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Subject:goodby sonic foundry
Posted by: aress
Date:1/2/2003 2:59:21 PM
this is long, but this is what is going on with SF.... as you all can see, it pretty much over for this company. i hope they do find a motivated buyer for the audio/video part of the company. Search - Finance Home - Yahoo! - Help -------------------------------------------------------------------------------- SEC Filings NasdaqNM: SOFO Enter symbol: symbol lookup Annual Reports for over 3,500 US and Canadian companies available. FREE More Info: Quote | Chart | News | Profile | Reports | Research | SEC | Msgs | Insider | Financials -------------------------------------------------------------------------------- Recent filings: Dec 21, 2001 (Annual Rpt) | Jan 28, 2002 (form10-K405/) | Jan 31, 2002 (form8-K) | Feb 14, 2002 (Qtrly Rpt) | May 15, 2002 (Qtrly Rpt) | Aug 14, 2002 (Qtrly Rpt) | Dec 30, 2002 (Annual Rpt) More filings for SOFO available from EDGAR Online | Get a Free Trial to Edgar Online Premium -------------------------------------------------------------------------------- December 30, 2002 SONIC FOUNDRY INC (SOFO) Annual Report (SEC form 10-K) ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The financial and business analysis below provides information that the Company believes is relevant to an assessment and understanding of the Company's consolidated financial position and results of operations. This financial and business analysis should be read in conjunction with the consolidated financial statements and related notes. In addition to historical information, this discussion contains forward-looking statements such as statements of our expectations, plans, objectives and beliefs. These statements use such words as "may," "will," "expect," "anticipate," "believe," "plan," and other similar terminology. Actual results could differ materially due to changes in the market acceptance of our products and services, market introduction or product development delays, our ability to effectively integrate acquired businesses, global and local business conditions, legislation and governmental regulations, competition, our ability to effectively maintain and update our product portfolio, shifts in technology, political or economic instability in local markets, and currency and exchange rates. The Company also faces several risk factors, which are outlined below. RISK FACTORS OUR AUDITORS HAVE ISSUED A "GOING CONCERN" OPINION Our auditors have stated that due to our working capital deficiency, our convertible debt obligations, and our lack of long-term credit availability, there is "substantial doubt" about our ability to continue as a going concern. Our plans in regard to these matters is to consider the sale of certain assets. As of the reporting date, we have received multiple non-binding offers from qualified bidders and we anticipate closing one or more transactions in early 2003. Such a transaction is expected to provide us with sufficient resources to: . Retire the remaining balance due subordinated debt holders; . Retire the additional $1,000,000 bridge note; . Restructure the Company and aggressively pursue a focused strategy of growing the remaining business. There can be no assurances we will reach an agreement to sell certain assets nor that any such agreement will be completed on terms favorable to us or timely enough to avoid disruption of operations. IF WE ARE UNABLE TO COMPLY WITH NASDAQ'S CONTINUED LISTING REQUIREMENTS, OUR COMMON STOCK COULD BE DELISTED FROM THE NASDAQ NATIONAL OR SMALLCAP MARKET. Since October 2001, our common stock has failed to maintain a minimum bid price of $1.00 per share for at least 10 consecutive days, which caused our stock price to fail to meet one of the minimum standards required by the Nasdaq Stock Market for continued listing as a Nasdaq National Market security. On October 16, 2002 we received a letter from Nasdaq indicating that we need to regain compliance by January 14, 2003 in order to remain on the Nasdaq National Market. In order to avoid delisting from Nasdaq entirely, we plan to voluntarily apply to Nasdaq to have our listing transferred to the SmallCap Market prior to January 14, 2003. The Nasdaq SmallCap Market also requires compliance with a minimum bid price of $1.00 per share for at least 10 consecutive days, although it affords an additional 90-day grace period, or until April 14, 2003. The Company may also be eligible for an additional grace period (until October 13, 2003). We must be in compliance with this requirement at the expiration of any available grace periods, or face delisting from Nasdaq. There can be no assurance that we will be able to satisfy all requirements for continued listing of our common stock on the Nasdaq SmallCap Market, including the minimum bid price requirement and minimum tangible assets or stockholders' equity requirements. If we are unable to meet Nasdaq's requirements in the future, our stock will be subject to delisting, which may have a material adverse effect on the price of our common stock and the levels of liquidity currently available to our stockholders. Delisting would also make it more difficult for us to raise capital in the future. If our common stock is removed from the Nasdaq SmallCap Market, an investor could find it more difficult to dispose of, or to obtain accurate quotations as to the market value of, our common shares. Additionally, our stock may then be subject to "penny stock" regulations. Sonic Foundry, Inc. Annual Report on Form 10-K For the Year Ended September 30, 2002 THE OVERALL ECONOMIC PROBLEMS IN THE TECHNOLOGY INDUSTRY HAVE WEAKENED OUR ABILITY TO RAISE CAPITAL AND ACHIEVE PROFITABLE OPERATIONS. The technology industry has been in a severe economic recession since mid-2000. Among other things, spending in the technology sector has shrunk, and stock prices have dropped precipitously. This has impacted us in many ways, including, most significantly, a drop in the demand for our products and services and a steep plunge in the market price of our common stock. In response, we have made significant cuts in our work force and in other areas, incurring a restructuring charge of $3.8 million in December 2000 and $1.2 million in September 2001. The technology industry in general, and our company in particular, has still not recovered from the economic recession. We lost $56.7 million in fiscal 2002, including the cumulative effect of a change in accounting principle, and we may continue to lose money for the foreseeable future. Although we generated $500 thousand in cash from operating activities in the fourth quarter of 2002, we may not achieve these results in the future and have cash needs in excess of that amount including quarterly interest and $330,000 per month principal payments on our convertible subordinated debt, capital lease payments, purchases of equipment and working capital. Lenders representing $4.75 million of original principal have agreed to defer approximately $900 thousand of the principal payments that were or will become due from September 2002 through January 2003, until the earlier of a transaction contemplated in "Liquidity and Management's Plan" or January 20, 2003. In addition, because of the extreme weakness in the price of our common stock, our access to capital markets has been severely restricted. OUR EVOLVING MIX OF BUSINESS MAKES IT DIFFICULT TO EVALUATE OUR COMPANY. We were incorporated in 1994 and became a public company in 1998. For the first several years of our existence, we focused exclusively on selling software products. In fiscal 2000, we began, primarily through acquisitions, to focus on our media services group. In October 2001, we purchased MediaSite, Inc., thereby adding a third business segment -systems software - to our company. Due to our evolving business mix, an investor will have limited insight into trends that may emerge and affect our business. In addition, the revenue and income potential of the systems software business is unproven. WE MAY CONTINUE TO INCUR NET LOSSES. We have incurred significant losses since our inception, $56.7 million in 2002; $49.9 million in 2001; $34.9 million in 2000; $6.0 million in 1999; and $0.6 million in 1998, and we may never become profitable. As of September 30, 2002, we had an accumulated deficit of $149 million. WE MAY NOT EARN REVENUES SUFFICIENT TO REMAIN IN BUSINESS. Our ability to become profitable depends on whether we can sell our products, services and systems for more than it costs to produce and support them. Our future sales also need to provide sufficient margin to support our ongoing operating activities. The success of our revenue model will depend upon many factors including: . Our ability to develop and market our systems software operations; and . The extent to which consumers and businesses use our products, services and systems. Because of the recession in the technology market, the early stage of our systems software business, and the evolving nature of our business, we cannot predict whether our revenue