’s the handsets, it is the whole ecosystem that will be far different when we sit here in five years.
But it requires going into the win diagram analogy, it requires people used to be in network operators such as they think more like content developers and content developers think more like operator, it creates this kind of confluences (inaudible) knowledge which is challenging for a lot of industry now for National Geographic you've got to get out but…
Unidentified Company Representative
Most interesting corporate move in the last 12 months has been the alliance between Comcast and the cable operators and providers because the delivery, the most expensive component of a cable system is the delivery to the home. The controlling factor in the media, in video is access to the content licenses. Let's see one group has the most efficient delivery i.e. over the air with LTE. The other group has the content licenses from folks like you my goodness what might they be able to do to you.
Unidentified Company Representative
Yeah, when is the great (inaudible) locking stuff up for a while.
Unidentified Company Representative
So I want to just quickly get back to Ron something. When you were at HTC you would have to make some technology decision and one of rewards in (inaudible) so what was the thinking by (basking) in MHL, what we even see from consumers that drove that.
I think for that case its sort of being able to take the experience on the device and bringing to the home and you know we put it on TV from a content point of view and being able to play. We have made a lot of different investments into other companies as well to be able to have the content available on the devices or on downloads or on the clouds in being able to play that and also for I think a lot of individual sort of travelers getting a better experience internationally is extremely important meaning that for some that are actually on the road all the time and traveling internationally, its very difficult some time to get the concept that you want to be able to watch when you are sitting in Taiwan for instance or in Sweden and you know to take that with you in being able to have it play wherever you want.
Unidentified Company Representative
So Tim on that point its interesting as well. So that was a driver HTC that you know I think has been an outstanding you know in the airline industry we've also in beginning of it, but Boeing and Airbus both have looked at us the subsystem which says they are going to assume everybody brings our own device and it’s a matter how you outfit the aircraft to draw down cloud video into the aircraft and distributed by WiFi or some version of that within the aircraft which essentially gets rid of all the costs, up for all the choices for us is consumers and make another use of that mobile device you are carrying over those networks and that's a ’13 ’14 kind of initiative. So its right on us now, but to Ron’s point so a used case was HTC as one OEM over a series of networks they sold, you know now you unleash the population in any geography and everybody can enjoy the content, the airline has almost no infrastructure and all the videos are cloud based delivery.
Unidentified Company Representative
I think the important thing to add to that to where David was going as well is that's not even just on the content that you want to watch on the videos going forward. To us its about back to sharing the experiences with your kid and stuff and no matter where you are in the world. So right now its sort of more you know to play the videos and the content that you have on the device for us going forward what I was trying to explain on those different experiences in much more an (inaudible) and things that are going on around you in being able to share that the (inaudible) besides the airline, we also see where that big effort going on in the car industry being able to, I don't want to just watch video, I want to add my whole new [life] take over any display and being able to use whatever display that's in front of me, you don't need to drive my device to be able to access all different apps as well as the content.
Unidentified Company Representative
You know on that point I just, I know it sounds like I am psychologist, I am truly not but there is a root for some of it. So I mention essential reflex to be forward. The other thing that's really interesting is when you look at the research on a non technical basis, the ability for humans to change their habits is extremely hard. So the ability for you to take a UI or something you are comfortable with all the research shows we can bring that same experience to other display types like the auto, like the hotel room where its your display, its not their display has absolutely proven the attach rates are extremely high. So from a money point of view, when you look at large net and these guys are doing video delivery in pay-per-view, their estimate is like a 5x increase on a number of times you watch a video because its your UI. It's your customization, it's your profile.
Unidentified Company Representative
That carries down to the device them selves. One of the reason Apple has been so successful is that they entered the user interface and how you navigate, especially touch which is a brand new approach on iOS devices, the thing whether it's iPod, iPhone or an iPad, and that’s where the device (inaudible) guys are really kind of struggling within because I look at the various users of Android that are sitting out there now and the UIs are very different than what I have on Amazon and on Kindle versus what I have on a Google. So point is, there is still a bit of confusion on that issue but we need a consistent experience (inaudible) web browser, where everybody know what a web browser and from a content standpoint, Adam I am interested, you have to look at all of these different platforms and in that context has to deal with different user interface. As a company is a traditional leading company really equipped to do that? I mean it sounds like you guys have put a lot of investment in that to make that happen.
We are judicious about the (inaudible) that we place. The latest research I’ve seen says that for every dollar made an iTunes, you make $0.21 in the Android market place and that was probably a year ago. So hopefully it's better now.
