Financial Summary

Recent Updates

Highlights

On November 15, 2011, Ubiquitous announced that it had begun offering its AIR NOE Solution for integrated wireless LAN in Rensesas Electronics Corp.’s (TSE 6723) latest wireless LAN modules.

(For original PDF announcement in Japanese-language only please click here.)

On November 14, 2011,the company released 1H/Q2 FY03/12 results: click here to go direct to the 1H FY03/12 results section.

(For original PDF announcement in Japanese-language only please click here)

On November 10, 2011, the company announced it was developing the necessary WPS Registrar for access point implementation as part of new wireless LAN solutions. The product would be available for evaluation at the end of 2011.

(For original PDF announcement in Japanese language only please click here.)

On November 4, 2011, the company announced a revision to its 1H FY03/12 earnings forecast, which was as follows:

• Sales: 408 million yen (vs. previous forecast of 477 million yen)
• Operating profit: 48 million yen (vs. previous forecast of 20 million yen)
• Recurring profit: 50 million yen (vs. previous forecast of 20 million yen)
• Net income: 27 million yen (vs. previous forecast of 16 million yen)

While entrusted development sales in the Network segment were strong, in the Game segment software licensing fees were more sluggish than expected, and the company downgraded its sales forecast by 69 million yen (-14.5%). However, the company upwardly revised its outlook for operating and recurring profit, as well as net income. The upward revision was due to:

• Some manufacturing costs have been pushed back into 2H
• Lower personnel costs as hiring plans were not met

The company maintained its full-year FY03/12 forecast.

(For original PDF announcement in Japanese language only please click here.)

On October 19, 2011, the company announced that it had started offering the latest version of its Ubiquitous QuickBoot R1.2 software for Linux and Android.

(For original PDF announcement in Japanese language only please click here.)

QuickBoot is a proprietary software product that allows embedded devices to start-up faster. The latest version of the software development kit was the first release in almost a year, and was based on feedback and requests from customers. Hardware constraints resulting from having enough free storage space to allow the installation of QuickBoot have been solved using compression technology and would allow the technology to be implemented into a wider range of embedded devices, the company said.

For corporate releases and developments more than three months old please refer to the News & Topics section.

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Trends & Outlook

Quarterly Trends

Seasonality

The company’s main customer is Nintendo Co. (TSE 7974)(58.6% of FY03/11 sales; Ubiquitous Network Framework is used in the Nintendo DS handheld video game console), which introduces a degree of seasonality in Q4. Sales related to Commissioned Development tend to follow budgeting cycles of customers, which tend to concentrate in Q2 and Q4, according to the company.

1H/Q2 FY03/12 Results (Announced on November 14, 2011; please refer to tables above)

1H sales were off 32.9% YoY at 409 million yen, which was equivalent to 36.5% of the company’s full year forecast. The company cited continued lower than expected sales in the Game Network category and reduced consumption due to March 2011’s earthquake in Tohoku that affected semiconductor shipments and thus products equipped with the company’s software as the reasons behind the shortfall in sales.

Looking at sales performance by product category, Game segment sales fell 63.3% YoY, while non-Game segment sales increased 13.0% YoY. Product category performance against full year sales forecasts was as follows:

• Game segment: 29.9% (vs. full-year forecast of 450 million yen)
• Network segment: 51.4% (vs. full-year forecast of 320 million yen)
• Database: 41.6% (vs. full-year forecast of 200 million yen)
• QuickBoot: 17.7% (vs. full-year forecast of 150 million yen)

In contrast, operating profit at 48 million yen exceeded the company’s initial forecast by 20 million yen. The company explained that this was because that even though sales were 69 million yen below forecast, operating profit benefited from factors including some manufacturing costs being deferred until 2H, lower personnel costs from unmet hiring plans, and the total amount for the transfer of assets relating to manufacturing costs was greater than initially estimated.

The company made the following comments on the performance of its various business segments:

Network

Game Segment

Royalty revenues were impacted by a slump in sales for mobile games that use the company’s products; these came in worse than initial forecasts.Game segment sales contributed to 33.0% of overall sales in this business, down 60.2% YoY.The company is attempting to gauge likely developments for the Game segment in FY03/12, and has commented it would be paying close attention to year-end sales and trends in major game titles.

On October 27, 2011, Nintendo downwardly revised its FY03/12 forecasts, slightly cutting its sales forecast for Nintendo DS software titles to 62 million units from the previous projection of 65 million units it announced on July 27, 2011.

Network Segment

The company commented sales in this segment remained strong, driven by healthy royalties from digital consumer electronics and an increase in wireless network-related projects. As a result, network segment sales as a percentage of total sales grew to 40.2%.

In digital consumer electronics, royalties generated by Ubiquitous DTCP-IP for major domestic electronics companies have steadily increased, due to last-minute demand in the television space that accompanied the end to domestic analogue broadcasting in July 2011. Moreover, recording device-linked royalties for other major electric machine manufacturers recovered. This was because the production of microcomputers equipped with recorders was resumed in Q2 FY03/12 having been halted following March’s earthquake in the Tohoku region. Furthermore, entrusted project development for broadcasters, which the company had been conducting for some time, also contributed to Q2 sales.

In the wireless-network related space the company released a beta-tester version of its WPS2.0 compliant ‘Ubiquitous WPS’ wireless LAN solution in May: the latest standard for WPS (Wi-Fi Protected Setup) created by the Wi-Fi Alliance, which is a trade association that sets standard specifications for wireless LAN products. The product was launched in July and according to the company, it is being used in the networked audio devices of domestic electronic equipment manufacturers and in the digital cameras of major manufacturers. Several devices equipped with this product have been launched since September 2011. In addition, sales of wireless-network related products were comparatively strong, including its network solutions for digital cameras, which enables cameras to connect with smartphones.

The strong performance of the company’s wireless network-related products has coincided with the rise of smartphones and increased demand for network connectivity among devices that until recently had not required connectivity, such as digital cameras and camcorders. SR Inc.’s understanding is that the emergence and increasing popularity of smartphones has meant that products that previously did not have network connectivity, such as digital cameras and video recorders, need to improve their functionality by offering network connectivity. This in turn has driven demand for the company’s products.

Database

Digital camera and audio-related royalty revenues were strong from existing customers. However, new client uptake and the incorporation of the company’s offerings into new products was expected to be behind schedule though and the company commented it was concerned that growth in royalties will slow down going forwards.

QuickBoot

Ubiquitous QuickBoot-installed products were to enter mass production in 2H and royalty revenues from this will start to flow in. The company had previously indicated it was highly likely that the first royalties it would receive from mass production would come in at the start of Q3. However, the timing was earlier than expected and royalties were recorded in Q2.

Conversely, the company is continuing on several fronts with development and evaluation toward Quickboot’s adoption. However, in some cases it will not be included in the mass-production process until after 2012 and it appears its adoption will be behind schedule. It has been suggested that the time required to implement QuickBoot was one reason for this delay and on October 19, 2011, the company released a new version, Ubiquitous QuickBoot R1.2, as one method of addressing this issue. This version is easier to use across a wider variety of devices, as not only does it take less time to implement, but also the installation of compression technology means the amount of ROM it requires has also been reduced.

As of November 2011, the company believed its FY03/12 forecast was attainable and decided to leave the forecast unchanged despite the presence of a variety of operating risks, such as the possibility that performance at the Game segment continued to slump if clients were forced to adjust production outputs due to problems in supply chains as a result of flooding in Thailand.