model will prove to be viable, whether demand for our products, services and systems will materialize at the prices we expect to charge, or whether current or future pricing levels will be sustainable. WE MUST CONTINUALLY DEVELOP NEW PRODUCTS, SERVICES AND SYSTEMS WHICH APPEAL TO OUR CUSTOMERS. Our products, services and systems are subject to rapid obsolescence and our future success will depend upon our ability to develop new products, services and systems that meet changing customer and marketplace requirements. There is no assurance that we will be able to successfully: . Identify new product, service and system opportunities; or Sonic Foundry, Inc. Annual Report on Form 10-K For the Year Ended September 30, 2002 . Develop and introduce new products, services and systems to market in a timely manner. Even if we are able to identify new opportunities, our working capital constraints limit our ability to pursue them. If we are unable to identify and develop and introduce new products, services and systems on a timely basis, demand for our products, services and systems will decline. We must identify and develop markets for our products, services and systems. A suitable market for our products, services and systems may not develop or, if it does develop, it may take years for the market to become large enough to support significant business opportunities. Even if we are able to successfully identify, develop, and introduce new products, services and systems, there is no assurance that a suitable market for these products, services and systems will materialize. The following factors could affect the success of our products, services and systems and our ability to address sustainable markets: . The failure of our business plan to accurately predict the types of products, services and systems the future marketplace will demand; . Our limited working capital may not allow us to commit the resources required to adequately support the introduction of new products, services and systems; . The failure of our business plan to accurately predict the estimated sales cycle, price and acceptance of our products, services and systems; or . The development by others of products, services and systems that makes our products, services and systems noncompetitive or obsolete. CONTINUED COMMERCIAL FAILURE OF INTERNET-BASED BUSINESSES COULD REDUCE DEMAND FOR OUR SERVICES AND SYSTEMS SOFTWARE. The substantial proportion of customers for our digital media services and systems software have been Internet-based businesses and we expect that in the future, a majority of our customers will be these types of businesses. Our business prospects and revenues would be harmed by the continued commercial failure or diminished commercial prospects of these or like customers. In addition, if such customers continue to have difficulty raising additional capital to fund their operations, our business prospects and revenues would be harmed. THERE IS A GREAT DEAL OF COMPETITION IN THE MARKET FOR SYSTEMS SOFTWARE AND SERVICES, WHICH COULD LOWER THE DEMAND FOR OUR SYSTEMS SOFTWARE AND SERVICES. The market for digital media services and systems is relatively new, and we face competition from in-house digital services by potential customers, other vendors that provide outsourced digital media services and other companies that directly provide digital media applications. If we do not compete effectively or if we experience reduced market share from increased competition, our business will be harmed. In addition, the more successful we are in the emerging market for Internet media services and systems, the more competitors are likely to emerge including turnkey Internet media application and service providers; streaming media platform developers; digital music infrastructure providers; digital media applications service providers (including for digital musical subscription) and video post production houses. The presence of these competitors could reduce the demand for our systems and services, and we may not have the financial resources to compete successfully. OUR MEDIA SERVICES AND SYSTEMS SOFTWARE BUSINESS MODEL IS UNPROVEN, MAKING IT DIFFICULT TO FORECAST OUR REVENUES AND OPERATING RESULTS. Our services and systems business model is based on the premise that digital media content providers and developers will outsource a large percentage of their digital service and content management needs. Our potential customers may rely on internal resources for these needs. In addition, technological advances may render an outsourced solution unnecessary, particularly as new media content is created in a digital format. Market acceptance of our services may depend in part on reductions in the cost of our services so that we may offer a more cost effective solution than both our competitors and our Sonic Foundry, Inc. Annual Report on Form 10-K For the Year Ended September 30, 2002 customers doing the work internally. Our cost reduction efforts may not allow us to keep pace with competitive pricing pressures and may not lead to improved gross margins. In order to remain competitive, we expect to reduce the cost of our services through design and engineering changes. We may not be successful in reducing the costs of providing our services. THE TECHNOLOGY UNDERLYING OUR PRODUCTS, SERVICES AND SYSTEMS IS COMPLEX AND MAY CONTAIN UNKNOWN DEFECTS THAT COULD HARM OUR REPUTATION, RESULT IN PRODUCT LIABILITY OR DECREASE MARKET ACCEPTANCE OF OUR PRODUCTS, SERVICES AND SYSTEMS. The technology underlying our digital media products, services and systems is complex and includes software that is internally developed and software licensed from third parties. These software products may contain errors or defects, particularly when first introduced or when new versions or enhancements are released. We may not discover software defects that affect our current or new services and applications or enhancements until after they are sold. Furthermore, because our digital media services and systems are designed to work in conjunction with various platforms and applications, we are susceptible to errors or defects in third-party applications that can result in a lower quality product for our customers. Any defects in our products, services and systems could: . Damage our reputation; . Cause our customers to initiate product liability suits against us; . Increase our product development resources; . Cause us to lose sales; and . Delay market acceptance of our digital media services and systems. Our errors and omissions coverage may not be sufficient to cover our complete liability exposure. WE RELY ON STRATEGIC RELATIONSHIPS TO PROMOTE OUR SERVICES AND PRODUCTS; IF WE FAIL TO MAINTAIN OR ENHANCE THESE RELATIONSHIPS, OUR ABILITY TO SERVE OUR CUSTOMERS AND DEVELOP NEW SERVICES AND APPLICATIONS COULD BE HARMED. Our business depends, in part, upon relationships that we have with strategic partners such as Microsoft, RealNetworks, Sony, Carnegie Mellon University and Fraunhofer Institute. We rely, in party, on strategic relationships to help us: . Maximize the acceptance of our products by customers through distribution arrangements; . Increase the amount and availability of compelling media content on the Internet to help boost demand for our products and services; . Increase awareness of our Sonic Foundry and MediaSite brands; and . Increase the performance and utility of our products and services. We would be unable to realize many of these goals without the cooperation of these partners. We anticipate that the efforts of our strategic partners will become more important as the availability and use of multimedia content on the Internet increases. For example, we may become more reliant on strategic partners to provide more secure and easy-to-use electronic commerce solutions and build out the necessary infrastructure for media delivery. Due to the evolving nature of the Internet media infrastructure market, we will need to develop additional relationships to adapt to changing technologies and standards and to work with newly emerging companies with whom we do not have pre-existing relationships. The loss of our existing strategic relationships, the inability to find other strategic partners or the failure of our existing relationships to achieve meaningful positive results could make it difficult to strengthen our technology development and to increase the adoption of our products and services. Sonic Foundry, Inc. Annual Report on Form 10-K For the Year Ended September 30, 2002 IN OUR SOFTWARE SEGMENT, WE RELY UPON DISTRIBUTORS TO INCREASE OUR MARKET PENETRATION SO THE LOSS OF ONE OR MORE DISTRIBUTORS, OR THE RETURN BY THE DISTRIBUTORS OF A LARGE AMOUNT OF OUR PRODUCT, WOULD HARM OUR SALES. We have contracts with Navarre Corporation, and other U.S. companies, that distribute our software products to various computer resellers, value-added resellers, catalog distributors and smaller retail outlets. Navarre Corporation accounted for 8% of total revenues and 13% of software revenues for fiscal 2002. Our contract with Navarre requires us to accept