EXHIBIT 99.1
Forward Looking Statements
This presentation contains statements that are forward-looking. Such statements are based on our current and periodic reports filed with the SEC. Actual results could differ materially from those currently anticipated. Certain of the information contained herein is derived from independent research reports and similar sources, which are believed by us to be reliable but which we have not independently verified and for which we can not be responsible. We undertake no duty or obligation to update any of the information contained in this presentation.
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Background
Founded 1944 in Silicon Valley
Advanced data and image acquisition equipment for military, intelligence, aerospace
Licensing of digital imaging patent portfolio for consumer products
Generated from professional television business Numerous patents
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Consolidated Financial Results
2004 revenues $101.4 million 2004 net profit $47.1 million EPS $12.35
The financial information contained herein is preliminary and subject to adjustment pending completion of the 2004 audit and restatement of prior period financial statements.
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Business Segments – Data Acquisition Equipment
Net operating profit $1.5 million
2004 includes approximately $2.2 million of non-recurring expenses Research development & engineering increased
Potential multi-year new product cycle
Extremely high variable profit margin Replacing large installed base
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Business Segments – Patent Licensing
Net operating profit $65.3 million
2004 includes $4.9 million of litigation expense Sanyo and Sony settled Eastman Kodak continuing
Current Products licensed
Digital video camcorders Digital still cameras DVD recorders
Opportunities in other products using similar technology
Cellular telephones with still or video cameras Set-top cable TV recorders Digital television receivers Other
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Licensing History
Major factor in professional television
11 technical Emmys 1 technical Oscar
Licensed consumer products (analog VCR) since 1968
Average annual VCR royalties $16 million from 1990 – 2000
As early patents expired added new patented features to extend life of patent licenses
Pioneered digital video
Digital special effects, digital time base correctors etc., in 1980’s
Introduced first commercial digital image compression system – DCT 1990’s
Digital image compression is now key enabler of many new digital imaging products
Cost Size
Power consumption
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Expansion in Addressable Markets
Digital image compression replaces previously distinct technologies
Electronics vs. chemical images
Still video images vs. motion video images Wired vs. wireless
Core technology expanded Ampex licensing beyond VCR market
Digital video camcorders Digital still cameras DVD recorders
Pursuing additional markets using digital image compression
Camera equipped cellular telephones – still and motion video Set-top cable TV recorder boxes Digital television receivers Other
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Key Patent Groups
Rapid image retrieval – expires Q2 2006 Image data shuffling – expires 2012 Feed forward quantization – expires 2013
High speed digital image decoding – expires 2014
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Geographical Patent Coverage
Patent Category USA Europe Japan Korea Taiwan
Rapid Image Retrieval
Image Data Shuffling
Feed Forward Quantization
High Speed Decoding
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Market Size*—2006
Product $ Billions
Digital video camcorders 9.4
Digital still cameras 31.6
DVD recorders 2.8
Camera-equipped cellular telephones 50.4
Set-top cable box recorders N/A
* Worldwide market – source IDC
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Current Royalties $72.9 million in 2004 royalties includes $40.0 million from Sony Sony royalties prepaid for all products through Q1 2006 Sony payment covers multiple products
Digital video camcorders Digital still cameras Other
Allocation of Sony royalties to products not known
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Products Licensed - Digital Video Camcorders
2004 royalties $6.4 million (plus a portion of Sony settlement)
Certain licensees have prepaid in prior years Largest manufacturer (Sony) has not been paying Expect significant royalty increase in 2006 $40.0 million Sony settlement includes digital video camcorders
Sony obligations prepaid through Q1 2006 After that date must pay running royalties
Multiple Ampex patents used
Certain Ampex patents required by industry standards
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Products Licensed – Digital Still Cameras
2004 royalties $26 million (plus a portion of Sony settlement)
Certain licensees have prepaid
Other licensees will pay running royalties
Additional licenses signed Q1 2005 – more expected
License agreements cover all Ampex patents for use in digital still cameras
Through life of patents
Royalties based on sales of products that use patents
Licensees currently paying on rapid image retrieval patent only
Expires April 11, 2006 Only in effect in USA
Digital still camera licensing potential for additional patents
Patents have broad geographic coverage Patents expire 2012 or later
Significantly higher royalties if worldwide patents used Royalties could cease if cannot prove infringement
Litigation may be required to enforce additional patents
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Products Licensed – DVD Recorders
2004 royalties < $1 million
One licensee currently
Commenced production in Q3 2004 Royalties based on current sales Multiple patents licensed
License also include set-top cable TV recorders
Negotiating with additional manufacturers
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Future Licensing Opportunities
Major focus on camera equipped cellular telephones (still and video)
Notification letters sent to major manufacturers in Q4 2004 Technical discussions commencing in 2005 Multi-year negotiation process expected
Evaluating use of Ampex patents in
Set-top cable TV recorders Digital television receivers
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Licensing Strategy
Strategy to negotiate licenses for recurring revenue based on sales, not one-time settlements
Reasonable royalty rates
Different strategy from “patent bandits”
Must be prepared to litigate
Digital still camera notices of infringement sent in 2002
Technical discussions and numerous negotiations for two years
Litigation commenced May 2004
Sanyo and Sony have settled Eastman Kodak is continuing
Canon and other licensees settled without litigation
May litigate additional still camera patents in 2005/6
Will litigate in other markets if necessary
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Summary
Baseline profitability from
Manufacturing subsidiary
Digital video camcorder and DVD-R licensing
Significant royalty increase expected from these products in 2006
Digital still cameras
Predominantly US royalties in 2005
Potential to extend to worldwide royalties in 2006 if other patents are used Royalties may cease in 2006 if other patents not used
Camera phones, set top cable TV recorders and other products using similar core technology in technical evaluation or negotiating phase
New litigation may be necessary
Other factors
Approximately 3.9 million diluted shares outstanding
Interest expense of $9.7 million in 2004 will be minimized in 2005 Tax loss carry forwards of $178.0 million to shelter future income
NASDAQ listing
Intention to apply in Q2 2005
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