10K Cover.MECH 4/14/00 3:45 PM Page 1
Aware, Inc.
1999 Annual Report
4 0 M i d d l e s e x T u r n p i k e , B e d f o r d , M A 0 1 7 3 0
w w w . a w a r e . c o m
10K Cover.MECH 4/14/00 3:45 PM Page 2
Annual Revenue and Net Income
(
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$25
20
15
10
5
0
($ 5)
1995
1996
1997
1998
1999
Revenue
Net Income
Aware provides digital subscriber line technology that enables
simultaneous high-speed data and voice transmissions over existing
telephone lines. We license our technology to semiconductor manufacturers
that sell chipsets incorporating our technology. Our technology offerings
include patents, system design blueprints, semiconductor cores, run-time
software, and hardware reference designs. We also sell DSL test and
development equipment and image compression software products.
To Our Shareholders
1999 was a landmark year for Aware.
This was the year that our management
team’s vision to focus on aggressively
growing our business using an intellectual
property business model was validated.
In 1999 we generated nearly $5 million of
profits on $20.5 million of sales. Royalties,
which represent the use of our technology in
our customers’ products, grew from
$400,000 in 1998 to $4.4 million in 1999.
As DSL deployments by service providers
around the world continue to grow, our
revenues and profits should continue to
grow as well. By focusing on technology
licensing, we have been able to align our
future with the future of some of the leading
companies in the high-tech industry. We
believe that success in DSL by Analog
Devices, Lucent and Intel, to name just a
few, will be synonymous with Aware’s success.
The potential market for DSL is
enormous: every twisted pair phone line in
the world. There are more than 750 million
telephone lines today, and the number
continues to grow. In order for DSL service
to be turned on, a DSL chipset is required at
a central office as well as the remote site.
Every new DSL consumer device or DSL
central office hook-up represents a revenue
opportunity for Aware.
Aware’s technology offerings are enabling
solutions for each of the important facets of
this industry:
• With Analog Devices, we pioneered full-rate
ADSL solutions and multimode G.Lite/ADSL
solutions for central office and remote
site applications.
• With Infineon Technologies, we are enabling
solutions that cost-effectively combine voice
call technology with DSL technology for
central office applications.
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• With Lucent Microelectronics and Intel, we
are enabling complete consumer Internet
access solutions that can offer speeds from
voiceband modem rates to G.Lite and
full-rate ADSL.
• With Siemens, we are designing a new
equipment architecture that integrates DSL
into traditional central office switches,
providing a DSL upgrade path.
• 3COM is using Aware’s technology to
integrate DSL into their broadband
access products.
• With NEC, we are entering the system-on-a-chip
market with a dual mode full-rate and G.Lite solution.
By forging ahead as a technology
supplier, Aware stands to benefit from each
of our customers’ successes. Through Aware,
our shareholders are able to derive benefits
from the DSL efforts within a number of
companies who, by all accounts, are leaders
in their respective industries.
Key contributors to this year’s financial
success were the addition of a number of
new customers and new development efforts
with existing customers. These projects
provide an immediate benefit because of the
contract revenue associated with our
customers’ developments. But even more
important, expanding the number of DSL
solutions that use our technology is a leading
indicator that we will maintain or improve
Aware’s market share in this explosive
industry. We were able to roughly double the
number of customer developments from
1998 to 1999, and expect this to continue to
grow. With our strong customer base, we
expect to be supplying technology to 40-50%
of the market in the coming years.
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Essential to our success as the premier
supplier of DSL technology is our ability to
continue to lead DSL innovation. Our
mission is to continue to address the rapidly
changing requirements in the DSL industry
with engineering innovation and to bring
those innovations to standards bodies for
global acceptance. Standards bodies are an
integral part of our strategy. They serve as a
rigorous technology validation forum for
our innovations. Today, we offer technology
packages for:
• Full-rate ADSL, G.Lite and multimode solutions
• Multiport chipset architectures for space-
efficient central office solutions
• ADSL-over-ISDN architectures for
international deployments
• Voice enabled DSL for cost-effective multi-
service offerings of high-speed data and
residential voice
• Techniques to improve provisioning,
maintenance and operation of DSL service
to help service providers meet their normal
standards of reliability
Each of our technology packages is
backed by extensive experience in DSL
trials, deployments and interoperability tests.