the return of any of our products that it does not sell and to credit it for the value of these products. It also provides Navarre with protection for the value of their inventory in the event that we lower our prices. If these distributors fail to continue to carry our products, return large quantities of our products to us, or competitive pressures require us to lower the prices of the products that we supply to them, our business will suffer. WE DEPEND ON A LIMITED NUMBER OF CUSTOMERS FOR A SIGNIFICANT PROPORTION OF OUR REVENUES SO THE LOSS OF, OR DELAY IN PAYMENT FROM, ONE OR A SMALL NUMBER OF CUSTOMERS COULD HARM OUR SALES. A limited number of customers have accounted for a majority of our revenues in our media services segment and will continue to do so for the foreseeable future. During the year ended September 30, 2002, three of our customers in that segment accounted for approximately 41% of our media services revenue. We believe that a small number of customers will likely continue to account for a significant percentage of our media services revenues for the foreseeable future. Due to high revenue concentration among a limited number of customers, the cancellation, reduction or delay of a large customer order or our failure to timely complete or deliver a project during a given quarter will reduce revenues for the quarter. In addition, if any customer fails to pay amounts it owes us, or if we lose a key customer, our sales will suffer. DUE TO OUR LICENSE AGREEMENT WITH CARNEGIE MELLON UNIVERSITY, WE MAY FACE COMPETITION IN OUR PUBLISHER(TM) PRODUCT AND WE MAY LOSE THE ABILITY TO SELL THAT PRODUCT IN THE FUTURE. Our Publisher(TM) product is based in part on licensed technology from Carnegie Mellon. As part of the MediaSite transaction we acquired a nonexclusive license to use certain technology in that product and have recently negotiated an exclusive license as to certain competitors. Because the exclusivity is limited to a defined list of competitors, a risk exists that Carnegie Mellon could license the technology to another party that is not currently a named competitor, but could become competitive with us. Moreover, if the License Agreement were to terminate before the underlying patents expired, we would lose the ability to sell the products covered by the License Agreement. WE MAY NOT BE SUCCESSFUL IN PROTECTING OUR INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS. Our inability to protect our proprietary rights, and the costs of doing so, could harm our business. Our success and ability to compete partly depends on the superiority, uniqueness or value of our technology, including both internally developed technology and technology licensed from third parties. To protect our proprietary rights, we rely on a combination of trademark, patent, copyright and trade secret laws, confidentiality agreements with our employees and third parties and "shrink wrap" licenses. Recently, we have undertaken additional efforts to identify which of our proprietary processes and algorithms may be patentable, and we currently have several patent applications pending with the U.S. Patent and Trademark Office. If patents are not issued as a result of any of these applications, or if we cannot afford to enforce them, other parties may infringe on our proprietary rights. Despite our efforts to protect our proprietary rights, unauthorized parties may copy or infringe aspects of our technology, products, services or trademarks, or obtain and use information we regard as proprietary. In addition, others may independently develop technologies that are similar or superior to ours, which could reduce the value of our intellectual property. Companies in the computer industry have frequently resorted to litigation regarding intellectual property rights. We may have to litigate to enforce our intellectual property rights or to determine the validity and scope of other parties' proprietary rights. We face the risk that our customers might not have all necessary ownership or license rights in the content for us to perform our encoding services. Any alleged liability could harm our business by damaging our reputation, requiring us to incur legal costs in defense, and exposing us to awards of damages and costs and diverting management's attention. Sonic Foundry, Inc. Annual Report on Form 10-K For the Year Ended September 30, 2002 Because we host audio and video content on Web sites for customers and provide services related to digital media content, we face potential liability or alleged liability for negligence, infringement of copyright, patent, or trademark rights, defamation, indecency and other claims based on the nature and content of the materials we host. Third parties may claim infringement by us with respect to past, current, or future technologies. If a third party's claim of intellectual property right infringement were to prevail, we could be forced to pay damages, comply with injunctions, or halt distribution of our products while we re-engineer them or seek licenses to necessary technology, which might not be available on reasonable terms. We could also be subject to claims for indemnification resulting from infringement claims made against our customers and strategic partners, which could increase our defense costs and potential damages. In addition, we have agreed to indemnify certain distributors and original equipment manufacturers, or OEMs, for infringement claims of other parties. If these other parties sue the distributors or OEMs, we may be responsible for defending the lawsuit and for paying any judgment that may result. WE MAY BE UNABLE TO RETAIN TECHNOLOGY LICENSED OR OBTAINED FROM THIRD PARTIES AND STRATEGIC PARTNERS. We rely upon licenses from third parties and strategic partners for some of our technologies. These companies that license the technologies to us may decide to discontinue the licenses at any time. If they do so, our business may suffer WE MAY BE UNABLE TO OBTAIN THE EXPECTED BENEFITS OF OUR RECENT ACQUISITIONS. Our acquisition of certain assets of MediaSite, Inc., which was completed in October 2001, will require devoting our resources to setting up a new media systems segment. In addition, in February 2002, we acquired certain assets of Digital Savant, Inc. We may not be able to successfully assimilate the personnel, technology, operations and customers of these acquisitions into our business. In addition, we may fail to achieve the anticipated synergy from these acquisitions, including product, systems and software development, and other operational synergies. The integration process of these businesses may further strain our existing financial and managerial controls and reporting systems and procedures. This may result in the diversion of management and financial resources from our core business objectives. In addition, it is possible that an unforeseen liability may arise from our acquisition of these companies and result in a claim against us. OUR REVENUES FROM OUR FOREIGN CUSTOMERS ARE SUBJECT TO ADDITIONAL RISKS ARISING FROM FOREIGN OPERATIONS. We maintain a media services facility in Toronto, Canada, which provides services primarily to Canadian and other international customers and we distribute our software products in approximately 30 countries through 30 international distributors. Net revenues from customers outside of North America accounted for 15% of total net revenues for the year ended September 30, 2002. We are subject to the normal risks of doing business internationally. These risks include: . Unexpected changes in laws or regulatory requirements. . Political instability. . Export and import restrictions. . Actions by third parties such as discount pricing and business techniques unique to foreign countries. . Tariffs and trade barriers and limitations on fund transfers. . Longer payment cycles and problems in collecting accounts receivable. Sonic Foundry, Inc. Annual Report on Form 10-K For the Year Ended September 30, 2002 . Potential adverse tax consequences. . Exchange rate fluctuations. . Economic conditions including inflation, high tariffs, or wage and price controls. . Increased risk of piracy and limits on our ability to enforce our intellectual property rights. WE MAY BE SUBJECT TO ASSESSMENT OF SALES AND OTHER TAXES FOR THE SALE OF OUR PRODUCTS, LICENSE OF TECHNOLOGY OR PROVISION OF SERVICES. We may have to pay past sales or other taxes that we have not collected from our customers. We do not currently collect sales or other taxes on the sale of our products, license of technology or provision of services in states and countries other than Wisconsin and California. The federal Internet Tax Freedom Act, passed in 1998, imposes a three-year moratorium on discriminatory sales taxes on electronic commerce, which was recently extended for 2 additional years. We cannot assure you that this moratorium will be re-extended. Further, foreign countries or, following the moratorium, one or more states, may seek to impose sales or other tax obligations on companies that engage in such activities within their