Took some time this afternoon to produce the following
which is what I think to be a conservative revenue
estimate and some calculations for resulting stock
price for Netergy. Feel free to comment...
WR Hambrecht predicts the current PBX equipment market to be
about $6B annually [1]. Let's say that 20% of that market in
2 years will be iPBX (IP-based PBX) based on penetration of
IPBX solutions and market growth of that space. Let's say
that of that 20%, Netergy gets 10% of the revenue. The math
works out to: $6B x .20 = $1.2B, $1.2B x .10 = $120M. Let's
say $100M to round down.
Frost and Sullivan predicts the current VoIP gateway business
to be around $209M, growing 60% per year with a target of
about $3.6B in six years. In two years, that figures to be
a $500M market at a 60% growth rate. Let's say that Netergy
gets 10% of that $500M gateway business, the math works out
to $500M x .10 = $50M.
I have seen no IP-phone penetration market surveys but with
just the gateway equipment, Netegry will be supplying Audacity
chips in its and others equipment. Let's say in 2 years, they
are selling 100K chip units (chips, cores or software) for
gateways, phones etc. - the number will probably be considerably
higher. That's about 100K * ~$40 or $4M.
Add up $120M for IPBX, $50M for gateways and $4M for chips etc.
and you get $174M in revenue. At net margins of 10%, 15% and
20% that works out to $17.4M, $26M and $34.8M. With 22.6M
shares outstanding, that works out to .77, $1.15 and $1.54
per share respectively.
A conservative growth rate for Netergy is 25%, which works
out to $19.25 (25 x .77), $28.75 (25 x $1.15) and $38.50
(25 x $1.54). Growth companies trade at 2X their growth
rate or more and since this growth rate (25%) is low, I
suspect these price targets should be multiplied 2.5X
which results in $48.13 ($19.25 x 2.5), $71.88 ($28.75 x
2.5) and $96.25 (38.50 x 2.5).
Note that all this uses a conservative growth rate, a
conservative net margin and a conservative piece of
the marketplace for a successful player in VoIP. This
also shows a $100 target is reasonable.[3]
It's all up to Netergy's products and execution of
business plan.
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[1] WR Hambrecht's estimate of PBX market
See: wrhambrecht.com
"We estimate the PBX equipment market to be about $6 billion annually,
the dominant majority being legacy circuit-switched PBX equipment."
[2] Frost & Sullivan's estimate of VoIP gateway business. $209M to
$3.6B in six years is 60% year-to-year growth or over $500M in
two years.
See: internetwk.com
"VoIP gateways will generate $3.6 billion in revenue by 2006, compared to
$209 million last year, Frost & Sullivan predicts."
[3] As always, check my math.
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