<My problem w/AMTX has always been: when is the market going to value the company based on future earnings when it has incredible potential, but none today>
This, IMO, is why AMTX today is not unlike a one (or primary) product biopharmaceutical company, and should be allocated into one's portfolio as a high risk "venture" type stock.
<The market values MSFT's '99 earning>
MSFT is an absolutely unique, IMO, company. Established and dominating the world market with NO realistic competition is in sight. Incredible aggressive management, arguably the best and biggest software talent pool ever, and beyond development costs - virtually no product overhead (and soon to get cheaper in an all digital distribution model). Nobody can really be compared to Microsoft, IMO.
<If they did the same w/AMTX, it would be a $50 stock today.>
As above, (playfully) and if bears could fly...
<My guess is: first orders=market values stock's next years earnings w/a 30% risk discount. First earnings, discount drops to 20%.>
The typical model (as I'm sure you know) for a growth stock in a growth sector is to look at 3-5 years of reasonable projected earnings and revenue growth. Take that percentage (let's say an aggressive 50%) and multiply the 50 times the *current* year's earnings to get a valuation. And at 50x (for ANY high PE growth stock), ANY stumble (missing earnings by a penny or slowing revenue growth) buys the stock a *significant* market discount.
<I want to know when these points are, and buy more just before.>
Recently from Tac Berry, we know this will NOT be 1997.
Another point I want to consider and hear opinion on -
I think it is agreed that Amati will not have an impressive business model if all they do is get licensing fees (someone said $2-$4 per, is this a given? And this of course, providing they actually do get them)
So to make money, they need to SELL modems. Now they have licensed their specific algorithms (as line code) which follow the existing ANSI standard to MOT and TI (Aware has also to TI. We don't know if they'll get MOT at some time as well).
So competition for Amati in the selling of modems (if there is any profit in the selling, which we will presume) will likely come from:
US Robotics
Motorola
Anyone who buys chips from MOT / TI
Anyone buying chips from Analog Devices (ADI)
Paradyne
Anyone buying chips from Lucent
(Did I miss any?)
This seems a pretty formidable list of competitors, considering name brand recognition and distribution channels.
No doubt, Amati will sell some modems, but how many and how quickly is the key to earnings and revenue growth, and therefore fair market valuations. In any case, we seem a ways away.
My thoughts, anyway...
Steve
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