jurisdictions. Our business would suffer if one or more states or any foreign country were able to require us to collect sales or other taxes from current or past sales of products, licenses of technology or provision of services, particularly because we would be unable to go back to customers to collect sales taxes for past sales and may have to pay such taxes out of our own funds. THE CONCENTRATION OF OWNERSHIP BY OUR AFFILIATED STOCKHOLDERS MAY DELAY OR PREVENT ANY MERGER OR TAKEOVER OF THE COMPANY, WHICH MAY LIMIT THE AMOUNT OF PREMIUM A STOCKHOLDER WOULD OTHERWISE OBTAIN ON HIS COMMON STOCK. Certain of our existing stockholders have significant influence over our management and affairs, which they could exercise against your best interests. As of September 30, 2002, our officers and directors, together with entities that may be deemed affiliates of or related to such persons or entities, beneficially owned nearly 30% of our outstanding common stock. As a result, these stockholders, acting together, may be able to influence significantly our management and affairs and matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. Accordingly, this concentration of ownership may have the effect of impeding a merger, consolidation, takeover or other business consolidation involving us, or discouraging a potential acquiror from making a tender offer for our shares. This concentration of ownership could also adversely affect our stock's market price or lessen any premium over market price that an acquiror might otherwise pay. PROVISIONS OF OUR CHARTER DOCUMENTS AND MARYLAND LAW COULD ALSO DISCOURAGE AN ACQUISITION OF OUR COMPANY THAT WOULD BENEFIT OUR STOCKHOLDERS. Provisions of our articles of incorporation and by-laws may make it more difficult for a third party to acquire control of our company, even if a change in control would benefit our stockholders. Our articles of incorporation authorize our board of directors, without stockholder approval, to issue one or more series of preferred stock, which could have voting and conversion rights that adversely affect or dilute the voting power of the holders of common stock. Furthermore, our articles of incorporation provide for classified voting, which means that our stockholders may vote upon the retention of only one or two of our six directors each year. Moreover, Maryland corporate law restricts certain business combination transactions with "interested stockholders." Overview In accordance with FAS 131 disclosure on segment reporting, the SEC's guidance has been to present financial information in a format that is used by the Company's management to make decisions. The Company is a leading provider of professional rich media solutions with three primary revenue centers: Desktop Software develops sophisticated software tools used by professionals and hobbyists for the creation, editing and publishing of digital audio and video. We currently focus our software efforts on the Sound Forge(R), ACID(TM), and Vegas(R) Video platforms. Sonic Foundry, Inc. Annual Report on Form 10-K For the Year Ended September 30, 2002 Systems Software (formerly MediaSite) develops automated rich-media applications and scalable solutions that allow media owners - including entertainment companies, educational institutions, corporations and government organizations - to deploy, manage, index and distribute video content on IP-based networks. Services supplies media digitization, management and delivery solutions for various industries, particularly the entertainment sector. These services consist of conversion, reformatting and encoding of television, film and other video content for multiple delivery platforms. These three revenue centers, along with their respective production costs, are analyzed independently from each other. However, because the majority of operating expenses support all revenue centers, all items below gross margin are analyzed on a combined basis. Critical Accounting Policies We have identified the following as critical accounting policies to our company and have discussed the development, selection of estimates and the disclosure regarding them with the audit committee of the board of directors: Revenue recognition, sales returns, allowance for doubtful accounts and other credits; Impairment of investments and Impairment of long-lived assets. Revenue Recognition, Sales Returns, Allowance for Doubtful Accounts and Offer Credits We recognize revenue for licensing of software products upon shipment, net of estimated returns, provided that collection is determined to be probable and no significant obligations remain. Product revenue from distributors is subject to agreements allowing limited rights of return, rebates, and price protection. Accordingly, we reduce revenue recognized for estimated future returns, price protection when given, and rebates at the time the related revenue is recorded or promotion is offered. The estimates for returns are adjusted periodically based upon historical rates of returns, inventory levels in the distribution channel, and other related factors. The estimates and reserves for rebates and price protection are based on historical rates. While management believes it can make reliable estimates for these matters, nevertheless unsold products in these distribution channels are exposed to rapid changes in consumer preferences or technological obsolescence due to new operating environments, product updates or competing products. Significant judgments and estimates must be made and used in connection with establishing reserves for sales returns, price protection and rebates in any accounting period. Material differences may result in the amount and timing of our revenue for any period if we made different judgments or utilized different estimates. During fiscal 2001, returns from software products sold to consumer retail distributors were higher than historical rates incurred in fiscal 2000 and 1999. In response to economic factors affecting the consumer retail market, we began recording revenues to consumer retail distributors on a consignment basis in September 2001. Please refer to Note 1 of our Notes to Consolidated Financial Statements for further information on our revenue recognition policies. The preparation of our consolidated financial statements also requires us to make estimates regarding the collectability of our accounts receivables. We specifically analyze the age of accounts receivable and analyze historical bad debts, customer concentrations, customer credit-worthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. Impairment of Investments We periodically evaluate whether any estimated decline in the fair value of our long-term investment is other-than-temporary. Significant judgments and estimates must be made to assess the fair value of our investment and determine whether an other-than-temporary decline in fair value of our investment has occurred. This evaluation consists of a review of qualitative and quantitative factors, review of publicly available information regarding the investee and discussions with investee management. Since our investment is in a private company with no quoted market price, we also consider the implied value from any recent rounds of financing completed. Based upon an evaluation of the facts and circumstances during the quarter ended June 30, 2002, we determined that our investment had a significant decline in fair value and that we are unlikely to recover most, if any, of our investment. Accordingly, we wrote off the entire $514,000 balance. Sonic Foundry, Inc. Annual Report on Form 10-K For the Year Ended September 30, 2002 Impairment of long-lived assets We assess the impairment of goodwill on an annual basis or whenever events or changes in circumstances indicate that the fair value of the reporting unit to which goodwill relates is less than the carrying value. Factors we consider important which could trigger an impairment review include the following: poor economic performance relative to historical or projected future operating results; significant negative industry, economic or company specific trends; changes in the manner of our use of the assets or the plans for our business; and loss of key personnel If we determine that the fair value of a reporting unit is less than its carrying value including goodwill, based upon the annual test or the existence of one or more of the above indicators of impairment, we would then measure impairment based on a comparison of the implied fair value of reporting unit goodwill with the carrying amount of goodwill. The implied fair value of goodwill is determined by allocating the fair value of a reporting unit to its assets (recognized and unrecognized) and liabilities in a manner similar to a purchase price allocation. The residual fair value after this allocation is the implied fair value of reporting unit goodwill. To the extent the carrying amount of reporting unit goodwill is greater than the implied fair value of reporting unit goodwill, we would record an impairment charge for the difference. The