Hi eric-
<Well... Amati could be selling 500,000 modems (VDSL & some ADSL early) just from the alleged-prospective 4-year NEC/HKT deal, annoucement of which>
Several questions:
Was 500K modems written in a release somewhere yet, or just from what you heard JS say about more than 200K LINES?
Will these be Amati brand modems or just licensing and maybe some tech?
Did you happen to read a counter post from a poster here (Peter Piper - who seemed pretty sure he knew) that Amati (that is CG in his report) would NOT be used for HKT, at least at first. So this may be a significant distance from a "given".
Still, of course, I agree it could happen.
(See: j rector's quick take on this *initial* deal alone for Amati's valuation, albeit with differing assumptions )
Thanks. Hard to keep current, let alone find earlier posts.
j's assumptions were that a) they get a contract for 500K; b) that it is a contract for Amati branded modems (to justify 20% net margins); c) that they get $500/modem (=$1000/line); and that they grow earning 50% a year.
First, my opinion is that these assumptious are pretty aggresive.
Second, his conclusion is a price of $36. He seems (for the sake of consideration) to ONLY be using this contract in his projection.
So allowing this we need to get 50% growth. This could only occur with the following: 60K-Y1 to 90K-Y1, 135K-Y3 and 203K-Y4.
Year 1 would yield profits of $6M/19M SO = .315/share x 50 = stock price of, say, $16.
And since CG won't be ready till '98, if all else in this assumption worked, could they even have 60K in '98? If so, then by the end of '98, they might be booking those profits, and a price of $16 is justified for 50 x TRAILING earnings. So a fair price of $16 would be for 1999 - IF all went according to these assumptions - which, as I said, I seriously question.
A decent move up from $12.5, but over 18 months, and only IF all the assumptions work.
We'll be watching, though.
Thanks eric-
Steve
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