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Executives

Moira Conlon - IR

Jeff Cavins - President and CEO

Mark Stubbs - CFO

Analysts

Michael Coady - B. Riley

Nick Gogerty - Fertile Mind Capital

Robert Niewieuk - Katana Capital

Aram Fuchs - Fertile Mind Capital

CallWave Inc. (CALL) F4Q08 (Qtr End 8/22/08) Earnings Call August 22, 2008 4:30 PM ET

Operator

Good afternoon, ladies and gentlemen. Welcome to the CallWave Fiscal 2008 Fourth Quarter and Year End Conference Call. At this time all participants are in a listen-only mode. Following the presentation the conference will be open for questions. (Operator Instructions). This conference is being recorded today Thursday, August 21, 2008 and at this time I would like to turn the conference over to Moira Conlon, Investor Relations for CallWave. Please go ahead Ma'am.

Moira Conlon

Good afternoon everyone and thank you for joining us today. With me on the call is Jeff Cavins, President and CEO of CallWave; and Mark Stubbs, Chief Financial Officer.

Before we begin let me remind you that during this conference call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to known and unknown risks, uncertainties or other factors that may cause the company's actual results to be materially different from historical results or any results expressed or implied during this call.

The potential risks and uncertainties that could cause the actual growth and results to differ materially include but are not limited to the Company's limited operating history; especially with respect to new products and services and in certain new markets into which those new products and services maybe sold, potential competition from network service providers; and other companies already offering compatible products and services, the Company's ability to attract and retain subscribers; limited barriers to entry; the Company's ability to commercialize certain of its technology, the Company's reliance upon third parties; potential systems failures; potential litigation including but not limited to litigation or alleging that the Company's products and services may infringe on third parties pattern rates; changes in the legal and regulatory environment and its ability to enforce intellectual property rights.

Information in this conference call related to the projections or other forward-looking statements is based on solely current expectations and CallWave expressly disclaims any responsibility to update forward-looking statements should circumstances change.

With that I would like to turn the conference over to Jeff Cavins. Jeff, please go ahead.

Jeff Cavins

Thank you, Moira. Welcome everyone and thank you for joining us today for our fiscal 2008 fourth quarter year end Earnings Call. Our CFO Mark Stubbs is going to begin today's call with an overview of our fourth quarter and year end financials. After that I will review our recent developments and give you our outlook.

With that Mark, would you please go ahead?

Mark Stubbs

Thanks, Jeff. In today's call I will be providing the sequential quarterly comparison of our fourth quarter 2008 financial results and review of our fiscal 2008 over fiscal 2007 financial results, since we are reporting on our June 30 fiscal year end.

I will begin with our results for the fourth quarter of fiscal 2008 as compared to the third quarter fiscal 2008. Revenue for the fourth quarter was $4.6 million compared with $5.2 million in the prior quarter. The sequential revenue decrease reflects the expected migration of the company's legacy Internet Answering Machine subscriber base.

The number of total paid subscribers across the direct consumer and indirect channels at the end of the fourth quarter was 485,000, compared with 510,000 reported in the third quarter.

Churn in our historical base has remained consistent over the few quarters. Looking ahead, our goal is to maximize the cash flow from our legacy customer base and products to fund our new collaboration in conferencing product lines, FUZE and WebMessenger.

ARPU in the fourth quarter in the legacy base remained within our historical $3 to $4 range. Cost of sales for the fourth quarter was $1.8 million, compared with $1.7 million for the prior quarter.

Gross margins for the fourth quarter were 62%, this was down compared with 67% growth margin for the third quarter. As I mentioned in the last quarter, gross margins were elevated in the third quarter primarily as a result of an Excise Tax refund. Without this onetime benefit margins would have been 60% in the third quarter.

In the fourth quarter, we successfully migrated our legacy network and billing systems. As a result, we expect to see some incremental margin improvement in the current quarter.

