I need to check out that low margin comment. At first glance, I would agree that the TFH tools are not as sophisticated as the Saturn III which means they would not command a comprable price. However, what is a lower margin on paper may not be a lower profit in reality. Sometimes we mix up margins and profits. I will need to do some homework but let me pose this question:
Which is more preferable?
25% margin on a system that costs $1 million to build and takes 30 days to manufacture
OR
50% margin on a system that costs %1.5 million to build and takes 90 days to manufacture.
The above numbers are no where close to actual UTEK numbers. They are completely fictitious. However, I do believe that you still can't answer this until you know the fixed and variable expenses relative to this manufacturing and sales process.
In simpler terms, How does a supermarket stay in business with a lousy 2-5% margin???? Supposedly they make it up in volume.
BTW-I do not give a damn about the profit margins on Big Macs at MacDonalds since the real $$$$ are in the French Fries and the Drinks.
In the case of UTEKs, I would like to believe the real $$$ is in the service contracts, service calls, parts, services, etal. AFTER the sale. For most semiconductor equipment companies, that's where the real $$$$ comes from. Therefore the key is how many systems you get out into the field and not the margins on each of the systems sold. As a matter of fact, the UTEKs on the used equipment market that find a home wind up increasing the profitability of UTEK by the refurbishment, service, parts, etc. that occur after they go back into production.
Andrew |