Company evaluates all of its long-lived assets, including intangible assets other than goodwill, for impairment in accordance with the provisions of SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS 144 requires that long-lived assets and intangible assets other than goodwill be evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable based on expected undiscounted cash flows attributable to that asset. Should events indicate that any of the Company's assets are impaired; the amount of such impairment will be measured as the difference between the carrying value and the fair value of the impaired asset and recorded in earnings during the period of such impairment. RESULTS OF OPERATIONS The following table has been presented to add clarification only and should be read in conjunction with the audited financial statements. At the beginning of fiscal 2001, the Company adopted EITF No. 00-14, "Accounting for Certain Sales Incentives." For comparison purposes, cash rebates previously accounted for as a marketing expense in 2000 have been reclassified as a reduction of software license fees (See footnote 1, Accounting Pronouncements). For the Years Ended September 30, ------------------------------------------------------------------- 2002 2001 2000 ---- ---- ---- Desktop software license fees $15,898 100% $15,550 100% $21,455 100% Cost of desktop software license fees 2,991 19 5,187 33 5,493 26 ------- --- ------- --- ------- --- Gross margin - desktop software license fees $12,907 81% $10,363 67% $15,962 74% Systems software license fees $859 100% - - - - Cost of systems software license fees 380 44 - - - - ------- --- ------- --- ------- --- Gross margin - systems software license fees $ 479 56% - - - - Media services $ 9,399 100% $10,734 100% $ 4,852 100% Cost of media services 7,214 77 7,733 72 5,177 107 ------- --- ------- --- ------- --- Gross margin - media services $ 2,185 23% $ 3,001 28% $ (325) (7)% ------- ------- ------- Total Net Revenue $26,156 $26,284 $26,307 ======= ======= ======= Year ended September 30, 2002 ("2002") compared to the year ended September 30, 2001 ("2001") Sonic Foundry, Inc. Annual Report on Form 10-K For the Year Ended September 30, 2002 Total net revenues decreased by $128 to $26,156 in 2002 from $26,284 in 2001. Increased contributions from the traditional desktop segment of $348 and contributions from the new systems software segment of $859 nearly offset a decline in services revenues of ($1,335). 2001 compared to the year ended September 30, 2000 ("2000") Total net revenues remained relatively unchanged, decreasing by $23 to $26,284 in 2001 from $26,307 in 2000. Although total revenues remained flat, the contribution from the two segments changed significantly. In 2000, sales from desktop software license fees contributed 82% to total revenues while the media services division contributed 18%. 2000 media services revenue, however, only include revenue contributed from the former STV Communications, Inc. ("STV") and International Image, Inc. ("II") since the effective dates of acquisition (See footnote 12). Revenue from Desktop Software License Fees Software License Fees in the Statement of Operations include both desktop and systems software. Revenues from desktop software license fees consist of fees charged for the licensing of Windows based software products. The Company's primary focus is on the platforms of ACID(R), Sound Forge(R) and Vegas(R) Video. These software products are marketed to both consumers and producers of digital media. We reach both our domestic and international markets through traditional retail distribution channels, our direct sales effort and OEM partnerships. 2002 Compared to 2001 Revenue from desktop software license fees increased $348 or 2%, from 2001 to 2002. The net change resulted from the following items: . Sales of Vegas Video (version 3 released in November 2001) grew by $1.7 million in 2002. A new release of Vegas Video is due out in early 2003. . Acid and Acid Loop sales declined $694. The decline is primarily due to the timing of new releases. In 2001, Acid sales benefited from two strong quarters ($2.8 million) after the release of Acid 3.0. In August and September the newly released version 4.0 drove Acid sales to $2.2 million. We expect that version 4.0's strong performance will extend into 2003, and that, eventually, sales from version 4.0 will exceed those of version 3.0. . Sound Forge and Sound Forge Studio approximated $5.0 million for both years. Sound Forge sales had little variance from year to year, while Studio revenues grew by $300k. . An additional contributor to 2002 sales was an OEM bundling arrangement with Sony. This arrangement netted $400 in Q3-2002. The arrangement is not expected to net significant additional revenues in future periods. . The remainder of the year-to-year change is attributable to Siren, Vegas Audio, and other products that were not actively promoted in 2002. 2001 compared to 2000 Revenue from desktop software license fees decreased $5,905 or 28%, from 2000 to 2001. The net change resulted from the following items: . Sales of Acid decreased nearly $4 million due to the expiration of a significant OEM arrangement with Hewlett Packard and withdrawal from consumer retail. . Acid Loop sales increased $500 due to a strong load in to the professional retail channel. . Sound Forge and Sound Forge Studio grew $1.5 million with the much anticipated release of version 5.0 o Siren sales decreased by $1.8 million due to withdrawal from consumer retail and the decision to cease development of further versions. . Vegas Video and Vegas Audio sales declined by $1.1 million due to a reduced retail presence. . Customized software engineering for Sony decreased by $500 Gross Margin from Desktop Software License Fees Sonic Foundry, Inc. Annual Report on Form 10-K For the Year Ended September 30, 2002 2002 Compared to 2001 Included in costs of software license fees are product material costs, assembly labor, freight, royalties on third party technology or intellectual content, and amortization of previously capitalized product development and localization costs. Despite only slight growth in revenue, gross margin for desktop software improved over $2.5 million in 2002. Gross margin for this segment equaled 81% of software license fees in 2002 versus 67% in 2001. The following items contributed to the marked improvement in desktop software gross margins: . A reduction in material costs associated with an increase in the number of electronic downloads. Download sales were 26% of desktop software sales in 2002 and 22% in 2001. . A reduction in obsolescence and scrap due to lower inventory levels. 2001 had significant charges related to the exit from lower priced consumer products and the consumer channel. . A shift toward higher priced professional products from lower (less than 50%) margin consumer products. Vegas Video, which was nearly 15% of desktop software revenues in 2002, has margins over 90%. We anticipate that software margins will continue to exceed 80% in the foreseeable future. 2001 compared to 2000 Gross margin for desktop software decreased from 74% in 2000 to 67% in 2001. The two significant issue contributing to the decline were: . Revenues from high margin OEM partners declined $4.0 million. The most significant OEM relationship was an agreement with Hewlett Packard that bundled Acid with CD-Roms. There are virtually no material or labor costs associated with OEM revenue. . In early 2001, weak consumer sales and new product introductions resulted in increased obsolete and slow-moving inventory that was written off. Revenue from Systems Software Revenue from our Systems software division, established upon the acquisition of MediaSite, consist of fees charged for the licensing of software products and custom software development. The primary focus is on the platforms of MediaSite Publisher(TM) and MediaSite Live(TM). These software products are marketed to government agencies, educational institutions, and corporations who need to deploy, manage, index and distribute video content on IP-based networks. We reach both our domestic and international markets through reseller networks, a direct sales effort and partnerships with system Integrators. System software revenues in 2002 amounted to $859. The revenues can be segmented as follows: . MediaSite Publisher sales were $368 for 2002. Over half of the Publisher revenues represent what we believe to be the first stage of a relationship with a system integrator selling to a unit of the Federal Government, from which may generate additional license and support revenues in the future. . MediaSite Live, which was completed in mid-June 2002, experienced sales of $206 in 2002. . Custom development for a Federal agency accounted for $252 of revenue. This contract was completed in May 2002. Total Federal government system software revenue totaled $538 in 2002. In Q4-2002, no revenues were recorded for either Publisher or custom development. Although we continue to offer those products and services, we have shifted most of this segment's focus to the Media Site Live product and expect that product to drive future growth. Gross Margin from Systems Software The significant components of cost of systems include: o A 5% royalty on sales of MediaSite Publisher's technology. . Cost of hardware that is bundled with MediaSite Live. Live sales should typically result in gross margins of approximately 60% - 70%. . Amortization of MediaSite acquisition amounts assigned to purchased technology and other identified intangibles. We Sonic Foundry, Inc. Annual Report on Form 10-K For the Year Ended September 30, 2002 will be amortizing approximately $100 per quarter over the next 5 years for the identified intangibles of the MediaSite purchase. Revenue from Media Services Revenue from services includes tape duplication for broadcast distribution, broadcast standard conversions, audio and video encoding, as well as fees for consulting and development services. 