Q1 FY03/12 Results

On August 12, 2011, the company released Q1 FY03/12 results (see table above).

Sales were down 22.7% YoY at 153 million yen. The company posted an operating loss of 26 million yen (vs. an operating profit of 30 million yen in Q1 FY03/11). The company commented that Q1 results were below the company’s forecast mainly due to lower than expected sales in the Game Network category.

The company maintained its 1H and FY03/12 forecast.

Sales were down 22.7% YoY at 153 million yen. Moreover, SG&A costs – led by labor expenses – rose 9.4% YoY resulting in an operating loss of 26 million yen (vs. an operating profit of 30 million yen in Q1 FY03/11).

The company maintained its 1H and FY03/12 forecast.

The company noted sales were more sluggish than it had originally expected with Q1 FY03/12 sales coming in at just 13.7% of its full-year sales forecast. The reason for this was lower than expected sales in the Game Network category. On the other hand, sales outside of the Game Network category came in within the range of what was expected, the company noted. Sales in the Game Network segment were down 51.2% YoY, non-Game Network sales increased 39.3% YoY.

The company made the following comments on the performance of its various business segments:

Network

Game Segment

As mentioned above, Q1 results were sluggish. The majority of sales in this segment are from Nintendo-DS Wi-Fi game royalties, SR Inc. feels the slump reflects an overall drop in game sales.

On this point, the company commented that it will be monitoring sales conditions for game titles, such as the impact of price reductions for the Nintendo 3DS. (From August 11, 2011, the manufacturer’s suggested retail price will be cut to 15,000 yen from 25,000 yen.) Although this price cut will not directly generate Nintendo 3DS game royalties, the company stated that it will be paying close attention to whether or not the price cut would stimulate game sales, including those for the Nintendo DS and during the year-end sales period.

On July 28, 2011, Nintendo downwardly revised its FY03/12 forecast, including cutting its projection for Nintendo DS software title sales to 65 million units from 67 million units.

Network Segment

Royalties from digital consumer electronics were adversely affected when shipments of semiconductor products equipped with the company’s software were halted because of the March 2011 earthquake in Tohoku. However, the company commented that the impact of the earthquake was incorporated into its forecasts at the outset and the impact was within expectations.

In May the company released an evaluation version of its WPS2.0 compliant “Ubiquitous WPS” wireless LAN solution: the latest standard for WPS (Wi-Fi Protected Setup) created by the Wi-Fi Alliance, which is a trade association that sets standard specifications for wireless LAN products. The company launched this product in July and as of August 2011 it was providing it to Murata Manufacturing Co. (TSE 6981) for use in its wireless LAN module and to BridgeCo Inc. of the United States for use in it its network audio SDK. According to the company, there have also been positive inquiries from other customers and it is optimistic that its wireless LAN solutions, particularly those provided by this product, will become a source of future sales.

In addition to the above, in the Network segment the company announced that it has completed development of a prototype product called “iRemoTap” in April 2011 - a solution for visualizing electric power savings. The device measures electricity consumption and gathers the data via a wireless LAN to a server, and then displays the information. In June 2011, in a bid to expand its businesses in the space, the company also announced a business partnership with Sassor Inc., which has expertise in visual power savings systems, particularly in user interfaces.

The Company plans to commercialize the iRemoTap sometime during FY03/12. The product is viewed by the company as its pilot project and first step toward realizing its new vision for the next 10 years as described in “Connecting Value - Providing Service Platforms,” announced in June 2011.

Database

The company generates royalties from existing customer use of its products in digital cameras and set-top boxes. Aiming to grow new customers, in June 2011 it released a free evaluation version SDK (Software Development Kit) and has been working to develop new business to acquire opportunities.

QuickBoot

The company commented it had finished the work required of it for some of the products that will use QuickBoot and it plans to ship these in 2H FY03/12. It was also continuing evaluation development for a number of other customers for automobile and television-related applications.

For details on previous quarterly and annual results please refer to the Historical Financial Statements section.

Full Year (FY03/12) Outlook

The company believes FY03/12 will be instrumental in setting the tone for business expansion for the decade ahead, and it plans to actively invest in new areas of business (e.g., web services).

The company expects sales to decrease 21.3% YoY to 1.12 billion yen due to:

• A 46% YoY decline in Game sales to 450 million yen from 833 million yen because no additional royalties are expected from Nintendo 3DS or game titles.
• Network sales are expected to fall -18.7% YoY to 320 million yen from 394 million yen as the Eco-points subsidy spending program ends.

However, Database sales are forecast to increase +42.2% YoY to 200 million yen from 141 million, and QuickBoot sales are expected to grow +172.7% YoY to 150 million yen from 55 million yen.

The company has forecasted operating profit to decrease by 74.0% YoY to 170 million yen. It commented in addition to the projected fall in sales, it expects operating profit to be further affected by increased outsourcing and labor costs due to hiring of new employees.

Key FY03/12 themes for each category follow:

Network:

• The company will continue developing applications for consumer electronics and hopes to increase product adoption within this field.
• In the wireless space, the company plans to accelerate development of products that are compatible with new standards. If everything goes smoothly, the company hopes to start selling products in FY03/12.

Database:

• Five new DeviceSQL-enabled devices were added to the roster as two major domestic electronics companies - Olympus and Panasonic - included the technology in spring 2011 digital camera models.
• While client adoption of DeviceSQL lagged in FY03/11, the company aims to increase adoption in FY03/12. The company feels beyond being a technological innovation the system offers real functional benefits to users.

QuickBoot:

• The company expects to receive mass-production royalties from 2H FY03/12 onward.
• Customizing this product has taken more time than the company originally anticipated and the company hopes to solve these technical problems by hiring more engineers and working with partners.

Based on a company interview SR Inc. feels that the company forecast for QuickBoot sales could come in slightly above or below projections depending on the timing of the second round of mass-production royalties. In addition, the company thinks that there is potential for Network sales to beat the forecast if new wireless products perform well.

Longer Term Outlook

The company transitioned to a new corporate structure on March 1, 2011, in an effort to speed-up its decision-making process, be better able to develop new technologies and meet client needs. Kanji Mihara, the new president, worked for many years as an engineer at Sony Corp. (TSE 6758) before spending time as the head of marketing and executive director of operations at Ubiquitous. He told SR Inc. he intended to pursue the company’s founding ethos of leading the way in creating a “ubiquitous network society”. The current mid-term period puts particular emphasis on corporate preparations for this high connectivity, ubiquitous network society. The company has said it aims to continue research and development and expand operations via tie-ups with other companies. On June 17, 2011, the company announced its “Second Founding Corporate Vision”, which sets out a goal of becoming a global leader in the “Internet of Things” and of offering service platforms based on its software that create value.

The Second Founding has been positioned as a component of the first three-year period within the company’s mid-term company plan. An important theme is development of the company's existing integrated platform software business. Achieving this depends on whether it can diversify its product mix away from the Game segment and towards a structure where the Network, Database and QuickBoot segments also contribute toward earnings. Additionally, as described in its Second Founding Corporate Vision, during this period it intends to accelerate development of its service platform-related business and make it another source of sales.

