Operating expenses as a % of revenues are declining....as revenues ramp I expect that this trend will continue. imo gross margins are exceptionally healthy and seeing it any other way is to be looking for warts where none exist.
I believe the rest of my argument (that the market is not there to justify a valuation north of a billion bucks) still holds....Actually your argument included the suggestion that their business was in decline....which imo is pure FUD and is not at all supported by looking at their revenue growth. Given Echelon's partners and Metcalfe's law on the dynamics of network growth/value, I think the size of the market for Elon's technology, and the scope of possible implementations will surprise to the upside over the next few years... the equity markets have consistently priced sector leaders at a premium.
So my point to Larry should be not 5 times fair value but somewhat less than 4 times..... If you think the stock is overpriced by say a factor of 3.75, don't buy it, or if you're really sure, why not short it and cover at 8 11/16 which would approximate your fair value.
Your previous reply to r.edwards suggests that the system's costs and maintenance costs might be much higher. If you had made even a cursory attempt to look into this you would find that one of the LonWorks advantages is Life Cycle Cost Savings.
Echelon Helps the GSA Move to Open Systems and Substantially Reduce Costs
The E.M. Dirksen Federal Courthouse in Chicago, Illinois, consists of approximately one million square feet of space serving Federal district courts, the FBI, the Department of Justice, the General Service Administration (GSA), and other Federal agencies. Given the number of courtrooms in the building, maintaining a comfortable temperature level throughout is a major challenge. In the past, a building engineer had to manually adjust the controls to meet the needs of various courtrooms. Over time, it became clear that the building?s heating, ventilation, and air conditioning (HVAC) equipment and control systems, dating back to 1963, had to be replaced.
The GSA decided to retrofit the complex using an open LonWorks© network. From the start, the new LonWorks solution proved to be a wise investment, saving the GSA an estimated $150,000* in installation and commissioning costs. Additionally, the system promises to dramatically reduce yearly operating costs, saving an estimated $75,000* in engineering resources and overhead and reducing annual energy consumption and expenses by 30 percent. And, since LonWorks is an open platform, the agency no longer has to rely on proprietary products. echelon.com |