2002 Compared to 2001 Revenue from services declined $1,335 or 12%, from 2001 to 2002. We believe a decline in advertising income of entertainment companies led to decreased demand for our traditional duplication and conversion services. Traditional services declined approximately $1,800 while Digital Restoration and High Definition services rose by $500. A decrease in encoding revenues of $375 also contributed to the overall decline. The new Mediaworks offering (including the acquired MediaTaxi technology) accounted for approximately $120 during 2002. 2001 Compared to 2000 Revenue from media services increased $5,882, or 121%, from 2000 to 2001. However, 2000 media services revenue only includes revenue contributed from STV since April 2000 and from II since June 2000. On a quarterly comparison, Q4-2001 revenues decreased $282 to $2,541 from $2,823 in Q4-2000. The collapse of the dot.com encoding industry at the beginning of fiscal 2001 as well as revenue from a one-time consulting arrangement in Q4-2000 contributed to the decrease. Revenues from II's traditional conversion and duplication services increased 22% from Q4-2000 to Q4-2001. Gross Margin from Media Services Costs of services include compensation, benefits and other expenses associated with production personnel, videotape costs and an allocation for general and administrative expenses such as facility costs. These costs have become relatively stable and fixed in dollars since Q3-2001 and we do not anticipate major changes in the near future. Future fluctuations in gross margin will result primarily from changes in revenue because: 1) these costs should remain relatively fixed going forward; and 2) newer offerings, such as MediaTaxi and MediaDub, are lower cost procedures dependent on software code rather than headcount. Gross margin from services decreased from 28% in 2001 to 23% in 2002. The decline relates to the revenue decreases discussed above and demonstrates the fixed nature, primarily labor costs and equipment depreciation, of our cost of services. 2002 also included $80 of amortization of MediaTaxi technology acquired in February. 2001 Compared to 2000 Gross margin from media services improved significantly to 28% in 2001 from (7)% in 2000. While revenue from media services increased 121% from 2000 to 2001, costs of media services only increased 49%. The improvement in gross margin resulted from the Q1-2001 elimination of duplicate positions, operational and process improvements, a switch to a temporary labor force for encoding services and a reduction in depreciation expense in Q3-2001 due to the write-off and disposal of underutilized leased assets no longer needed for the business. Operating Expenses The following chart is provided to add clarification by presenting items as a percentage of total revenues. This should be read in conjunction with the audited financial statements. Sonic Foundry, Inc. Annual Report on Form 10-K For the Year Ended September 30, 2002 For the years ended September 30, --------------------------------- 2002 2001 2000 ---- ---- ---- Total revenues 100% 100% 100% Cost of revenues 40 49 41 --- --- --- Gross margin 60 51 59 Operating expenses Selling and marketing expenses 34 48 72 General and administrative expenses 27 39 38 Product development expenses 27 30 30 --- --- --- 88 117 140 Restructuring and other charges - 19 4 Amortization of goodwill and other purchase Intangibles - 104 54 - --- --- Total operating expenses 88 240 198 --- --- --- Loss from operations (28)% (189)% (138)% === === === Selling and Marketing Expenses Selling and marketing expenses include: wages and commissions for sales, marketing, business development and technical support personnel; our direct mail catalog; print advertising and various promotional expenses for both our software products and services. Timing of these costs may vary greatly depending on introduction of new products and services or entrance into new markets. 2002 compared to 2001 Selling and marketing expenses decreased by $3,751, or 30%, to $8,803 in 2002 from $12,554 in 2001. This decrease is primarily the result of our December 2000 restructuring which included the following key actions: . 2001 $1.0 million write-off of prepaid advertising related to a 2000 equity issuance . Reduction in retail advertising ($2.0 million reduction in 2002) . Significant staff reductions sales, services business development, marketing and customer service ($900 reduction in 2002) . Decline in tradeshow expenses, outsourced customer service, and catalog expenses ($1.4 million reduction in 2002). Over the past year we have built a larger database of names and no longer have to rent as many lists for our catalog campaigns. The above savings were offset by over $2.5 million of sales costs (primarily salaries, travel, and public relation efforts) of the new systems division. 2001 compared to 2000 Selling and marketing expenses decreased by $7,268 or 37%, to $12,554 in 2001 from $19,822 in 2000. The decrease was the result of: . Reductions in advertising, staff, and other expenses related to the December 2000 restructuring. . A greater percentage of revenues coming from the media services division, which requires less expensive, more targeted forms of marketing. . A reduced focus on more costly brand marketing such as tradeshows and media advertising. General and Administrative Expenses ("G&A expenses") General and administrative ("G&A") expenses consist of personnel and related costs associated with the facilities, finance, legal, human resource and information technology departments, as well as other expenses not fully allocated to functional areas. 2002 compared to 2001 G&A expenses decreased by $3,174, or 31%, from $10,153 in 2001 to $6,979 in 2002. The reduction is due to the elimination of non-recurring, integration related expenses and elements of the Q1-2001 restructuring plan which included the removal of duplicate personnel functions and the consolidation of facilities. $1.9 million of the year to year decrease occurred in Q1. In addition, bad debt expense decreased by $800. Approximately $600 of the decline related to a salary waiver program for executives that began in December 2001 (under the terms of the salary waiver program, certain executives waived salary in exchange for stock options). Sonic Foundry, Inc. Annual Report on Form 10-K For the Year Ended September 30, 2002 2001 compared to 2000 G&A expenses increased slightly by $171, or 2%, to $10,153 in 2001 from $9,982 in 2000. The elimination of non-recurring, acquisition related expenses and elements of the December 2000 restructuring plan, including removal of duplicate functions through staff reductions and consolidation of facilities greatly improved our efficiencies in 2001. The impact resulted in a decrease in Q1 G&A from $3.9 million to $2.2 million in Q4 or 39%. These improvements partially offset a $995 increase in bad debt expense. $780 of the increase is attributable to the software division with 52% relating to the termination of a relationship with one of our distributors. Bad debt expense from the media services division comprised the remaining $213 with three customers contributing 51% of the increase. Product Development Expenses ("R&D expenses") Product development expenses include salaries and wages of the software research and development staff and an allocation of benefits, facility and administrative expenses. Fluctuations in product development expenses correlate directly to changes in headcount. In accordance with SFAS Number 86, the Company capitalizes the cost of development of software products that have reached technological feasibility. No development costs for our core product line were capitalized during 2000, 2001 or 2002; however, portions of the MediaSite ($1.4 million in 2002, amortized over 5 years), MediaTaxi ($240 in 2002, amortized over 2 years), and the Jedor ($240 in 2000) acquisitions were allocated to capitalized software development. Going forward we believe software development costs qualifying for capitalization will continue to be insignificant, and, as such, we expect that we will expense most or all research and development costs as incurred. 