They will be manufacturing DWDM chips obviously to meet the market demand at that time, be it 8, 16, 32 or whatever wavelengths. I assume they will package them ready for use by the customer, but I'm guessing. DWDMs presently sell, packaged, for about $600/channel. So an 8 channel DWDM would sell for $4800 and cost about $1000 which produces a gross margin of $3800/unit. With 500 units possible/day means a possible daily gross margin of 500 X $3800 = $1,900,000.
At OFC I was told their 8-channel chip would go to Molex by early summer for testing and the S-8 states the higher channels are yet to be developed.
1) how long will it take Molex to test and certify the 8-channel chip?
2) you use JDSU prices for 8-channel DWDM. Since LUMM uses a different process they claim is cheaper, what will the price difference be? Could you re-do the numbers based on Lumenon's likely prices and not JDSU's?
3) and based on the current facility's ability to fabricate up to 20 chips per day, wouldn't it be more helpful to calculate income based on this figure and not one that most likely won't become reality until 2001?
4) with Molex maintaining 100% control of all LUMM's products, what are the margins likely to be? And what happens if Molex doesn't certify their products? Are they obligated to buy them anyway? If not, can LUMM sell them to other OEMS? Would they need to re-design them to new specifications? How long would this take? The 10-Q states that Molex has reserved the right to take over production for a royalty of 25% above their cost. So, if they can manufacture an 8-channel DWDM for $1000, Lumenon would get $250. You're saying they can do it for considerably less, so the net would go down proportionately.
Let's say for the six months beginning in June they manufacture 20 a day, 22 days a month, at $200 profit. That comes to $88,000, multiplied by 6 gives them $528,000.
How long will it take to build the factory? How long to certify the lines? How long to get yields up to 500 per day? Would it be fair to say the following six months might see, what, 250 per day? That would net them $6.6 million for six months. If your sales figures are even remotely accurate, we should all be investing in Molex, not Lumenon.
From the last 10-Q:
Lumenon and Molex agreed to jointly develop certain products related to the Dense Wavelength Division Multiplexing market and other photonics markets. Under the terms of the agreement, Molex is committed to provide services towards the development of the products. Subject to Lumenon proving out its technology and its ability to manufacture and deliver certain devices, Molex is committed to purchase the entire production of Lumenon for the first twelve months with a maximum number of units per month. After the twelve-month period, Molex will have the option to purchase all production of Lumenon at fair market value. Under certain circumstances, Molex may have the right to manufacture all components of the devices in return of a royalty of 25% of gross cost of Molex. For the six-month period ended December 31, 1999, an amount of $13,461,670(US$9,327,008) was recorded under research and development expenses.
If you could get a rough ASP for Lumenon's 8-channel and find out what Molex has set the margins at for the first year of production, we could make more accurate calculations.
TIA --
Pat |