Each one leverages advancements in signal
processing and digital communications
techniques and tools, chip design and
verification tools and software development
tools. Aware has been first to market on a
number of important DSL technology
fronts including rate adaptivity and
multimode solutions and, most recently,
fast-retrain — a technique standardized by
the International Telecommunications
Union that improves the robustness and
versatility of DSL service offerings.
Paralleling our commitment to engineering
innovation are our efforts to file patent
protection for our inventions. We ended
1999 with 24 issued patents and 20 patent
and provisional patent applications.
Through our ongoing commitment to
engineering excellence, standards body
participation, and patent filings we are
building a patent portfolio that is a strong
asset for our business.
Looking toward the future, our strategy
is to continue to leverage our technology
innovations and our process of delivering
value as an intellectual property company.
The future of ADSL, the future of Aware,
and the opportunity for growth as an
independent technology supplier have never
looked better.
Sincerely,
Michael A. Tzannes
President and
Chief Executive Officer
John K. Kerr
Chairman of the Board
DSL Landscape
TECHNOLOGY SUPPLIERS
Aware
or
Internal Developments
SEMICONDUCTOR
MANUFACTURERS
Traditional
or
Fabless
D
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P
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SYSTEMS
MANUFACTURERS
Telephone
Company
Equipment
Customer
Premises
Equipment
SERVICE PROVIDERS
Incumbent and Competitive
Local Exchange Carriers
International PTTs
Internet Service Providers
END-USER SERVICE
Internet Access
+ Voice
+ Video
Conferencing
+ Video
3
Corporate Information
John K. Kerr
Chairman of the Board
Aware, Inc.
Legal Counsel
Foley, Hoag & Eliot LLP
Boston, MA
Michael A. Tzannes, Ph.D.
President and Chief Executive Officer
Aware, Inc.
Independent Accountants
PricewaterhouseCoopers LLP
Boston, MA
Board of Directors
Edmund C. Reiter, Ph.D.
Senior Vice President
Aware, Inc.
G. David Forney, Jr., Sc.D.
Adjunct Professor, MIT
Vice President (retired), Motorola, Inc.
David Ehreth
Chief Executive Officer
Westwave Communications, Inc.
Michael A. Tzannes, Ph.D.
President and Chief Executive Officer
Edmund C. Reiter, Ph.D.
Senior Vice President
Richard P. Moberg
Chief Financial Officer and Treasurer
Officers
Richard W. Gross, Ph.D.
Senior Vice President, Strategic
Development
Halil Padir
Senior Vice President,
Research & Development
Click here to view our 1999 10K
4
Transfer Agent
EquiServe
150 Royall Street
Canton, MA 02021
Annual Meeting
The annual meeting will be held at
10:00 a.m. on Thursday, May 25,
2000 at the Bedford Renaissance
Hotel in Bedford, Massachusetts.
Stock Listing
The Company’s common stock is
traded on the Nasdaq National
Market under the symbol AWRE.
Corporate Headquarters
40 Middlesex Turnpike
Bedford, MA 01730
781-276-4000
West Coast Headquarters
3685 Mt. Diablo Boulevard
Lafayette, CA 94549
Website
www.aware.com
Investor Relations
For a copy of the Company’s Form
10-K, additional copies of this
report or other financial
information, contact:
Aware, Inc.
Investor Relations
40 Middlesex Turnpike
Bedford, MA 01730
781-276-4000
10K Cover.MECH 4/14/00 3:45 PM Page 1
Aware, Inc.
1999 Annual Report
4 0 M i d d l e s e x T u r n p i k e , B e d f o r d , M A 0 1 7 3 0
w w w . a w a r e . c o m