An overview of the mid-term plan by category follows:

The forecast includes declines of sales in the Game segment, reflecting decreasing royalties from Nintendo-DS Wi-Fi games (the majority of the company’s Network sales). In non-Game Network sales, although the company expected more manufacturers to use its products FY03/12 sales are expected to take a temporary hit in response the end of the government Eco-points consumer purchase subsidy program. It has forecasted sales to then rebound in FY03/13. However, that rebound is predicated upon the continued development and eventual sales of wireless LAN related products that the company was working on as of the start of FY03/12.

The company expects database sales to grow in the medium term. Royalties from DeviceSQL-enabled digital cameras were contributors to earnings in FY3/10, and the company anticipates growing sales (and royalties) by increasing the number of products using DeviceSQL.

The forecast for QuickBoot revenues includes significant growth in FY03/12. If SDK sales are on-track, royalties could make a significant impact from FY03/12 onwards, pushing QuickBoot’s top-line contribution to levels similar to those expected for Game products in FY03/13.

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Business

Business Description

Broadly speaking, the company makes software components for embedded computers.

Ubiquitous develops software components for embedded computers, focusing on resource-constrained platforms (small processors, low memory). Embedded computers refer to specialized computer systems that are developed for a specific function (as opposed to a general purpose computer that can be used for multiple tasks). An example of an embedded computer is a handheld game console – design is optimized for the core function, playing video games. An obvious example of a general purpose computer is a PC (personal computer). Company products have traditionally focused on networking; however its product portfolio has been growing to include packages that can be used in both network-enabled and stand-alone platforms.

The company reports sales across three product divisions: Software Licenses, Support, and Commissioned Development, however the majority of the company’s sales have historically been from Software Licenses (approximately 81% of FY03/11 sales).

Product Description

The company’s products can be classified into two categories: network products (the company’s core competence and historic focus) and other middleware. The company sells its Software Development Kits (SDK) as either stand-alone products, or as part of a “platform” offering (a turn-key solution which includes an operating system, network support, and other basic software).

Networking Software. Core product.

The key product has historically been Ubiquitous Network Framework, a software package which allows device manufacturers to add networking capability to their products. Nintendo selected Ubiquitous Network Framework for use on its DS video game console in 2005; Ubiquitous is the sole supplier of the solution. SR Inc. understands that the technical specifications of the Nintendo DS made internal implementation of a networking package by Nintendo difficult. Ubiquitous was able to solve Nintendo’s need by offering the small and efficient TCP/IP solution. Ubiquitous is paid a royalty for each network-enabled game cartridge that is sold.

Network protocols are the means by which network devices communicate and exchange data. TCP/IP is actually a combination of two network protocols, TCP and IP, the latter specifies an addressing structure. TCP establishes a method for data exchange between two or more network entities. TCP is a computationally intensive protocol for transmitting data due to several factors: ordered transfers ("receivers" rearrange data in the correct order), retransmission of lost data (receivers must determine that some data is missing, then ask for a retransmission), and error-checking and flow control (each data packet is checked to verify it’s complete, and receivers can ask senders to slow down). The challenge arises from the features that make up the TCP protocol (data retransmission, error checking, etc.), all which require CPU time. Minor increases in processing time can mean much higher lag between points as throughput increases, and overall system slowness for small processors that don’t have enough power to operate the device and handle complex calculations for TCP.

The company indicated that although the Ubiquitous Network Framework has been instrumental in the company’s early successes, other technologies have evolved and the product is becoming less and less unique than when it was originally introduced.

Ubiquitous Network Framework is also sold to Renesas Electronics Corporation (a leading microprocessor manufacturer), who resells the SDK with its products.

Platform Products

Ubiquitous Network Framework – a Software Development Kit (SDK) which effectively bundles several networking technologies together in one package. The SDK includes all of the major software components that a device manufacturer would need to add network functionality to a product:

• An operating system (the Ubiquitous Kernel, a non-preemptive operating system which was created to provide :the ‘bare minimum’ for TCP/IP to function)
• Common device drivers and basic applications (file system, calendar and timer)
• Common networking protocol support (TCP/IP, SSL) as well as network programs such as a web server, email, etc.
• Higher level protocol support (such as DLNA modules which provide support for interacting with other consumer electronics)

Network Offload Engine (NOE) – a combined hardware and software solution that allows for offloading processing of network protocols to a dedicated processor.

Ubiquitous micro Network Framework – a stripped down version of the Network Framework, designed to bring the most essential networking components to devices with limited processing capabilities.

Ubiquitous USB Host – a SDK which includes the minimum amount of software required to equip a device with USB support. The SDK includes the Ubiquitous kernel, drivers to support common hardware, and the necessary software to enable USB support.

Middleware. Growth driven by embedded database solutions.

The company’s middleware products are designed to work with the company’s operating system (the Ubiquitous kernel) or with those provided by other companies. The company offers multiple different products; DeviceSQL (a database) and QuickBoot (software that accelerates booting for devices) are the most relevant (see By The Way for the full list).

Ubiquitous DeviceSQL

DeviceSQL is a database engine SDK (technically speaking, a ‘database’ consists of two components: the raw data, and the engine, code that controls access and modification of the data) that the company acquired in 2008 from Encirq Corporation. Embedded software developers typically strive for as many features as possible while minimizing the total program size (size matters; if programs are too large, devices will need more memory and larger processors, increasing costs). The company claims that DeviceSQL is the world’s smallest database engine (24 Kb!), and boasts an impressive list of features:

• Abstraction from database commands (programmers can perform complex database operations without expert-knowledge of the database commands that run behind the scenes)
• Support for ACID transactions (atomicity – all or nothing processing, consistency – the database remains stable, isolation – data isn’t accessible until an operation is completed, durability – completed operations survive system failure)
• Stable response time (adding more data does not slow the database down)
• Multi-threading and multi-processor support

The technology has been used in several devices. For example, Olympus Corp.’s (TSE 7733) Tough TG-310, Tough TG-610 and Tough TG-810 camera models to enable smarter image searches, which were launched in February 2011; Alpine Electronics Inc’s (TSE 8816) Rear Vision Navi car navigation system (announced in October 2009); Pioneer Corp.’s (TSE 6773) CDJ-200 and CDJ-900 music systems (announced in October 2009); Panasonic Corp.’s (TSE 6752) Lumix DMC-TZ20 and Lumix DMC-FT3 (announced in February 2011). The company can only disclose which manufacturers use its products when it is allowed to. It points out however that the list of its customers reads like a Who is Who of the Japanese consumer electronics industry and device industry.

The pricing of DeviceSQL varies, mostly depending on the number of expected number of units a manufacturer hopes to sell; the company suggests that prices range from as few tens of yen up to several hundred yen and multiple royalty value can be applied in a single project depending on the number of units shipped and other factors.

QuickBoot. Revolutionary product and main driver of future growth.

QuickBoot is a novel software solution that allows embedded devices to start faster. The technological challenge that it appears to dramatically solve is two-fold: allowing devices to reach a "useable" state faster than conventional methods, and providing substantial power savings compared to 'suspend and resume' methods used by many manufacturers to solve the boot speed problem. The word "dramatically" is used here to highlight the fact that QuickBoot prototype on Android, released by the company in November 2009, made the user interface ready to use in less 1 second, compared to 10 or more seconds for the fastest available alternatives.

Technology detail

As more consumer products are built on embedded technologies, the devices have evolved from single-function machines to include more robust networking, graphics, and other functions that make the devices into desirable products. Additional features typically means more resources (processor, memory, etc.) are required, which means greater power consumption and complexity being packed into shrinking packages. The trade-off for more gadgetry packed into newer embedded devices has meant greater power demands (to run the many components) and longer load times (programs need to be loaded, initialized, etc. before users can use them).