2002 compared to 2001 R&D expenses decreased $755, or 9%, from $7,986 in 2001 to $7,231 in 2002. The decrease resulting from the company-wide restructuring in December 2000 well exceeded the 2002 addition of MediaSite developers. Headcount at the beginning of the December 2000 quarter was over 100. Current headcount is just under 60. As part of the restructuring, we eliminated low volume, niche products such as Soft Encode as well as the engineering positions required to maintain these products. 2001 compared to 2000 R&D expenses remained relatively unchanged, increasing $118, or 1%, from $7,868 in 2000 to $7,986 in 2001. As a percentage of total revenue, R&D expenses also remained unchanged at 30% for both 2001 and 2000. Many of the positions eliminated in December 2000 had been added in 2000. Restructuring and Other Charges As outlined in footnote 15 to the audited financial statements included in this report, restructuring charges of $4,973 were recorded in 2001. Consistent with management's plan to reduce costs in response to weak market conditions, the restructuring charge primarily consisted of: 1) an accrual for 60 days of severance and benefits for domestic employees terminated on December 20, 2000 as well as severance and other expenses associated with closing our office in the Netherlands; 2) an asset impairment charge related to the sale, disposal or write-down of PCs, office equipment and other assets no longer required; 3) operating and lease termination costs related to the consolidation of facilities; and 4) miscellaneous charges such as forfeited tradeshow deposits. The restructuring significantly reduced certain expenses as discussed in the Gross Margin, Sales, G&A, and Product development sections above. At September 30, 2002 the remaining balance in the restructuring accrual -entirely related to rent - was $93. This balance includes a 2002 charge of $60 which anticipates future rent costs above and beyond the original accrual. The lease related to the accrued rent expires in Feb 2003. Other Income (Expense) The increase in interest expense was due to the subordinated debt issuance in February 2002. (See note 4 to the consolidated financial statements). In addition, other expense included $535 of losses on asset disposals, a $514 loss on the write-off of long- Sonic Foundry, Inc. Annual Report on Form 10-K For the Year Ended September 30, 2002 term investment, and a $238 gain on the settlement of debt. Cumulative Effect of Changes in Accounting Principle, Amortization of Goodwill and Other Purchase Intangibles Effective October 2001, the Company adopted Financial Accounting Standards Board ("SFAS") No. 142, "Goodwill and Other Intangible Assets." Under the new rules, the Company ceased the amortization of goodwill associated with the services reporting unit, which included the acquisitions of STV Communications and International Image. Implementation of the new rules also requires an assessment of the carrying value of goodwill using a number of criteria, including the value of the overall enterprise as of October 1, 2001. The Company retained an independent appraisal firm to assist in the assessment, which resulted in a $44,732 write off of the entire remaining value of goodwill associated with the services reporting unit. Future impairment charges, if any, associated with MediaSite or other acquisitions will be reflected as an operating expense in the statement of operations. The 2001 and 2000 amortization of goodwill and other purchase intangibles consisted of expense associated with the purchases of STV and II. Total purchased intangibles consisted of assembled workforce of $3,200, amortized over one to five-years and goodwill of $82,900, amortized over a three to seven year period. In the quarter ended December 31, 2000 we received a final appraisal of II's fixed assets and, as a result, reclassified $1,200 of the purchase price from goodwill to fixed assets. In April 2001, we paid $500 in full settlement of a $700 note due the minority shareholders of II, which resulted in a reduction of goodwill. |
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Subject:RE: goodby sonic foundry
Reply by: Maruuk
Date:1/2/2003 3:30:11 PM
Lies, all lies! We don't need no steenking NASDAQ! Bugs? What bugs? 4.0b is error free! Daisy, daiseeee...oh...what a....(braaap)...will I dream? |
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Subject:RE: goodby sonic foundry
Reply by: dkistner
Date:1/2/2003 3:42:48 PM
I wouldn't be in business for any amount of money! Hairy stuff...and I think I hear the sound of bells tolling throughout technology industry. I expect what we have to look forward to is more Microsoft-type megaliths supplemented by kitchen-table programmers who don't have the resources to move us along very fast or far. I don't know much about this kind of thing, or business forecasting, but I thought SoFo's Desktop Software part looked relatively good. I think you'd have to be an accountant to really be able to read between all the lines, though. To SoFo's credit, they painted the picture in what probably seems to most of us to be the bleakest possible terms. But remember that it all has the stamp of a legal department on it...covering all the bases just in case. I doubt Enron's annual report looked anything like this. |
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Subject:RE: goodby sonic foundry
Reply by: Jessariah
Date:1/2/2003 5:08:56 PM
It's gonna be tragic if these apps wind up in the dumpster. |
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Subject:RE: goodby sonic foundry
Reply by: aress
Date:1/2/2003 6:49:17 PM
believe me, i am soooo bummed by this, i have been a huge supporter of SF since acid V1. i would run rings around the protool guys here with the acid/vegas/forge trio.... i have made a great living with a great tool like acid, and feel sick that it might end............ my only hope is a company like digidesign would buy SF technology, and melt it into protools..... fasten your seatbelts, its going to be a bumpy ride........... |
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Subject:RE: goodby sonic foundry
Reply by: Maruuk
Date:1/2/2003 9:06:10 PM
The competition is brutal in this field--you really need to be cash-rich to compete. You see how riddled the report was with "we can't be competitive without X resources..."--it's really true. There's no money in a simple looping app, and you could see how fast SOFO went downhill once they tried to add even a couple of the features of the Big Boys without proper development resources. I'm not sure there's any player out there who sees a future in maintaining the Acid marque. As the report notes, you have to swim twice as fast as the Big Boys to stay even. Everybody and his sister have some enhanced .wav format that does Acid-eze. If SOFO had been able to copyright the basic process of enhanced .wav's--now THAT'S a business. Be like Microsoft and the OS. There's certainly a loops biz, but keeping the app viable against Sonar, Cubase and Reason--is that really a profitable game with Kazaa and everybody cracking half the apps in circulation? Acid may just be like the Beatles or Elvis or the MG-TD: a cultural phenom in it's time and remembered fondly. This too must pass. Just a little tip: hang on to 3.0g for dear life--it's the TD B4 they tried to make it "cool" as the MGA--it's the Fab 4 B4 the bustup--it's Elvis B4 the Army. In short, it's the highest expression of looping genius and conceptual purity we will ever know. |
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Subject:RE: goodby sonic foundry
Reply by: Jessariah
Date:1/2/2003 10:44:28 PM
If I had my pick, I'd go with Cakewalk to take over the line. This is just terrible, if it plays out to the end of ANY of these apps. Vegas smokes any other video app in the same league. Forge smokes Wave Lab. Acid is amazing. Then there are all the loop libraries... I look at the numbers and have a really hard time understanding why this company is dying...I've dumped a lot of time and money into SoFo products...I hope whoever takes them over can utilize the gold beneath the bad balance sheet. |
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Subject:RE: goodby sonic foundry
Reply by: Maruuk
Date:1/3/2003 2:21:34 PM
Usually the magic and integrity that goes into a well-branded product like Acid is lost in the shuffle of the new culture that takes it over. The most common process is akin to an auto boost in LA: it's sneaked over the border and stripped for parts. Essentially what Learning Company did to Broderbund. The problem is the new guys have to fully support all the major product elements, including technology and the vision thing, of an application. The likelihood of that is about zero. While it seems logical to an outsider for the buyer to want to exploit the brand to the max, in reality it's very cumbersome for the new technology company to do that. They likely already have their own .wav+ tech. Their own ideas about interface. Their own vision thing. They usually buy for the boring stuff--the underlying tech, code, process stripped down to engines and parts like an auto factory. And hardware--the dev systems and junk that comes along with the package. And protoplasm--the deal may include a transfer of intellectuals to make the intellectual property valuable. It would be rare indeed for the new proprietors to take Acid forward and present it as it could be. Less rare that they sell it off as a cheapass Audio bundle and make a quick killing through discounters. Or quietly subsume it in tiny pieces into their own product, gaining the additional benefit of one less competitor. "Bleached bones of ancient apps lie classic The software world is quite Jurassic"--Maruuk, 1/3/02 |