Unidentified Company Representative
It’s actually worse.
Right, so, you know, in terms of our experimentation with content delivery and new content creation gains applications, (inaudible) we have put a lot of effort in the areas where we think we are going to get most usage and of course the most money. It is a challenge, (inaudible) but no, traditional media companies are not equipped to do this, and the learning curve that we are allowed to have is just because of one of the dynamics we discussed earlier in terms of the kinds of licenses you have, the traditional businesses they have that are (inaudible) stuff and it gives us the time to learn and to get better of it. But out of the block we are not (inaudible)
Unidentified Company Representative
Adam I think for when you talk about the UI part itself first you’ve got generic android and then you’ve got a lot of handset manufacturers put on their own skin over top of that, and if you want a much better and rich experience to that I think that the handset manufacturer will take on a responsibility with the partners like working with the National Geographic to create a better experience within their skin for that UI and being able to have different tools available, so they have development teams, they are parked aside to be able to help accommodate some of that stuff or give the tools available to companies like National Geographic to build it for them.
So let me say that we were lost in the wood, right and we were obviously running and we are doing a lot. And my point is just that we need stuff (inaudible) all kind of try and sell and some of it will (inaudible) healthy and see what works and you try and experiment and you get better, but it is a skill set that we are actively building and the way that we are able to do that because we have other business that kind of keep us that’s (inaudible).
Unidentified Company Representative
So interesting on the media side though I think out of respect to Adam there is a change in the guard going on in both the OEM category and the media company categories. In the OEM categories you are aware of some of the same ones, there’s one in the Japan that owns a studio, there is another one Korea that is pretending to be a media company and hard work company clothing, and it takes a lot for that gene pool to work and media companies the other side used to be had all these (inaudible) and all these different areas to develop for but now that the platforms and the connectivity is unifying around the number of areas and in volume, it makes it easier for them to do what's best and say understand their user and their viewer use to deliver these better experiences. So not all of the media companies will change uniformly, there is a few that are doing it very well, and there are a few that are faking to be media company. The upper coming media company like a Netflix or on HBO that create custom content and on the OEM side a few of them will be successful, just had one in Japan that owns a studio in LA, now they are one of the largest providers currently a 4-K content, they have a lot of aggressive plans to try these new experienced for the user and because of standards aren’t developing in a way that you don’t have to worry about 14 flavors, its going to be a really good time for the end user.
Unidentified Company Representative
And the reason it will be is, because the market will move from away from content, away from networks, away from devices and to as you are saying Bill the information that is created by my usage of those three that enables me make better use of those three and enables somebody else to be able to reach me more sufficiently and that the fascinating struggle that is going on that will define who will talking about here in five years. The fashion and struggles that’s going on right now is between the networks between the device manufactures such as Apple and others and between the content both as to.
They are all the all getting pieces of this information and somebody is going to have - there is going to be a huge range war over whose information it is and by the way you just happen to be talking about the most personal and the most important component of my life which is information about me. And we have a range we are coming on this that is going to make what we've been doing at this point seem like in regard.
Okay, one point I will just make, but correct me, the information is retroactive not proactive, so it is interesting and dynamic that was [creativity], so you know everything about what a person is doing and what they are using, how they are using it constructively it’s already made. The chances are that, the chance is that that data will point to something that you shouldn't beam and you are not, or probably going to (inaudible) but you are still going to need this kind of experimentation before we put something out here but the game will tell you much more quickly what's working and what's not. But its not going to be unfortunately I don't think the data itself, we need to have all that's going to be a good predictor of what we should be doing that we are not doing now from a content perspective.
Well, it’s going to be telling you that you need to deliver on Ohio State football highlights.
Told me when it went.
Alright we are almost out of time. Just any questions from the audience? We've answered all of them, that's really quite remarkable. Alright then Bill I'm going to ask you to just kind of wrap up. You listen to what we heard today and what we heard during our panel and it seems to me that besides the fact that our mobility is going to be huge, it sounds like really connectivity is going to be the driver of a whole a lot of new things and the way people are going to use it, is that right?
I think it’s at least right and the other part of right is as an enabler its always, always, always been proven economically that if you let the user do what they wish they could do if only they knew they could do it, it’s a home run. When a technology forces a user to think you must do it this way, that way or the other, so there's confluence of having network capabilities and speed which translates to convenience which lowers cost. So the user can continue to show us what they want to do because that's really what Steve Jobs did and a number of others when he introduced these products. It was to let the user tell us where they want to go.