The industry’s answer to user demands for "instant-on" functionality was twofold: suspend and resume (certain components are turned off, but some continue to draw power) and hibernation mode. Unfortunately, suspend and resume implementations sacrifice power consumption to provide full operation at the touch of a button. Hibernation modes write all of the system data to permanent storage, but require all of the data to be reloaded into memory once the user activates the device. Suspend and resume provides speed at the cost of power, hibernation provides improved power consumption at the cost of boot speed.

Ubiquitous’ QuickBoot seems to address both of these major constraints on system designers (load time vs. power consumption). QuickBoot is a superior alternative to suspend and resume, and can improve hibernation performance. The proprietary technology determines which pieces of code are the most important, and loads these first. This results in two remarkable advantages over conventional options: when the device is off, it consumes no power (vs. suspend and resume, which continues to draw power), and when a user starts the device, it loads certain programs first and reaches a useable state very fast.

The company hopes that the technology can stay highly competitive for at least 3 years in its initial form; target devices include smartphones, electronic books, digital home appliances, and medical equipment. SR Inc. understands that the technology’s limiting factor is mostly memory size (how much information needs to be available at the point of power-on), which could be mitigated by advances in flash memory technology.

Ubiquitous announced the release of QuickBoot SDK 1.0 on March 23, 2010. The company suggests that the price per SDK could be in the area of tens of millions of yen (additional fees for support or customization), with hundreds of thousands yen per year of maintenance. The biggest source of the future revenues however will be the royalties from the devices incorporating the technology.

SR Inc. understands that QuickBoot technology is supported on the following microprocessor and operating systems:

Professional Services

The company also provides consulting and other customized development for clients; however this is a small part of the overall business.

Business Model

The company’s sales are an upfront payment for an SDK (which can include initial support or customization), and running royalties based on the number of devices that a manufacturer sells. SR Inc. understands that the royalty payment stream is typically the greater portion of overall revenue, so sales (and profitability) are driven by the number of licenses that are shipped.

Per unit prices can vary by customer type. For customers that are creating the final product (such as Nintendo) there is more room to negotiate up-front vs. royalty income; resellers (such as microprocessor companies) tend to have less bargaining power with their consumers, which can impact prices paid for SDKs.

Costs are largely incurred up-front (when the company invests in R&D to develop new products). Marketing expenses could increase as the company tries to broaden its customer base. The company suggested that it will continue to invest in R&D (by increasing headcount in engineering and general staff), but substantial cost increases could be made following an increase in overall profits.

Cost Structure

The main components of the company’s costs are labor and Research & Development expenses (averaging over 60% of SG&A from FY03/06 through FY03/11). Labor costs are basically fixed; the company produces software packages to be used in other devices, so per-unit expense after development is negligible. R&D expenses are to an extent variable, but some level of R&D could be considered mandatory (developing innovative technologically advanced products is the name of the game in embedded computing).

Profitability Snapshot, Financial Ratios

Strengths, Weaknesses

Strengths:

• The management team. The company founders and its current leadership honed their skills at some of the most recognized companies in the IT world, such as Microsoft and Accenture. That means the young (majority of the directors in their 40s) team has something that very few Japanese venture companies have – international level management and financial skills in addition to advanced technical skills.
• Technological edge. In SR Inc.’s view, the QuickBoot technology might represent a “killer app” with remarkable potential. The innovative attitude and technical aptitude to create such technology are relative strengths that organizations either have or don’t; tinkering engineer’s spirit can’t be duplicated and Ubiquitous seems to have that spirit.
• Profitability. The company has been and is profitable (a difficult proposition for start-ups, especially technology companies trying to create a niche), and has seen relatively healthy profit margins (see Profitability Snapshot). This provides the company with cash that it can reinvest to develop and improve its product offering. In SR Inc.’s view this also substantially improves the company’s ability to finance its growth – the Japanese stock market historically tended to reward cash generative growth businesses while casting a doubtful eye on ventures with a promising technology but producing no profits.
• Size. Although the company’s small size could be considered a limitation in some respects, the small lightweight structure that defines a small company is an edge that large bureaucratic companies seldom possess. Major changes in the technology industry are typically revolutionary, started by hobbyists who want to change the world. A smaller company provides the necessary individual autonomy and creative freedom.

Weaknesses:

• Lack of revenue diversification. As of FY03/10, the company’s success has mostly been the result of one product (TCP/IP) and one customer (Nintendo). To grow further, the company needs to establish itself as a critical supplier of embedded technologies, as opposed to a single product. The company appears to be addressing this weakness (the Platform offering was announced in 2009), the results of which have yet to develop.
• Limited marketing capability outside of Japan. The company has been successful in cultivating relationships with domestic device manufacturers and microprocessor companies (Olympus and Renesas being examples), but as yet lacks overseas marketing and sales capabilities.
• Unproven new major product. QuickBoot appears to be a very promising technology. If successful it has the potential to become the core product and drive Ubiquitous’ growth for several years. However, it could take some time before it becomes a major contributor to the bottom line. (Having said that, the company released QuickBoot 1.0 on March 23, 2010; initially supporting ARM processors and the Linux (including Linux-based Android) operating systems).

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Market & Value Chain

Market Overview

Estimating the market size for embedded systems is difficult due to the wide range of systems that could be included. Ubiquitous’ products could be included in many types of devices: from handheld game consoles to small outdoor weather monitoring sensors to mobile telephones. An important market for the company is consumer electronics, although the company’s technology could be used in a wider range of applications (embedded systems are found in practically every industry). Japan‘s consumer electronic industry produces and sells hundreds of millions devices; the growing sophistication, miniaturization, and connectivity of these devices provide a fertile ground for growth for purveyors of embedded software.

SR Inc. also speculates that the overseas market may become increasingly important for the company. Software like QuickBoot in particular is promising in this regard. The reasons are twofold. First, while the Japanese electronics manufacturers have historically tended to do everything in house, the overseas firms seem to be more focused on their core strengths and happy to outsource or buy off-the-shelf solutions that would enhance their products but are not their core competence. In a way, the Japanese companies often buy from the outside when they have no choice. The overseas companies, particularly those in emerging Asia, would only develop themselves in non-core areas when they have no choice. Second, a consensus based Japanese managerial culture often means that decisions take time to be made. By contrast, more top driven Asian and American competitors tend to make decisions more quickly. In SR Inc.’s view there is no right answer in this respect, and highly successful Japanese firms have been proving it over and over. However, form a perspective of an up-and-coming software vendor, a quick decision to employ its technology with less modification is much more beneficial than a prolonged consideration and extensive customization demands. In other words, Ubiquitous can be successful both in Japan and elsewhere in the world but it can be successful faster overseas.

Customers

Switching costs for customers are relatively high. Typically, once an SDK is selected for a product, the device manufacturer will continue to use the component until the device is discontinued. SR Inc. understands that the reason for this is due costs associated with re-engineering, testing, and support which can escalate if a manufacturer creates multiple versions of the same product.

Suppliers

Excluding employees, the company does not have suppliers that have a substantial impact on the company’s business.

Barriers to Entry

The barriers to entry for embedded software development are mostly technical.

