For discussion purposes, I want to examine the revenue and earnings
potential of three of the new products, specifically Linux Router
(OSR8040) , Red-C 16000, and Zuma. The price of the Zuma box is not
known, but with the features described it probably comes very close
to seven figures per unit. In keeping with conservative goals, I have
reduced this to an $800,000 base price. Still, be prepared to be
shocked.
Since all three of these products are new (no revenue yet), and since
MRVC was in the black in Q2 without them, the assumption that is made
here is that all of MRVC's other products will bring them to a break
even point or better, so all fixed or overhead costs have already been
accounted for by those other products.
Some background facts to consider.
- RBAK sold over 300 units this quarter and 1000 in the past year, and
the market is just emerging. You could see several hundred thousand
units sold over the next 10 years across all vendors as both DSL and
Cable drive sales.
- CSCO sold over 500,000 routers in less than 10 years. Almost all are
software based and will need to be replaced (or accelerated, but that
is another topic).
- Many new routers will also be sold as the Metro market heats up and
the Internet/Intranets continue to expand.
- CSCO's margins run in the low-mid 60%s
- RBAK's margins were over 70% this year.
As I did this, I had to keep adding low end columns as these numbers
get incredible - and they are QUARTERLY numbers, not annual. Thus the
post will have to be scrolled horizontally, but it was better to show
more data.
Yes, MRVC has been poor at marketing. Therefore this has to be
considered in choosing which column you are comfortable with.
Also remember that these numbers assume NO profit contribution (just break even) from
any other products or subsidiaries including OA, Aranea and MetroFusion.
Everyone can examine these numbers and pick the column and GM
combination that they feel is realistic to get a feel for revenue and
earnings potential here.
As always data is presented on a best effort basis.
I used a straight 27 million shares for the EPS calculation.
Comments appreciated.
A B C D E F G H I J K
Number Sold/QTR
Linux Router $300K 5 10 20 30 50 100 150 200 250 300 400
Red-C 16000 $100K 5 10 20 30 50 100 150 200 250 300 400
Zuma Router $800K 1 1 2 3 5 10 15 20 25 30 40
Total Sold/QTR 11 21 42 63 105 210 315 420 525 630 840
Revenue/QTR (millions)
Linux Router $1.5 $3.0 $6.0 $ 9.0 $15.0 $30.0 $45.0 $60.0 $ 75.0 $ 90.0 $120.0
Red-C 16000 $0.5 $1.0 $2.0 $ 3.0 $ 5.0 $10.0 $15.0 $20.0 $ 25.0 $ 30.0 $ 40.0
Zuma Router $0.8 $0.8 $1.6 $ 2.4 $ 4.0 $ 8.0 $12.0 $16.0 $ 20.0 $ 24.0 $ 32.0
Total Revenue/QTR $2.8 $4.8 $9.6 $14.4 $24.0 $48.0 $72.0 $96.0 $120.0 $144.0 $192.0
Profit/QTR (millions)
50% GM $1.4 $2.4 $4.8 $ 7.2 $12.0 $24.0 $36.0 $48.0 $60.0 $ 72.0 $ 96.0
60% GM $1.7 $2.9 $5.8 $ 8.6 $14.4 $28.8 $43.2 $57.6 $72.0 $ 86.4 $115.2
70% GM $2.0 $3.4 $6.7 $10.1 $16.8 $33.6 $50.4 $67.2 $84.0 $100.8 $134.4
EPS per QTR
50% GM $0.05 $0.09 $0.18 $0.27 $0.44 $0.89 $1.33 $1.78 $2.22 $2.67 $3.56
60% GM $0.06 $0.11 $0.21 $0.32 $0.53 $1.07 $1.60 $2.13 $2.67 $3.20 $4.27
70% GM $0.07 $0.12 $0.25 $0.37 $0.62 $1.24 $1.87 $2.49 $3.11 $3.73 $4.98
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