Operating expenses totaled $3.9 million for the fourth quarter of fiscal 2008, compared with $5.3 million in the prior quarter. The prior quarter operating expenses included a $1 million restructuring charge. Excluding this charge, operating expenses decreased approximately 9% quarter-over-quarter.

With the acquisition of WebMessenger, we expect to incur approximately $600,000 to $800,000 in restructuring charges as we streamline operations to the integration of WebMessenger. Net loss for the fourth quarter of fiscal 2008 was 710,000 or $0.03 per share. This compares with a net loss for the third quarter of fiscal 2008 of 1.2 million or $0.06 per share, which included a $1 million charge associated with the restructuring in January.

For fiscal year 2008, we have reported revenue of 20 million, compared with 25.2 million in fiscal 2007. We continue to expect to begin generating revenue from FUZE and our new WebMessenger product line in the second quarter of fiscal 2009. We expect that over time, sales of our new products will mitigate the impact of declining revenue from our legacy customers and products. As we start to record revenue associated with our new product lines, we will break them out from our legacy revenue to provide a clear view on progress regarding our new product introductions.

As you think about our business model going forward, you should know that we plan to sell FUZE and our WebMessenger product line as both a subscription-based service and on a traditional software licensing and maintenance service basis.

Since we have not yet launched our new products, it is too early to provide a lot of color on how to model our future business and what the products mix will look like. However, we will be offering various pricing packages and model that will appeal to both SMB and Enterprise customers that we expect to generate recurring and predictable revenue streams in the future.

Operating expenses decreased at 20.8 million for fiscal 2008, compared with 27 million for fiscal 2007. Operating expenses in fiscal 2008 included 2.1 million in restructuring charges. We will continue to tightly manage our operating expenses as we launch our new product lines in September. However, we expect to invest in sales, marketing and research and development over the next two quarters to support our new product launches.

Net loss for fiscal 2008 was $5.7 million, or $0.27 per share, compared with a net loss of $7.5 million, or $0.36 per share for fiscal 2007. The net loss in fiscal 2008 before restructuring charges was $3.6 million or $0.17 per share.

Turning to the balance sheet as of June 30, 2008, we earned $2.3 million of interest during the year on cash and marketable securities and closed the quarter with $46.1 million in cash, cash equivalents, and marketable securities, compared to $46.8 million at March 31, 2008.

In fiscal 2008 we took $2.5 million in temporary write-downs to equity associated with auction rate securities. We continue to believe we have sufficient capital to fund our current business plan.

Accounts receivable in the fourth quarter was $1.8 million, compared to $2 million in the prior quarter. Total assets were $56.6 million, working capital was $43.8 million and total shareholders equity was $51.9 million at June 30, 2008.

With that I will turn the call back over to Jeff.

Jeff Cavins

Thank you Mark, since our last call we have been focused on the development and our upcoming launch of FUZE. I am pleased to report that we are on track to bring FUZE to market with our public launch scheduled for mid September at the Web 2.0 interrupt Expo in New York City.

Before I go into more detail about FUZE, I would like to take a step back and review the progress that we have made since I join CallWave about 10 months ago. In January of this year you may recall, we announced a new strategy to align the company around unified communications and more specifically the collaboration and conferencing segment of this market.

Unified communications is the power of software to deliver complete communications voice, messaging and video across applications and devices that you use everyday. The experiences that we all associate with the telephone, including landline and mobile such as voicemail, phone calls, messaging and conferencing to the things that we do on our computers, documents, spreadsheets and collaboration; and in our case, the added functionality of integrated video, real-time messaging, as well as high resolution audio and document sharing.

By any measure, the unified communications market is tremendous and it is certainly gaining momentum. On October 2007, Bill Gates announced that the unified communications market represents a $43 billion opportunity for Microsoft. IBM estimates this market is worth $21 billion to their business, and Cisco estimates $30 billion to their business.

Our focus is on the global collaboration and conferencing segment of unified communications which Gartner and IDC estimate will reach $4.8 billion in 2009, and will grow to $5.8 billion by 2012. The growing global demand for collaboration and conferencing solutions is being driven by the convergence of a number of forces that we like to refer here at CallWave as the perfect storm. It is the things that you read about in the newspaper everyday.