Competition

There are numerous companies that develop embedded software; the company’s relatively small size (30 employees as of FY03/09) and limited product portfolio (TCP/IP was approximately 68.6% of FY03/10 sales) mean that there are few competitors for direct comparison.

Substitutes

There are limited substitutes to the company’s products (embedded software). Theoretically, hardware solutions could replace many functions performed by embedded software, but not without tradeoffs between system complexity, power usage constraints, per unit cost, and device maintenance (software is easily upgraded).

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Strategy

Ubiquitous was created to create unique technologies that are otherwise unavailable for customers. This niche strategy fits with the company’s key strength: engineering expertise. Product examples of this strategy include the Ubiquitous TCP/IP stack (providing fully-compliant network connectivity to resource-constrained systems), the Network Offload Engine (NOE; extremely resource-constrained systems offload network processing to other devices), and QuickBoot (dramatically reduces the time necessary for a device to be “ready” for use). The company's ultimate strategic goal is the creation of a high connectivity, ubiquitous-network society.

The company’s execution has been largely focused on the domestic market. This was due mostly to convenience, i.e. a “first things first” factor. The management team recognized the need to expand into a worldwide supplier. However the company is small and working with the Japanese companies kept the team sufficiently busy. The Japanese clients of Ubiquitous are global in their scope however, and that means that the company will not be starting from scratch when presenting itself to the overseas customers. Nintendo DS is known worldwide.

The strategy going forward seems to be to continue to develop and reinforce existing domestic client relationships while aggressively investing in overseas growth. This may mean temporarily higher costs as the management and sales teams are beefed up for the new challenge. However, it would appear that such spending is necessary and should bear rich fruit if done intelligently and strategically. The management team credentials seem to suggest that this should be the case.

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Historical Financial Statements

Earnings Results Discussion for the Year Preceding Current Fiscal Year (For Reference Purposes)

FY03/11 Results

The company released FY03/11 results on May 13, 2011.

Sales, operating profit, recurring profit and net income all hit record highs. Sales for FY03/11 came in 7.8% above the company forecast at 1.4 billion while recurring profit at 653 million yen beat the forecast by 16.8%. The company cited continued steady sales in network and network gaming fields as the main reasons for the results.

However, there were notable divergences between the company’s top-line forecasts and actual results when looking at the segment level. Sales at the Games unit came in at 833 million yen vs. an initial forecast of 740 million yen, likewise, Network sales beat forecasts with 394 million yen in sales vs. an initial forecast of 200 million yen. However Database sales fell short at 141 million yen vs. an initial forecast of 220 million yen. Sales in the QuickBoot category were roughly in-line with forecasts at 55 million yen vs. the 50 million yen initial forecast.

Sales in the Game category exceeded forecasts for two main reasons: the release of popular game titles and a block payment for Nintendo 3DS software license agreements. In addition, an increase in mass-production royalties in the Network category also contributed to the better-than-expected sales.

In the Database category, although mass-production royalties (primarily for digital cameras) increased sales failed to meet company forecasts, mainly because new client adoption of DeviceSQL was sluggish. In the QuickBoot category, sales came roughly in-line with expectations, but the company commented it expects progress in the segment to be slow.

The Game category continued to account for a high percentage of sales at 58.6% although this was down from FY03/10’s 68.7%. The percentage of Network sales increased to 27.7% from 18.8% in FY03/10. For more detailed information on each category, see the Q3 FY03/11 Results section.

Q3 FY03/11 Results

The company released Q3 FY03/11 results on February 14, 2011.

The company noted that Q3 (cumulative) results suggested a pace ahead of forecasts: sales were 80.2% of the full year forecast and net income was 96.4% of the full year forecasts. Ubiquitous announced an upward revision to its FY forecasts on February 4, 2011 due to mainly three reasons. Those reasons were: i) Non-Game Network royalty revenues increased in Q3 due to strong sales of electronics which use the company’s products, ii) in the Game category, the company received an up-front payment for “Nintendo 3DS” , iii) the company minimized some costs.

However, the speed of progress differed for each category. While the Game and non-Game Network categories saw steady performance, sales in the Database segment slowed down. Additionally, the company said that progress in monetizing QuickBoot had also experienced delays.

In the company's revised FY forecasts, Q3 (cumulative) operating profits were 98.4% of the FY forecast, so the company expects almost zero operating profit in Q4. The company commented that this is because it plans to incur some costs for Commissioned Development and marketing in Q4.

Progress in R&D and business development during the quarter included:

• The company announced the release of QuickBoot, with newly added “Android Pack” in November 2010.
• The company announced engineering partnerships with Core Corporation (TSE 2359) and Nippon Systemware Co., Ltd. (TSE 9739). The company commented these partnerships could mean more expertise is available to help manufacturers integrate QuickBoot into their products, with sales starting in December 2010.
• The company announced the release of the newest version of Ubiquitous DeviceSQL, Release 5.0 (DeviceSQL 5.0), with sales starting in November 2010.

The company offered the following overview by category:

Network: For cumulative results through Q3, sales in the Game category were 669 million yen while non-Game Network sales were 245 million yen. In the Game category, royalty revenues from Wi-Fi capable Nintendo DS games were steady, and the company received an up-front payment for Nintendo 3DS software license agreements. The company said that it did not have any royalty revenue from Nintendo 3DS games, and would not receive royalties in the future for 3DS games.

The company forecasts royalty revenue from Wi-Fi capable Nintendo DS games to continue. Therefore, sales numbers of Wi-Fi capable Nintendo DS games will drive its revenues. Incidentally, the percentage of the company's sales coming from the Game category fell from 74.2% in Q3 (cumulative) FY03/10 to 63.2% in Q3 (cumulative) FY03/11. Although it is possible that Game sales could fall in the future, SR Inc. thinks it is unlikely for several reasons. First, the Nintendo DS has exceeded 100 million units worldwide (a large install base for future game sales). Second, with the Japanese, American, and European markets already established, further growth could be possible in emerging markets. Finally, the Nintendo 3DS is in a different price bracket than the Nintendo DS, so the market may split into distinct high and low-price segments.

In the non-Game Network category, cumulative sales through Q3 were 245 million yen. The Eco-points program boosted sales of products that use Ubiquitous Network Framework and Ubiquitous DTCP-IP, and the company has seen significant increases in mass-production royalties.

Database: For cumulative results through Q3, Database sales were 105 million yen. Royalties increased due to mass production of DeviceSQL-enabled digital cameras. Some negotiations were still ongoing, and DeviceSQL is struggling to gain wider client adoption (a similar situation to Q2 FY03/11). In response, the company has been attempting to actively promote and stimulate demand for the new version of DeviceSQL (Ubiquitous DeviceSQL Release 5.0, released November 2010).

QuickBoot: For cumulative results through Q3, QuickBoot sales were 38 million yen. In Q3 FY03/11, the first inclusion of QuickBoot in a customer's product was finalized. The product is a consumer device, but Ubiquitous does not expect the production run to be especially large because QuickBoot will be used only on some models within a larger product group. The company said that it is continuing to conduct medium and large-sized integration tests with manufacturers' devices. Additionally, progress in monetizing QuickBoot has been delayed due to new technological issues regarding implementation that arose as inquires from potential clients grew. The company said that the technological issues aren’t insurmountable, instead calling them "growing pains" that sometimes arise with new products. In other words, there may be some minor technical incompatibilities with some clients’ particular needs, and it’s tough to estimate the time needed to determine an acceptable solution. The company commented that the situation changes daily and that some issues are resolved sooner than expected while others may take longer than expected to fix.

