Hi David,
Let me take a shot at this.
How many total handheld devices will be on the market in the year 2004?
1 billion
What share of this market will PALM own?
10%
What will be the average sales price of a PALM PC?
$200.
What kind of turnover will there be. In other words, what % of PALM owners will buy a new one each year?
50%
What level of Net Margin can we expect from PALM on these sales?
By this time, Palm will not be doing hardware any more.
Assuming that Palm will continue to have 30% growth in gaining new customers, a 50% replacement rate, and $20/license on the OS, we are talking about (30+50)*20 = 1.6 billion. Add on top, we will have applications, software service, Palm web site, and a lot of great potential unknowns that will most like exceed the revenue of the OS. Of course, this estimation is based on the assumption that Palm will continue to execute and lead the market.
I would take a $4 billion revenue with 20% net margin, multiplying with an 80 PE, I get a market cap of $64 billion. This calculation is purely based on my imagination of the software/application/net segment of the Palm business. I am not sure how much Palm will get out of its hardware unit when it sells it, and what kind of potential it would bring. Palm has also invested in other companies that are doing Palm related work. If all goes well, a $100 billion market cap is not too much imagination in 4 years.
Curious questions. How much do you think a hardware-less PALM INC. is worth today? How much do you think the hardware unit will worth if it gets spun off?
Khan |