World is experiencing a socio-economic phenomena. The business world is shrinking and increasingly global. At the same time, environmentalism and green initiatives are few only new corporate behaviors. The US economy is stagnant, oil prices are at historical highs, and the cost for travel is only going up. The new workforce is driving new forms of communicating and working together.

Work groups and corporate organizational structure are being redesigned and formed around telecommuting. Companies are changing organizational structures and supporting new workforce behavior in addressing these forces.

In collaboration, solutions make it easier to work effectively and collaborate for many locations. We do seem the need to be in the office. This flexibility is important for workers in the current economic environment and the pressure to global level is unyielding. It is estimated that the average American spends $1,400 on gas just to commute to and fro from work, that is it $4 a gallon. [Acousid] has been grown five-fold over the past six years.

Now from the employer's perspective, unified communications products can make economic sense, flexibility can substitute in some cases for increased pay, less fixed costs, such as office costs, office supply costs, heating and cooling costs associated with buildings, which ultimately frees capital. Growth in teleworkers will continue to drive unified communications growth.

American Express recently estimated that corporate meetings spend will reach $75.8 billion in 2008, and spending between $1200 and $1500 per airline flight is common. Bernstein Research estimates that a $1 increase in the price of a gallon of gas adds $357 a year to the average Americans commute cost.

As a result, mobile professionals and enterprises are moving away from airplanes as a means of attending routine meetings, and they are increasing their investments in collaboration and conferencing technologies which make work more flexible and less expensive. Cisco is one such company, just recently Cisco announced that their travel costs have been reduced by over $150 million over the last year, as a result of using collaboration and teleconferencing solutions.

Looking ahead we expect that both mobile professionals and enterprises will look to these tools more and more as a means to meet corporate objectives and perfect work in their daily lives. We believe that there will be more legislative initiatives designed to reduce congested freeways, in crowded buildings, and our dependency on energy. These macro trends will continue to drive the demand for collaboration solutions.

To address this large and rapidly growing opportunity, we set our sights on leveraging CallWaves internet telephony foundation to develop the unique and competitive collaboration and conferencing offering. We also aligned our resources with this new opportunity by restructuring and right sizing the business. In the last two quarters, we have installed a new management team; we have reduced our year-over-year OpEx by approximately $8 million. We have enhanced our already world-class Board of Directors, we have made two strategic acquisitions, and we recently relocated our corporate headquarters at San Francisco.

Today our team brings to bear global disciplines in software, telecommunications and unified communications. We now manage operations in Silicon Valley and Santa Barbara as well as in Sofia, Bulgaria and we will introduce new products this quarter that will exceed any product introduction in the history of the company.

One of these FUZE, we believe represents an opportunity to uniquely address the global need for collaboration in conferencing. FUZE offers a number of compelling features including browser-based high definition video and integrated audio conferencing and a unique conferencing control feature that we call Fetch. Fetch allows people, the moderator and participants to be fetched into a conference call via calendar and contact links eliminating the frustration of dialing conference numbers and pin codes.

Fetch can be thought of as conference call automation. We design FUZE under the premise that all collaboration in the future will start at the mobile phone. Microsoft Office Communication Server known as OCS is rapidly becoming one of the most widely adopted unified communication solutions worldwide. As companies deploy OCS, it is clear that a mobile OCS client is needed for the mobile workforce. This client must be able to extend OCS to any end point device regardless of operating system.

In mid-September, we will unveil FUZE for the mobile phone, which will give us OCS extensibility and a unique offering that we believe is highly differentiated. Our Fetch feature will reside on the mobile phone along with the other capabilities that we bring into market for FUZE mobile such as enterprise messaging, presence and integration with Microsoft OCS.

This technology gives FUZE users unique connectivity to the corporate directories so that any one can be instantly connected into a meeting or a collaboration session anywhere in the world. This is extremely important given the rapid migration toward a virtualizing global workforce.