With respect to the FY03/12 forecast, the company may release a milestone progress report within its established reporting period (possibly before releasing FY03/11 results) reflecting developments during Q3.

Q2 FY03/11 Results

The company released Q2 (1H) FY03/11 results on November 12, 2010.

The company noted that 1H sales were 50.4% to FY forecasts and 1H net income was 64.8% of FY forecasts, so the 1H results were at a pace exceeding forecasts. Ubiquitous announced an upward revision to its 1H forecasts due to larger than expected sales of consumer electronics (aided by Eco-points) in the Network category and increased royalty revenues from Ubiquitous-equipped products. Consequently, the proportion of sales related to Games decreased from 73.2% of total sales in 1H FY03/10 to 60.2% in 1H FY03/11. Database-related sales have been sluggish.

Despite favorable 1H sales, full year forecasts were unchanged due to the company’s expectation of a “double dip” into recession. Based on 1H FY03/11 performance, Ubiquitous revised its forecast for non-Game Network sales from 200 million to 260 million yen, and Database-related sales from 220 million to 160 million yen, while the forecast for the Game category and Quick Boot were unchanged.

The company offered the following overview by category:

Network: In 1H FY03/11, sales in the Game category were 367 million yen while non-Game Network sales were 159 million yen. Non-game Network sales were larger than expected due to mass production royalties from the Ubiquitous Network Framework (added to a recorder made by a major Japanese electronics maker) and Ubiquitous DTCP-IP (added to a TV released by a major Japanese electronics maker). In the Game category, sales were as expected due to the release of major DS game titles by Nintendo (Pokemon series, released September 2010).

Database: 1H FY03/11 Database sales were 60 million yen. Despite increased royalties from mass production of DeviceSQL-enabled digital cameras, demand was lower than expected for other products. The company’s analysis indicates that demand for database products has not decreased, but instead some clients may have deemphasized data management while remaining cost-conscious in the economic downturn. Considering future prospects, the company said that it is actively working to tap latent demand with the release of a new version of DeviceSQL and other products.

QuickBoot: QuickBoot sales in 1H FY03/11 were 22 million yen. At first Ubiquitous was hoping to bundle QuickBoot with hardware for release in the fall of 2010 in a joint initiative with Atmark Techno, Inc. (announced May 2010). The company delayed the plan while it pursues a new arrangement with Atmark Techno, inc. which includes marketing. Ubiquitous forecasts QuickBoot sales of 300 million yen in FY03/12 and indicated at the Q2 FY03/11 results meeting (held November 15, 2010) that it thinks the estimates remain valid. The company is in the process of conducting some medium and large-sized integration tests with manufacturers’ devices. Integration testing is when device manufacturers test products which include other components (like QuickBoot) to verify performance, usability, and other factors; it is typically one of the final steps before large-scale adoption.

Q1 FY03/11 Results

The company released Q1 FY03/11 results on August 6, 2010. Please refer to the table above for quarterly milestone progress.

Q1 sales were 198 million yen (-0.3% YoY). The company indicated that progress to the plan was as planned.Growth in operating profit margin was low vs. sales due to higher fixed costs in SG&A (hiring more engineers).

The company’s core client is Nintendo (68.6% of FY03/10 sales), so until other revenue streams are developed results will closely reflect performance of Wi-Fi game sales. There were several major DS game titles released in FY03/10, including “Dragon Quest IX” and three Pokemon games. As of Q1, two Pokemon titles were announced by Nintendo for FY03/11 and it would be too early to speculate about the total number of games sold in FY03/11.

Progress in R&D and business development during the quarter included:

• The company announced that QuickBoot will be included on the Armadillo platform (produced by Atmark Techno, Inc.). The announcement added that the two companies will cooperate further to promote the use of QuickBoot in medium to small sized embedded systems.
• The company released the latest version of DeviceSQL, version 4.3, with sales starting in May 2010.

In SR Inc.’s opinion, the Q1 QuickBoot announcement (see News and Topics) marks a definite step forward for Ubiquitous. The company added that it has received numerous enquiries about QuickBoot from foreign and domestic manufacturers, which makes it hopeful for business development through FY03/12. Establishing revenues from QuickBoot would reduce the company’s dependence on Nintendo royalties and generate cash for investments in further growth.

FY03/10 Results

The company released FY03/10 results on May 7, 2010.

Sales for the year were 1.2 billion yen (+22.6% YoY), 18.3% over initial estimates.

Operating profit was 463 million yen (+23.9% YoY), 78.2% over initial estimates.

Recurring profit was 471 million yen (+57.7% YoY), 74.4% over initial estimates.

Net income was 184 million yen (+74.3% YoY), 31.1% over initial estimates.

FY03/10 Results Report Card (vs. January 26, 2010 revised forecast)

Strong performance – sales, operating and recurring profits exceeded previous medium term forecast targets for FY03/11.

Revenues

Target: 1,080 million yen (+14.2% YoY)

Result: 1,159 million yen (+22.6% YoY)

Operating Profit

Target: 400 million yen (+7.0% YoY; 37.0% OPM)

Result: 463 million yen (+23.9% YoY; 39.9 % OPM)

Recurring Profit

Target: 408 million yen (+36.6% YoY; 37.8% RPM)

Result: 470 million yen (+57.7% YoY; 40.6% RPM)

Net Income

Target: 150 (+42.4% YoY; 13.9% NPM)

Result: 183 million yen (+74.3% YoY; 15.8% NPM)

FY03/10 results were satisfactory according to the company, exceeding forecasts by a significant margin, with total sales topping 1.0 billion yen for the first time, a symbolically important achievement. The financial results remained dependant on Nintendo (although sales to Nintendo declined as a percentage of total sales to 68.6% in FY03/10 vs. 75.1% in FY03/09). However, sales in all other categories also grew strongly, increasing relative contribution: Networking software increased 48.8% YoY (18.8% of total sales), DeviceSQL database product sales rose 64.8% YoY (12.6% of total sales). The company was very pleased with DeviceSQL performance but it also noted that some of its manufacturer clients were slow to commit amid still weak economy. That caused a slight miss (by about 5 million yen) relative to an upwardly revised (in January 2010) 150 million yen budget for DeviceSQL sales.

The gross profit margin declined YoY, which can be partially explained by the increase of sales in Commissioned Development (+56.8% YoY) which is lower margin than Ubiquitous’ other businesses due to an associated labor expense.

Operating profit margin was flat YoY. The company increased headcount during the year, and commented that hiring full-time employees would continue into FY03/11. R&D spending was unchanged YoY (approximately 100 million yen).

Extraordinary losses were 155 million yen (of which 127 million yen a valuation charge for investment securities).

QuickBoot

Overall, the company was very happy with the progress of QuickBoot business in FY03/10. The plan for FY03/11 was to continue developing the technology and look for partnerships that would bring the commercialization closer. In May 2010 Ubiquitous announced QuickBoot support for Freescale Semiconductor’s i.MX application platform (i.MX processors are widely used in various devices like smartbooks and tablet PCs), saying that it would be a primary platform for QuickBoot technology. The company also demonstrated a new QuickBoot demo version. While the first demo used the Armadillo system (an embedded hardware platform that provides support for a large number of different interfaces and is used by developers), the new one was made on a commercially available Sharp NetWalker device, a resource and development environment constrained ‘real thing’. The boot time in the Sharp NetWalker demonstration was approximately 3-4 seconds, impressive as according to the company, because time constraints meant that the demo version was done with hardly any customization.

