Socket Mobile, Inc. ( SCKT)

Q4 2010 Earnings Conference Call

February 17, 2011, 5:00 pm ET

Executives

Kevin Mills – President & CEO

Dave Dunlap – CFO

Analysts

Brian Swift – Security Research Associates

Alex Berger – Hudson Bay

Bernard Bedel [ph]

Presentation

Operator

Greetings and welcome to the Socket Mobile Fourth Quarter 2010 Management Conference Call. (Operator instructions)

It is now my pleasure to introduce your host, Dave Dunlap, Socket’s Chief Financial Officer. Thank you, sir. You may begin.

Dave Dunlap

Thank you, operator. Good afternoon and welcome to Socket’s fourth quarter and year-end management conference call to review financial results for its 2010 fourth quarter and the year ended December 31, 2010. Joining me today is Kevin Mills, President and Chief Executive Officer of Socket. Our usual host Jim Byers with the MKR Group had a scheduling conflict, and so I am handling the conference call preliminaries.

Socket Mobile distributed its earnings release over the wire service at the close of the market today. The release has also been posted on Socket’s website at www.socketmobile.com. In addition, a replay of today’s call will be available at vcall.com shortly after the call’s completion, and a transcript of this call will be posted on the Socket website within a few days.

We have also posted replay numbers in today’s press release for those wishing to replay this call by phone. The phone replays will be available for one week.

Before we begin, I would like to remind everyone that this conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. Such forward-looking statements include, but are not limited to, statements regarding mobile computer, data collection and OEM products, including details on timing, distribution and market acceptance of products, and statements predicting trends, sales and market conditions and opportunities in the markets in which we sell our products.

Such statements involve risks and uncertainties and actual results could differ materially from the results anticipated in such forward-looking statements as a result of a number of factors, including, but not limited to, the risk that manufacture of our products may be delayed or not rolled out as predicted, due to technological, market, or financial factors, including the availability of product components and necessary working capital; the risk that market acceptance and sales opportunities may not happen as anticipated; the risk that our application partners and current distribution channels may choose not to distribute the products or may not be successful in doing so; the risk that acceptance of our products in vertical application markets may not happen as anticipated; and other risks described in our most recent Form 10-K and 10-Q reports filed with the Securities and Exchange Commission. Socket does not undertake any obligation to update any such forward-looking statements.

With that said, I would now like to turn the call over to Socket’s President and CEO, Kevin Mills.

Kevin Mills

Thanks, Dave, and thank you for joining us today. In today’s call we will begin with a short review of our Q4 and overall 2010 results, and then outline the business opportunities we see in 2011.

Our fourth quarter revenue of $2.6 million was much lower than expected due to the impact of an industry wide shortage of LCD components in the quarter, which cost us to defer shipments of over 1.2 million of SoMo related products into this year. The limiting factor in our Q4 revenue was the supply of material as opposed to demand for the products.

We have seen improved bookings in January, which combined with our backlog carry forward into 2011 totaled more than 3.6 million in orders at the end of January that are scheduled for delivery in the first quarter. While 2010 remained a challenging environment for Socket as the overall pace of our business moved forward cautiously and slowly we did see good growth in bookings for both our SoMo and cordless scanning products, particularly towards the end of the year.

These strong bookings for handhelds and cordless barcode scanning products were offset during the year by declining revenue from our legacy plug-in type products that have been phased out, resulting in the overall decline in 2010 revenue.

Late in 2010, we restructured our sales team and realigned our distribution channels to better position Socket for the business dynamics of today’s rapidly changing mobile marketplace. The result is we are seeing greater visibility on our near-term demand side of our business. While in the past we were waiting on customers to make a final purchasing decision prior to deploying our handheld or scanning products, today we are in the position of having those orders in hand due to a combination of backlog and stronger than normal January bookings.

We currently remain limited by supply, but feel the situation is being addressed since the worst of the supply issues will soon be behind us. To give a little more color on the supply problems, they were initially caused by higher than expected demand for screens by Apple and other mobile phone suppliers. This resulted in industry wide consolidation as companies like Foxconn [ph] purchased LCD manufacturers to meet the higher demand from the mobile phone market.

As a result of this demand and consolidation, the display manufacturers readjusted their capacity priorities and smaller companies like Socket and many others were left without any production time in the short run. In an effort to address these supply issues, production was moved to newer facilities, which resulted in additional delays. Unfortunately, these new factories did not come online prior to Chinese New Year. As you may be aware, Chinese New Year just concluded at the end of last week, and the factories are in the process of coming back online.

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