The shift in socio-economic behavior related to how people work and how work groups are formed as a key catalyst in corporations becoming more virtual. The new entrant into the workforce is oriented around real-time communications such as IM and SMS.

Presence-based applications which extend the ability to work and collaborate, we also believe high fidelity. Therefore we designed FUZE to support high definition imagery, including video. So now documents, spreadsheets, PowerPoints, Images and even video can be shared and synchronized in full high definition format.

In order to fortify FUZE and create a competitive position, we made two technology acquisitions. In July, we acquired Intelligent Gadgets which gives us the ability to deliver and synchronize high definition video and imagery, including documents spreadsheets, PDF's, even images such as CT scans and medical images, between browsers anywhere in the world.

Just a few weeks ago, we completed our acquisition of WebMessenger. WebMessenger's technology gives us a presence engine for all of our products and gives us enterprise class, secure platform agnostic real time messaging and the ability to extend FUZE to end-point devices such as mobile phones, while at the same time, integrating those end-point devices into Microsoft's OCS environment.

WebMessenger brings RSA encrypted real-time messaging integrating the corporate environment to the mobile user. It also enables us to extend desktop collaboration across all platforms; Blackberry, Windows Mobile, Symbian, Palm, Smartphones, and now and most recently the iPhone, addressing one of the major hurdles developers have faced in creating collaboration and conferencing solutions.

This becomes what we believe is a strong solution for the rapidly growing virtualized workforce. We are excited about this since we do not know of any other application that currently has this capability.

Now, Instant Messaging is one of the fastest growing, in fact, it is the fastest growing communication medium on record. Enterprise-Mobile Message users in 2007 were around 85 million users, and industry experts predict that this will increase to more than 310 million by 2011. This growth is being fueled in part by this new type of worker entering the workforce. The common profile of this worker is a recent college graduate, he grew up in a social collaborative environment; from childhood this worker was Mobile-centric, or this individual was Mobile-centric and accustomed to using real-time Messaging and communication solutions such as short message service or Instant Messaging as opposed to e-mail.

Social platforms, such as online gaming and social networks, are the norm in the form of communicating with peers and colleagues. We believe that the present engine and real time messaging capabilities that we now have, arm us with an important competitive advantage for this new worker and for mobile phone users worldwide overall.

Today there are over 4 billion mobile subscribers on the planet. About a quarter of these are business professionals, and about 10% of the worldwide mobile workforce uses their mobile device to dial into conferences everyday. According to our recent survey, the virtualization of the US workforce has grown by more than 800% in the last 5 years and the velocity is only picking up.

We continue to believe that mobility is the key to collaboration, and this has reflected in our product development strategy. We have been integrating the intelligent gadgets in the WebMessenger technologies and the FUZE for many months now and we estimate that these technologies will enhance our overall competitive position in the collaboration and conferencing market.

We believe that WebMessenger will present an exciting opportunity on a standalone basis as well, as integrated into our collaboration service.

A week after acquiring WebMessenger, Nokia selected WebMessenger mobile for Microsoft Office Communication Server as one of the first applications to be a part of the 2008 form Nokia innovation series.

This series is a new program that provides global marketing support to select small and mid-size developers that demonstrated new applications to address market demands, for a Nokia mobile devices and we are delighted to have been selected and acknowledge for WebMessenger's innovation.

We plan to provide more details about FUZE on launch day. Our pricing strategy as Mark said is built around recurring predictable and scalable economics. We plan to monetize our services via subscription base pricing as well as traditional software licensing plans.

Subscription base pricing give us predictable and recurring revenue and is an accepted form of pricing SAS solutions in the small, medium and enterprise and the at home office markets.

With the larger enterprise customers we will offer both subscription pricing and software licensing in order to better align or operating the traditional buying, disciplines and budgets.

We will announce at launch several pricing packages and pricing tiers for our product lines. The target customers for FUZE are both small and large businesses as well as mobile professionals. We have put in place some marketing and sales organization that brings to bear a well put experience in collaboration sales, mobile technology sales and large corporate sales.

