What They Have
Compression and streaming software for presenting 3D avatars on the Web.

On the Plus Side
1. The compression/streaming tech is very well done, resulting very low load time and completely smooth animation after the initial load.
2. The avatar exists in the web browser, not on the web page. This allows the avatar to maintain persistence as the user moves from page to page throughout the site. As far as I know, they are the only people who do that, and I think it's a far more compelling way to present such an avatar.
3. One big customer, Canal+, who has created a rich demo of the cabilities of the software.
4. An engineering team which was one of the first state-side development shops to receive a Sony PlayStation 2 development license and software in order to create development libraries for it. This means that these guys know their stuff, and the have a foot in the door in the game market. Think Xbox.

Nobody else has technology that supports the avatar as a persistent third-party. This could be very attractive for companies looking to create guides to their sites which can also migrate to other sites and provide commentary, reviews, interact with other avatars, etc. Instead of a "third voice", the avatar could become the "trusted voice" of Canal+, Disney, whomever.

On the Minus Side
1. I don't think the technology is defensible over the long run. Somebody somewhere will soon come up with an even better compression technology.
2. They're focused on the compression/streaming software, whereas I think they should be focused on the complete service, i.e., designing, building and delivering a ready-to-go avatar. As it is, the customer still has to do everything - build the 3D model, animate it (by hand or by motion capture), record audio for all of its lines, etc. Companies like Canal+ already have these resources (expensive people and very expensive machines) in-house, so it's no problem leveraging them. Anybody smaller is going to face prohibitive costs over which QEDSoft has no control.
3. Microsoft's Bob (and bastard offspring the paper clip) has shown rather spectacularly how hard it is to design an avatar which is interesting but not too intrusive and annoying. The first couple of people to whom QEDSoft sell the compression/streaming suite better have done their homework on the design/characterization front. If they don't, they run the risk of creating Bob II. QEDSoft's software will be tainted by association.