So it’s going to be one of the most exciting times. The challenge will be to figure out which piece of the value chain each party gets and to Tom’s point the data in a connectivity business is extremely important. It’s the missing link. It’s the link that most individual data sources don't have. So when that comes together both the privacy aspect of it but the utility when usually the user can have the experience you want rendered in a way you want in a place that you've chosen and its portable which is the way our lives are for the most part, that's an exciting time and its in volume. We are not talking about a 100,000 units here. We are talking about 300 million, 400 million, 500 million units in a fairly short order of time wise and another year or two at most.
And it’s got to be seamless.
It’s got to be transparent. The user doesn't have to know anything about atomic science to get benefit.
Yeah. That's what the answer to that is.
Unidentified Company Representative
I am wondering if you have insights on sort of the (inaudible)
I wish to tell you but that you know we don't, I don't have an idea what the killer is. I think the demographic that we see, that's most likely to be interested in that is kids or most likely to adopt it early is kids and we are doing, we are going to be launching a kids over the top network and what you know I alluded earlier I referenced earlier this kind of progression of taking what you've already got, putting on a new platform and then kind of retrofitting and doing some of new stuff. This is going to be from the ground up. So one of the things in our development pipeline is to make sure these products are dual speed enabled. What that actual experience will be is still a question. I mean, obviously, the quizzing and the polling and things like that are easy and fun but I don't think they are killer apps yet.
It's not just about the second. It could be in screens. So that’s one thing because kids don’t really hear it, two, three or 12. The thing we learned in one of our investments which I think they are going through and these are going to be humble in his travel channel days is when we own a chain of video stores. We have a couple hundred of things when Blockbuster was formed. The thing we found that was very interesting about technology was if the kids adopted and got benefit, they would drive the adults to the same pattern. So there are two things going on here. One is this OTT for a kids channel is pretty remarkable and we will know however many screens are engaged with but lets share volume with the kids, the behavior of the parents. So it's a very different model. So he is very humble.
And what you are alluding to simultaneous? And you cannot assume that will be driven downward from a central point. Is 40% of 18 to 35 year old should stay, which I believe this is a statistic, are the on their laptop, at the same time they are watching the television screen. They are determining what they are going to go out and get. It may not be you are watching a basketball game, let’s go see Kobe, highlights of Kobe. It could be, let’s go out and see what's happening again. Use a video, the point of the matter is, the second screen experience will not be a driven down experience so much as it would be once again this distributed user controlled experience where I have access to this wealth of information at all the side what I am going to look at. Thank you very much.
Unidentified Company Representative
And again we have come from a different approach right back to the day in licensing and about like what a kid or a team would want to do with the content. And Adam if you look at what happens sort of the music industry now you have got guys like Dead Mouse and Skrillex and stuff like that that are actually taking multiple different sources of music putting together and creating their own. We see the same thing, when I look at second screens or stuff like that I have done a video experience of my own I want to overlay that on the top experience forgetting all the issues how and whom the content stuff like. But as a user point of view, you can actually see that from what’s happened on the music side of the world transitioning over the video side of the world. So I can take live footage or whatever from a National Geographic space incorporate my own experience into that and have my own content.
The good news is that probably there is lot of technologies to help think. So one of the challenges is if somebody is watching it on a DVR or watching it time shift or watching it on demand, how do you get those things (inaudible) fantastic technologies that essentially Shazam like technologies to help you link up and do what you want to do on a second screen.
Unidentified Company Representative
So let me end by just one little anecdote, because I think this says a lot about where we are heading. I have two granddaughters and when they come to my house, they have access to you name it technology we have got it, but it’s really interesting because the other day the older girls were sitting on the living room with a TV but I didn’t expected her to just pick up an iPad and whatever. She went through the (inaudible) and what’s she said to me was kind of weird but it’s probably really correct is that those in essence she picked up the screen that was the nearest to here that gave her access to what she wanted, and that's what I think we are going to have happened is that, it is [lending] in my house, if I am in the kitchen, I am going to kitchen laptop. If I am on the couch I want in my iPad. If I am out on the road, I am going to have my smartphones. And when you decide it is really an issue, it’s a critical issue. They [hack] into have the network connectivity both big and little and it means that the consistent link up to [David] and synchronized all across all apps and that is the opportunity, and again one thing which is amazing, when we are going to peoples home and then we talk to them in our survey, we used to think that they only had one or two screens in their house.
Now it’s six or seven and its going to be 10 to 12 in the next couple of years, and everyone of those need to be connected. All right, well panel thank you so very much. We appreciate you being here, and thank you for the appearance.
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