Jay, an excellent start to estimate future cash flow and profits. Here are few refinements you may want to consider.
In 1999, they will not be shipping much for another three to six months, since they do not have quals and this time.
Profits margins increase as volume increases, but on the other hand, competitive pressures may cause price squeezing, somehow your model should have a peak of profit margins vs time.
Right now, I believe that VLNC probably has about $100 MM of tax losses on their book, so the tax issue is not critical, but the market always looks forward to the time that normal profitability (inlcuding taxes) is established, so you may want to take a tax rate into account.
I agree with Larry that 20% penetration is the most optimistic outcome feasible for VLNC, and thus for modeling purpose you should not assume more then 10%, particularly in cell phone where TNB is already in the market and is establishing a "fighting floor" for VLNC to overcome.
Zeev |