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Subject:RE: goodby sonic foundry
Reply by: dhanjit
Date:1/3/2003 2:50:26 PM
"I don't know much about this kind of thing, or business forecasting, but I thought SoFo's Desktop Software part looked relatively good." Me too. Gives you hope that the products have a future, whether SoFo retain them or sell them. |
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Subject:RE: goodby sonic foundry
Reply by: dkistner
Date:1/3/2003 3:16:32 PM
To somebody without much understanding of accounting or investment, it looks to me like SoFo took a big gamble and got into a huge cash-flow crunch with the acquisition of the media services end of it...and probably has too many of its eggs in that one fragile basket. I hope it all works out for them in the long run...and for us, too. But the thing about taking risks is that you HAVE to take risks to keep moving forward, but there are no guarantees you'll have a happy result. It's one of the reasons I don't invest in the stock market...the other is that I don't have any money to invest in the stock market. |
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Subject:RE: goodby sonic foundry
Reply by: waynegee
Date:1/3/2003 3:22:10 PM
Yeah Maruuk is right...I think it's over. Cakewalk would be the logical company to buy the technology. They need it cuz' as hip as Sonar is, their loop feature-set is pretty crap. If they combined Acid usability and code into Sonar, it would take over the earth. The king is dead...long live the king. |
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Subject:RE: goodby sonic foundry
Reply by: Outlaw
Date:1/3/2003 4:14:16 PM
Man this is sad , Sonic pretty much made available the tools to get the job done right to all us PC heads ....and im sorry Cakewalk does not impress me much... I followed the "King" as long as i could.. I dropped Vegas and went to SX just for hardware control and direct monitoring . I still master and edit in Forge and lay tracks in Acid 4b..i hope Sonic can dig themselves out ive been using Forge since way before 3.0 (remember just 2 floppies to install??) hope the best for you SoFo |
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Subject:RE: goodby sonic foundry
Reply by: catfish_pete
Date:1/3/2003 5:00:12 PM
Yes, this is terrible news. A company whose products are inspired & highly creative, and whose implementation & programming is rigorous & painstaking, really deserves much better than this. This should happen to Microsoft, not SoFo. P. |
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Subject:RE: goodby sonic foundry
Reply by: Maruuk
Date:1/3/2003 5:38:01 PM
Speak of the Devil--This couldn't POSSIBLY have anything to do with Acid, but it just came in over the transom: "Throughout 2003 we will have exciting news for you. Just days from now, we'll unveil a new product that is an even bigger surprise than SONAR was two years ago. And that's just the beginning."-- Greg Hendershott CEO Cakewalk Oh well, one down, one up--as long as the user community keeps getting good stuff from SOMEBODY. |
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Subject:RE: goodby sonic foundry
Reply by: Spirit
Date:1/3/2003 10:09:15 PM
An alternative to the usually predicted scenario is that SoFo will sell everything EXCEPT Acid/Vegas/Forge. After all, these are the proven, core products that have remained profitable. They wouldn't even need to develop them too heavily, just bugfix for a while and put the trimmed "rump" of SoFo into cruise-control. |
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Subject:uhhhh.... ok?
Reply by: Jacose
Date:1/3/2003 11:32:53 PM
sorry man, but you have earned the ignore button simply for quoting yourself. that is.... SICK! lol ;) |
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Subject:RE: goodby sonic foundry
Reply by: Jessariah
Date:1/3/2003 11:35:31 PM
That would be a good thing. Maybe all the "rich media" stuff will be tossed, and they'll keep what works (and has worked). Afterall, they just re-released CDA. We saw a major overhaul of Forge this year (2002) and Vegas is continuing to gain momentum and respect in the prosumer market. Seems like an awful lot of work/potential for apps that are about to be hauled away in the back of a truck. Probably the only thing I would disagree with is the direction they took with Acid. They tried to add "too much" to it, in my opinion. I know Maruuk took a lot of heat about this, but I think that the wiser move may have been to just focus on Acid's main draw - looping/chopping - and spent resources on making it Rewire compatible for those who wanted to integrate midi, soft synths, etc. I think they tried to make Acid more than it should be. A lot of features is fine, but let's face it -- anyone who is serious about this business uses more than one app to get it done...we're also the first ones to lay down the green whenever a new version comes out. |
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Subject:RE: goodby sonic foundry
Reply by: DanMan
Date:1/4/2003 5:17:57 AM
:( ... Ive baought almost everything they sell ... Thought my purchaces might have helped :) ... but alas ... I hope they can keep it going. |
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Subject:wait...it gets better...
Reply by: waynegee
Date:1/6/2003 12:57:59 AM
taken from the pages of F**KED COMPANY: >>>Wow I knew Sonic Foundry was f**ked but this is insane... A few key points from their recently-filed 10K: They lost 56 million in 2002. The CEO's brother loaned the company $1 million. The terms 25% interest, payback due in 4 months. The collateral put up by the company? Everything.<<< Oof. |
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Subject:more.......................
Reply by: aress
Date:1/6/2003 10:37:52 AM
this whole thing is making me want to barf................ anyway....thanks to all SF creative engineers for the best music/audio product i have used in a long time..... i can use version for 4 until the next best thing..... by the way version 4b seems to be solid now on my system, and version 4 sounds much better than 3g......... in fact i am working on a major film project now completly on ACID... most fun i can have with my pants on..... http://comments.fuckedcompany.com/fc/phparchives/search.php?search=sonic+foundry |
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Subject:RE: goodby sonic foundry
Reply by: Snappy
Date:1/6/2003 12:42:46 PM
so sad. =( whatever the outcome, thanx SoFo for sharing your genius! /me clears a little space on my vintage/irreplaceable gear shelf for an Acid CD.... |
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Subject:RE: goodby sonic foundry
Reply by: spesimen
Date:1/6/2003 3:01:21 PM
>>A lot of features is fine, but let's face it -- >>anyone who is serious about this business uses >>more than one app to get it done... yep, but that's not really by choice, for me anyway. i waste way too much time exporting/importing between different apps. i'm also quite sorry to hear about sf's troubles.. |
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Subject:RE: uhhhh.... ok?
Reply by: Maruuk
Date:1/6/2003 4:48:36 PM
Jacose...try writing something deserving of quotation. |
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Subject:RE: uhhhh.... ok?
Reply by: Jacose
Date:1/6/2003 11:15:04 PM
hey man, I was kidding, you couldnt possibly go on my ignore list, youre too funny :) |
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Subject:RE: uhhhh.... ok?
Reply by: Maruuk
Date:1/7/2003 2:23:48 AM
Jacose--now THAT'S quotable!:^> |
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Subject:RE: more.......................
Reply by: DataCowboy
Date:1/7/2003 3:34:39 PM
Who knows, maybe someone like Pinnacle Systems (www.pinnaclesys.com) will buy up the desktop apps from Sonic Foundry so the management can focus on the areas they clearly are more interested in. Of course, Pinnacle just bought Steinberg so their need for SoFo apps isn't particularly high, but it would give them the full product line (multitrack, looping, cd authoring, editing, etc) in desktop audio and video. Hexadecimal www.freesidemusic.com |
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Subject:RE: more.......................
Reply by: dkistner
Date:1/7/2003 3:45:10 PM
"the management"...I caught that! ;) |