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Technology Stocks : Aware, Inc. - Hot or cold IPO?
AWRE 2.160-1.4%Nov 28 9:30 AM EST
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To: Matt Webster who wrote (4732)11/15/1998 10:13:00 AM
From: Bill   of 9236
 
Matt, thanks for the model. I think your view has many merits. Two points though:

1. Try a royalty model of $3.00 per unit for the first 1 million per partner plus $0.50 per unit thereafter. Add $1-2 million up front license fee per partner (although much of this has already been included in this year's revenue).

2. Assume households (and businesses), not people. In the U.S., there are 102 million households. PCs will penetrate about 60% by 2001. Some subset of that 61 million are candidates for ADSL over the next three years. With the exception of Canada, international deployment of ADSL is lagging the U.S. by at least 2 years.

If all 61 million U.S. households bought AWRE based ADSL technology in the next three years, AWRE would realize about $35 million from household sales plus $35 million for C.O. sales (where a compatible ADSL DSLAM is required to terminate the household connection), equalling $70 million total over three years. Add modest international rollout to this. Of course if ADSL penetrates only 40%, as you believe, then AWRE's revenue would be substantially lower.

A market cap of more than $300 million is more than 5x too high, IMO. They should have stayed in the equipment/systems business.
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