Software and the bottom line . . .
In bio-ID, hardware margins are probably about 20% on low cost scanners like IDT's version for Compaq, but more like 80% margins for the necessary software -- which includes the algorithm, the application, and systems integration revenues. Fowler has basically stated in conference calls that IDX is using a subcontractor for its hardware, which is one of the reasons he can ramp up production without encountering a bottleneck.
But that also means that IDX is not getting the full 20% on its scanner hardware. Maybe it will take $1 profit of, say $4 profit on a $20 item. Of course, that's $1 of licensing profit with no fixed costs or further investment.
Of the other, say, $25+ dollars coming in, about $20 or a bit more is gross profit. You can see that the money is in the software. Gross profits of, say, $21 on a $45 as-supplied CPQ scanner, and all but one dollar comes from the software. (These figures are only rough guesses. I do not have any inside information on the actual figures, but these are probably in the ballpark.)
It will not come down to the bottom line immediately, because IDX is surely still in a heavy reinvestment stage in this technology, and because top line revenues have just begun. I think bottom line numbers start to accumulate after we get a couple more OEMs, and they have been producing for a couple of quarters.
Nonetheless, once all these ducks are in a row, the stock is not going to wait for them to quack. It will react. |