Q3 Results

Ubiquitous released Q3 results on February 5, 2010. See table above for cumulative progress to the company plan.

Q3 sales were 289 million yen (-1.0% YoY). The company indicated that progress to the plan was faster than expected, and that strong results were expected in the fourth quarter (partially due to the seasonal nature of game sales).

Progress in R&D and business development during the quarter included:

• Announcement and demonstration of QuickBoot technology (a mechanism to dramatically decrease the time required to start a device).

Update on Full Year Prospects

Ubiquitous made an upward revision of full year estimates on January 26, 2010 (shown in the table above). The company seems optimistic regarding full-year results, mentioning that additional orders were expected for DeviceSQL.

Q2 (1H) Results

Ubiquitous announced Q2 (1H) results on November 6, 2009. See table above for cumulative progress to the company plan.

Q2 (1H) sales were 336 million yen (+41.3% YoY). The increase in sales was mainly due to the launch of several popular game titles during the quarter. Growth in operating profit was in part due to delaying relocation of company headquarters.

Progress in R&D and business development during the quarter included:

• Installed sensors using the Ubiquitous AIR NOE (see Product description) as part of project for the Ministry of Agriculture, Forestry and Fisheries.
• Obtained a new software licensing contract for DeviceSQL.

Q1 Results

Ubiquitous released Q1 results on July 31, 2009. See table above for cumulative progress to the company plan.

Q1 sales were 199 million yen (+50.2% YoY). Progress in R&D and business development during the quarter included:

• Made and delivered a prototype for a higher speed TCP/IP for mobile terminals from a large domestic manufacturer.
• Ported middleware compatible with DTCP-IP to a mobile terminal platform and exhibited it at ESEC 2009.

Income Statement

Gross margins for the company have historically been high, roughly in 85%-95% range; per-unit costs of software packages Ubiquitous sells are minimal. As the business grows, total gross profit will be a function of the product mix: Support and Commissioned Development have higher costs (labor) while the device royalties carry the gross profit margin of 100%.

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Balance Sheet

Assets

The company’s asset structure is dominated by current assets, mostly cash and some receivables. The fixed assets are mostly long-term deposits and SR Inc. would call those semi-current assets in a practical sense. The company’s business is producing software, which is more a function of costs (software developers) than an asset base.

Liabilities

Liabilities are negligible. The company had no debt as of FY03/10 and held a net cash position each year under review (FY03/06 through FY03/10).

Shareholders’ Equity

The increase in shareholders’ equity in FY03/08 was the result of the IPO. Other changes have been mostly the result of net income and dividend payments.

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Cash Flow Statement

Operating Cash Flow

The company’s operating cash flow has largely reflected net income. FY03/10 operating cash flow was the result of higher net income YoY (+74.3%) and adding back non-cash charges (investment valuation losses of 127 million yen).

Investment Cash Flow

The major outflow in FY03/08 was related to investments (566 million yen) and deposits (600 million yen). The company's investment cash flow changes alongside movements in account deposits and refunds.

Financial Cash Flow

The company had no financial cash flows in FY03/06 and FY03/07. The inflow in FY03/08 was from listing on the Jasdaq; the outflow in FY03/09 reflected a dividend payment.

Simple Free Cash Flow

The company’s simple free cash flow was negative in FY03/09 due to capital expenditures: 33 million yen for tangible and 143 million yen for intangible assets. (The company purchased DeviceSQL in September 2008) Simple free cash flow improved YoY in FY03/10 due to higher net income and reduced capex.

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Other Information

History

Ubiquitous Corporation was founded in May 2001 to develop network software to realize the vision of the "ubiquitous network" – adding intelligence to everyday devices to provide maximum benefits for people using them.

The company’s first product, Ubiquitous TCP/IP, was developed and released in November 2001. The proof of concept environment was sparse: an 8-bit microprocessor running at 10 MHz with only 16Kb of memory (for perspective: the original Pac-man arcade game released in 1980 used the same processor, running at 3 MHz; and an empty Microsoft Word file is approximately 9Kb). The product effectively demonstrated the company’s ability to squeeze a large protocol (TCP/IP) into a tight space (a feat even more impressive considering that the software included a web server!).

The company’s first major success was in 2003, when Toshiba (TSE 6502) selected Ubiquitous TCP/IP to add web connectivity to Toshiba’s security cameras. Total licensing revenues were approximately 100 million yen, which helped improve the company’s financial situation.

The next major development for the business was a licensing agreement with Renesas technologies (unlisted; one of the world’s largest manufacturers of microprocessors as of FY03/10) announced in 2004. The agreement included Ubiquitous TCP/IP, Ubiquitous Media Connect, and Ubiquitous Rendezvous (all networking products). The agreement was a boost to the company’s prospects – securing the agreement provided the confirmation that venture capital investors were looking for, who invested 450 million yen in December 2004.

2005 was the year of Nintendo. Ubiquitous TCP/IP and SSL packages were selected by Nintendo for inclusion in the Nintendo DS handheld video game console.

2007 was a year of firsts for the company. The company became the first listed company on the new Jasdaq Neo market (listed on November 13, 2007). In June, Ubiquitous announced that its Audio-Video product (Ubiquitous AV) was part of the first component to achieve Digital Living Network Alliance (DLNA) certification.

The company expanded its product offering in 2008, purchasing the rights for DeviceSQL from Encirq Corporation.

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News & Topics

Company News & Topics

August 2011

On August 12, 2011, the company released Q1 FY03/12 results: click here to go direct to the Q1 FY03/12 results section.

(For original, English language summary release in PDF format please click here)

June 2011

On June 17, 2011, the company announced a partnership with product design and development company Sassor Inc. and unveiled its “Second Founding Corporate Vision”, which extended its mid-term company forecast by one year out to FY03/14: click here to go direct to the mid-term company forecast section.

(For original Japanese-language only announcement in PDF format please click here .)

May 2011

On May 13, 2011, the company released FY03/11 results.

March 2011

On March 30, 2011, the company announced its Ubiquitous DeviceSQL was included in Olympus Imaging’s (a subsidiary of Olympus Corp. (TSE 7733)) three new digital cameras: “OLYMPUS Tough TG-310”, “OLYMPUS Tough TG-610” and “OLYMPUS Tough TG-810”. These three models were released in February 2011.

February 2011

On February 28, 2011, the company announced Ubiquitous DeviceSQL was included in Panasonic’s (TSE 6752) new digital cameras “LUMIX DMC-TZ20” and “DMC-FT3”. Those cameras were released on February 25, 2011.

On February 25, 2011, the company announced a change in management with an effective date of March 1, 2011.

• Kanji Mihara (New role: President of Ubiquitous, previously Managing Director of Ubiquitous)
• Tomoyuki Ietaka (New role: Managing Director of Ubiquitous, previously President of Ubiquitous)

On February 14, 2011, the company released Q3 FY03/11 results.

On February 4, 2011, the company announced a revision to its FY03/11 forecasts. The revised figures were as follows:

• Sales: 1.3 billion yen (previous forecast: 1.2 billion yen)
• Operating profit: 560 million yen (previous forecast: 400 million yen)
• Recurring profit: 560 million yen (previous forecast: 400 million yen)
• Net income: 336 million yen (previous forecast: 240 million yen)

The company identified the following factors behind the revision:

• Non-Game Network royalty revenues increased in Q3 due to strong sales of electronics which use the company’s products.