Our sales and marketing groups will drive online sales via Web Marketing; corporate sales via direct sales force and tele-sales., and third party distribution via partners, resellers and distributors.

Now following our two recent acquisitions, we believe we now have the components we need to sell and support a highly differentiated product and offer a stand alone mobile product for corporations deploying to OCS.

We plan a global rollout of FUZE and WebMessenger product lines later on in our fiscal year. We will scale the FUZE service using cloud computing and virtualization technologies which give us the unique ability to scale services without the need for large CapEx investments.

As part of our ongoing corporate strategy, we will continue to opportunistically consider acquisitions. Our strategy remains the same; we will evaluate opportunities that bring us subscribers or customers, provide us unique technologies or capabilities, and/or help us accelerate revenues in earnings growth, or in many cases a combination of those three. Whether we drive growth by investing in the business or making acquisitions, our goal remains to drive long-term shareholder value.

In closing, I would like say that we are pleased with what we have been able to accomplish over the past few quarters and we are excited about the future. We believe we are well positioned with truly unique and differentiated technologies and products for the high growth collaboration in conferencing market.

We have a strong IP position, a solid team, strong financial controls, and a fully funded business plan. We look forward to seizing the opportunity to drive growth from FUZE and WebMessenger in the transition CallWave into a growth company.

Thank you for your attention. With that, I will open up the call for questions. Operator, please go ahead.

Questions-and-Answer Session

Operator

Thank you. (Operator Instructions). Your first question comes from the line Michael Coady with B. Riley. Sir, your line is open.

Michael Coady - B. Riley

Thanks. Thank you. Hey Jeff, hi Mark.

Mark Stubbs

Hey, Michael.

Michael Coady - B. Riley

Mark, I missed what you said about the legacy subscriber number?

Mark Stubbs

$485, 000 at the end of the quarter, Michael.

Michael Coady - B. Riley

Okay. I know that you are more excited about FUZE, of course going forward but, I think there have been some initiatives to try and scroll the churn there, stop the subscriber losses, is there been any success? Can you talk about that subscriber base over the next several quarters?

Mark Stubbs

Yes, we can. We have put some marketing initiatives and so forth, and as you know, we rolled some pricing increases to our legacy backspace. As we look at the base separately, the backspace has remained fairly stable quarter-over-quarter. However, the decline in the legacy internet answering machine has again remained fairly consistent, quarter-over-quarter the decline has come. So we have not seen any, we have not been successful in stopping that migration.

Michael Coady - B. Riley

Okay. The short-term debt on the balance sheet given in the cash position, what was the reason for that?

Mark Stubbs

It's basically an in and out, and it is the intelligent gadget. So that went out, that went off the balance sheet the day after the quarter closed.

Michael Coady - B. Riley

Got you, okay. Will WebMessenger and FUZE be sold separately? I assume they are going to be bundled and sold separately?

Jeff Cavins

Yes, of course at Web 2.0 we will introduce FUZE which has a lot of WebMessenger technology embedded in FUZE but WebMessenger will be relaunched as an independent product line as well. So we will have two parallel products, FUZE and WebMessenger, and FUZE will be an example of integrated collaboration using WebMessenger technology.

Michael Coady - B. Riley

Okay. Could you talk about success in the early access or early adaptor program for FUZE?

Jeff Cavins

Yes, as you know I think, we mentioned on our last call we had announced an early access program for FUZE designed for a select group of companies to commit to FUZE and start using it, and then to serve as reference accounts for us. So while we have not, and we are not on this call discussing or disclosing the early access program candidates and participants, our goal is at launch to come out and describe and disclose who they are. We have not, I am sorry, go ahead Mike.

Michael Coady - B. Riley

No, please just go ahead.

Jeff Cavins

As I said, we have a pretty robust marketing plan for launch. As you know at your conference, we elected to not show FUZE out of difference to the press and media with whom we will have an under embargo and then as well the early access program participants will be unveiled at launch.

