14 Nov Sonic Foundry reports first cash-positive quarter
Madison, Wis. – Rich media communications developer Sonic Foundry, Inc. has announced that it generated more than $400,000 in positive cash flow in the fourth quarter of 2006, its first cash-positive quarter since the dotcom bust.
Sonic Foundry, which has been building toward profitability since moving into the rich-media space, announced its year-end financials during a webcast in which the company showcased new search technology.
The company reported 52 percent organic growth in revenues, reaching $12.6 million for its 2006 fiscal year compared to $8.3 million for fiscal 2005, while lowering its annual net loss to 11 cents per share from 14 cents per share for fiscal 2005.
Sonic Foundry’s fiscal fourth quarter revenues were $4.1 million with a GAAP net loss of one cent per share. The quarterly loss consisted entirely of non-cash related items of depreciation and amortization and compensation for stock options required by new accounting regulations.
Coupled with improved collections, the positive operating results generated an increase in cash for the quarter of $436,000.
Through continued gross margin improvements and a renewed focus on project consulting, Sonic Foundry anticipates more than $20 million in revenues with full year profitability in 2007.
A glimpse into future revenue drivers came during the webcast of financial results, which featured chairman and CEO Rimas Buinevicius utlilizing the company’s communications system, Mediasite, to demonstrate its new multi-modal search capabilities for locating segmented content.
“Five years ago, after acquiring Mediasite, we envisioned a day when the world would be communicating with rich media for student learning, business and government communications,” Buinevicius said. “In 2006, that moment has arrived.
“Today, we are showcasing yet another significant advance, being able to automatically create searchable rich media databases for the purpose of finding knowledge instantly.”
Buinevicius demonstrated the system’s capabilities by showing how its phonetic algorithms can produce search results from spoken words, even when they are delivered with foreign accents. He added that the company is considering rolling third party technology into the existing English speech recognition software to provide searchable content in other languages.
The new search technology combines speech recognition, phonetic search, optical character recognition, language processing, and contextual analysis. It locates segments drawn from the 12,000 corporate and university presentations recorded on Mediasite, and sifts through the content of the speeches and associated PowerPoint presentations.
“So what we’re doing here, algorithmically, is finding both instances of the spoken word as well as the written word,” Buinevicius said as he searched various keywords with his laptop.
The search technology has been under development for 15 years, fueled by over $30 million in R&D. As a service, it will help fuel greater adoption by overcoming price objections for manual transcription fees, and it can be used within applications beyond Mediasite, including podcasting, webcasting, and third party content libraries.
Buinevicius pointed to external events that have validated consumer applications for IP video, including Google‘s acquisition of YouTube, the popular user-generated video sharing community. He views the acquisition as a signal for the way people will adopt the technology.
“It makes our process of explaining the technology easier,” he added.
Buinevicius said estimates of the value of Sonic Foundry’s target market are difficult to make. Based on projections from related industries – the $15 billion electronic training and distance learning markets and the estimated 25 million rooms that need LCD projectors – analysts believe that the company is nowhere near market saturation and very near early stage in terms of market potential.
“The math is maybe too big to be believable,” Buinevicius said.
Perhaps the best indicator of where the technology is headed can be found with incoming college students who increasingly demand searchable media content from their universities.
Buinevicius also announced that the U.S. Patent and Trademark Office granted a patent covering the company’s RGB (red, green, blue)-based graphics capture and distribution processes. The patent will enable Sonic Foundry to pursue new licensing deals.
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