• In the Game category, the company received an up-front payment for “Nintendo 3DS” (scheduled for release on February 26 in Japan).

• The company minimized some costs for R&D, marketing, and other areas.

November 2010

On November 30, 2010, the company announced the release of QuickBoot, with newly added “Android Pack”.

The company explained that developers using QuickBoot on Android-based devices, would be able to use the ”Android Pack,” in addition to “Static” and “Dynamic” QuickBoot modes. The “Android Pack” enables device users to store more personalized settings than the “Static” (a preconfigured start up screen) or “Dynamic” (reload core functions before power off) modes. The company further commented that the added functionality that the Android Pack provided device manufacturers would likely help spread adoption of QuickBoot.

On the same day, the company announced engineering partnerships with Core Corporation (TSE 2359) and Nippon Systemware Co. (TSE 9739). The company commented these partnerships could mean more expertise is available to help manufacturers integrate QuickBoot into their products.

On November 24, 2010, the company announced the release of the newest version of Ubiquitous DeviceSQL, Release 5.0 (DeviceSQL 5.0). The company commented that DeviceSQL 5.0 includes new functions like multi-dimensional and full text search capabilities. The company further commented that these new features could make DeviceSQL a good fit for GPS or map-related applications and may therefore appeal to a wider range of potential customers.

On November 18, 2010, the company announced that the company and Fujitsu Semiconductor Limited will collaborate to sell a solution which enables devices to reduce power consumption and boot quickly by using Ubiquitous’ “Quick Boot” and Fujitsu’s “MB86C36” LSI (large scale integrated circuit). The solution is targeted at multi-function office machines, printers, and routers produced by equipment manufacturers.

On November 16, 2010, the company announced that the Osaka Securities Exchange (OSE) selected its stock for inclusion in the newly created “Jasdaq TOP 20 ETF”.

On November 12, 2010, the company released Q2 (1H) FY03/11 results.

October

On October 29, 2010, the company announced a revision to its 1H FY03/11 forecasts. The revised figures were as follows:

Sales: 609 million yen (previous forecast: 540 million yen)

Operating profit: 260 million yen (previous forecast: 150 million yen)

Recurring profit: 260 million yen (previous forecast: 150 million yen)

Net income: 150 million yen (previous forecast: 90 million yen)

The company mentioned that higher than expected operating profit was due to the combination of strong royalty revenues from the Ubiquitous Network Framework, controlled SG&A costs (lower than expected) and delayed R&D costs. The company explained that the full year FY03/11 forecasts were unchanged because it expects to spend more on R&D in the 2H.

On October 5, 2010, the company announced that the Osaka Securities Exchange (OSE) selected its stock for inclusion in the newly created “Jasdaq TOP 20” index. The OSE developed the “Jasdaq TOP 20” for use as a benchmark for ETFs or investment trusts.

September

On September 29, 2010, Nintendo (TSE 7974) announced a revised forecast for FY03/11. The forecast was revised down to reflect the strengthening yen, the holiday season sales outlook, and the expected release timeframe of the Nintendo 3DS. Nintendo is Ubiquitous’ main customer, so SR Inc. thinks that the potential for impacting progress toward quarterly milestones warrants attention.

A company news release on September 24, 2010 indicated that the company received approval from the Osaka Securities Exchange (OSE) to move onto a newly created market, Jasdaq Standard (created following the merger of Jasdaq, NEO, and Hercules), after October 12, 2010.

August

The company released Q1 FY03/11 results on August 6, 2010.

May

The company released FY03/10 results on May 7, 2010.

On May 10, 2010 the company announced that its QuickBoot software would be bundled with Atmark Techno’s Armadillo development hardware platform. Device manufacturers basing products on Armadillo will be able to include the fast booting time and energy efficient benefits of QuickBoot technology “out of the box” without incurring additional project time and cost.

The company indicated that including QuickBoot as a default component in Armadillo could make penetrating the device market less difficult for Ubiquitous which could increase the probability of future royalty revenues.

March

On March 23, 2010, Ubiquitous announced the release of QuickBoot 1.0 SDK, with ARM being the primary platform supported (ARM9, ARM11, and Cortex A-series processors). The SDK includes “QuickBoot snapshot script” and “QuickBoot snapshot driver” (used to store snapshots of RAM to nonvolatile memory), as well as “QuickBoot BIOS” and “QuickBoot IRA (Intelligent Resource Allocator)” which enable systems to boot up instantly by selecting necessary blocks of the stored memory image.

In the release the company indicated that QuickBoot would be demonstrated at the ARM private meeting rooms at CCBN in Beijing, March 22-25, 2010 and at ARM Connected Community booth at ESC Silicon Valley, April 26-29, 2010.

Industry News & Topics

In a ComputerWorld article published March 10, 2010, ARM worldwide mobile computing manager Roy Chen said in an interview that the launch of Apple’s iPad will trigger a rush of rival products this year, suggesting that over 50 tablet PC devices could hit the market in 2010.

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Top Management

Kanji Mihara became President of the company (April 1, 2011).

President Kanji Mihara joined Ubiquitous in 2007, bringing both digital media development and sales capabilities to the company. He was with Sony from 1987 to 2004 where he was a development engineer in digital media. After Sony, Mihara was with Microsoft Japan as a Business Development Director of the Digital Media Division.

Hitoshi “Jey” Suzuki is the CTO and a founder of the company, and is responsible for leading “what’s next” for the company’s technology development. Suzuki’s experience covers the majority of the modern information age. He was with ASCII (the Japanese agent for Microsoft) from 1987 until 2000, where he collaborated with Bill Gates on one of the first ever notebook computers (TRS-80 model 100). He was with Microsoft from 2000 until 2001, working in the WebTV division, after which he founded the company. Suzuki’s technical expertise is far-reaching. His specialties include operating system development, complier development (the programs that translate text programming code into machine-readable code), and maximizing capabilities of hardware through efficient software design.

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Employees

Company employee data (as of FY03/11):

• Number of Employees: 38
• Average age: 39.3
• Years with the company: 3.2
• Average salary: 9.54 million yen.

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Dividends and Shareholder Benefits

The company has paid dividends in the past: 1,554 yen per share in FY03/08 (48.1% of earnings) and 630 yen per share in FY03/09 (50.0% of earnings). The company indicated that it had no fixed plans to a pay a dividend in the future, preferring to keep the cash on hand in light of challenging economic conditions.

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Investor Relations

The company maintains an investor website (in English and Japanese). As the company is listed at Jasdaq NEO, apart from usual quarterly results, it also releases quarterly milestone progress reports.

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By the Way

List of Products

Platform Products:

- Ubiquitous Network Framework

- Ubiquitous micro Network Framework

- Ubiquitous USB Host

Middleware Products:

- Ubiquitous Device SQL

- Ubiquitous DTCP-IP

- Ubiquitous WPA/WPS

- Ubiquitous QuickBoot

Professional Service

Interesting Company Fact

On the TRS-80 Model 100 computer (released in 1983; one of the first ever notebook computers) there are two invisible files commemorating the designers, Junji Hayashi and Hitoshi “Jey” Suzuki.

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Latest Q&A

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