Michael Coady - B. Riley

Okay, thanks. Then I will just ask couple one, jump off. The direct sales force, actually I am sorry, let me jump back to what you are saying in terms of the editors, the press, have they agreed to take a look at FUZE when it comes out prior to the launch?

Jeff Cavins

Yes, we are currently talking with… August is a tough time, so the first week of September our list of candidates will be narrowed down and we will try to focus it on a small handful of editors and reviewers about two weeks prior to the show. We did hire a PR firm called Breakaway Communications, they have been working with us for a couple of week, excuse me, a couple months helping us to prepare the launch. So we think we have a pretty interested group of participants in the press on this product.

Michael Coady - B. Riley

Okay, thanks. The direct sales force, could you tell, I think you alluded to hiring a relatively high level person to head that group, the direct sales force for FUZE can you talk about that person and the size of the group now and then I will jump off.

Jeff Cavins

Okay. When we acquired WebMessenger we assimilated several of their enterprise sales people who come from the mobile discipline and carrier markets. We made a couple of key hires, one of them was, I would rather not mention the company name but it was the number one corporate enterprise sales person for a large company that is in this space that we wanted to attract talent in and as well we built out organically the sales force through some of our hiring programs in the last couple of months.

The footprint of the direct sales organizational remain somewhat conservative and surgical but these are highly skilled people and we will augment as I mentioned in the script, we will augment the direct sales organization with a Tele sales organization that is currently being put in place.

Michael Coady - B. Riley

Okay. Thanks Jeff, good luck and I look forward to seeing the product next month.

Jeff Cavins

Okay. Thanks, Michael.

Mark Stubbs

Thanks, Michael.

Operator

Our next question comes from the line of Nick Gogerty with Fertile Mind Capital. Sir, your line is open.

Nick Gogerty - Fertile Mind Capital

Good afternoon. Just curious, I signed up for your beta program and I was wondering A, if it is publicly available and then what the gestation period is from beta to launch?

Jeff Cavins

You signed up for the FUZE beta program?

Nick Gogerty - Fertile Mind Capital

Yes.

Jeff Cavins

The beta program will come just after launch, we have significant amount of folks like yourself who signed up for beta, but what we did is we did not unveil the software to you because we were focused on our early access program customers.

Nick Gogerty - Fertile Mind Capital

Okay.

Jeff Cavins

Right around mid-September you will see that open up, so all the beta customers as well as live customers that are non-beta, as this will be production ready software as of September 16.

Nick Gogerty - Fertile Mind Capital

Can you give any indication of what you anticipate out of the Nokia forum relationship other than exposure or marketing dollars or etcetera?

Jeff Cavins

The important thing to take away from Nokia and the exposure that we got through that program is that, as companies begin to adopt premise based presence in instant messaging solutions like OCS, Microsoft's office Communication Server series, they have to provide those capabilities to mobile users who are not logged into their computers, and presence and messaging is fundamental to the users of these solution and extending communication capabilities through the mobile phone.

So Nokia is an example of one of the platforms that we support. We support virtually every platform in the mobile market. As you may know they have the largest footprint globally of any mobile operating systems.

Nick Gogerty - Fertile Mind Capital

Thank you.

Jeff Cavins

Thanks.

Operator

Your next question comes from the line of Robert Niewieuk with Katana Capital. Sir, your line is open.

Robert Niewieuk - Katana Capital

Hi, I apologize. I think I just missed it. What is your cash balance now after taking the acquisition payment or just current cash balance if you know it?

Mark Stubbs

Well, the current cash balance at the end of the year was 46.1 million. We just disclosed a recent acquisition, WebMessenger, for $9 million, and we had a short term debt for $1 million right at the end of the year. So both of those will come out of the cash balance as we hit the New Year and will be reported, as a decrease to the cash balance, as our first fiscal quarter.

Robert Niewieuk - Katana Capital

Okay, so the 9 million is all cash?

Mark Stubbs

That is correct.

Robert Niewieuk - Katana Capital

Okay. That is all I had. Thank you.

Mark Stubbs

Thank you. Thanks.

Operator

We will pause for just a moment to again compile the Q&A queue. Your next question comes from the line of Michael Coady with B. Riley. Sir, you

Michael Coady - B. Riley

Thanks. Thank you, I will jump on again. Mark, can you provide any commentary on operating costs and hopefully gross margin given the acquisitions and the cost cutting measures that you have put in place?

Mark Stubbs

Yes, good question. So we do expect to see incremental lift in the margins, you know with moving some of our technologies over. I would model that Michael closer to the first half of 2008, where we were around 64% in the coming quarter as well as you know I think we have been pretty aggressive and cutting our overhead specifically in our cost to align with our business. As we said on the call, we are going to invest into the launch of this and to the success of these products. So, I think in the current quarter I would model the cost lift to between 15% to 20% quarter-over-quarter.

Michael Coady - B. Riley

You said the cost progressed?

Mark Stubbs

The cost increase we expected to be between 15% to 20%, over Q4, 2008. So our total operating expenses were approximately $3.9 million we expect the cost of change to increase by approximately 15% to 20% quarter-over-quarter aside modeling.

Michael Coady - B. Riley

Got you. Okay, great. Thanks.

Operator

The final question comes from the line of Aram Fuchs Fertile Mind Capital. Sir your line is open.

Aram Fuchs - Fertile Mind Capital

Yes I was wondering if you can just talk about the logistics of the integration of the WebMessenger operation. I saw that they also have an office in Sofia. So and maybe if you can just give a background of how you got together that would be great?

Mark Stubbs

The fact that we were developing with WebMessenger as a development partner many months ago created an integration as we work together. The organization in Sofia Bulgaria is exclusively an engineering and R&D organization but they are part of the quarter R&D effort related to not only FUZE but to WebMessenger and then FUZE mobile which I talked about on the call. So they are more now one company they have been integrated into the business and we operate development facilities in Sofia Bulgaria, Santa Barbara and in San Francisco.

Aram Fuchs - Fertile Mind Capital

Okay and I was wondering why would you release the data after you have gone live with the product that seems to miss the point of typical data right?

Mark Stubbs

Yes what we did with the data users as we wanted to aggregate interested parties and most of the data users often times are individuals or what we might call the SOHO market or mobile professional and the early access program. We were looking for large corporation who have the demand and need for our larger footprint for our products. So that is what the difference between a beta user and an early access program user. We decided to not roll out the product to the beta users given some of the interest in the early access program. So the beta users at launch will not be beta users, you must be a live customer, you can go to our website, you can buy the product.

Aram Fuchs - Fertile Mind Capital

Okay. My last question is about, last quarter it seemed like you are going to lead from the marketing prospective with the HD Audio Conferencing, just judging from your feedback from the early adaptors and some of the other experiences, is that the most popular features there?

Jeff Cavins

Well, the features that we think highly differentiate our offering, are the mobile extensibility. We will say, you will hear us say this often, that we believe all collaboration in the future will start at the mobile phone. It is the hardest thing for unified communications companies to solve, which is extensibility to the mobile phone. As well, unique features and capability such as high-definition video that can be displayed played and synchronized between browsers as a unique feature. High-definition Audio is unique, but I think just by virtue of the market demands mobility and High-Definition Video will be pretty [core] famous for our messaging of the product.

Aram Fuchs - Fertile Mind Capital

Great. Thanks for your time.

Jeff Cavins

Thanks.

Mark Stubbs

Thanks.

Operator

There are no further questions at this time.

Jeff Cavins

Okay. Well with that, I would like to thank you all for joining our conference call. For those who have interest, we will be unveiling these products on September 16, in New York City at the Jacob Javits Convention Center. I would like to invite all of our interested parties to come see the launch of these products.

With that we will end the call, thank you.

Mark Stubbs

Thank you.

Operator

This concludes today's conference call. You may now disconnect. Thank you.

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