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Technology Stocks : Net Perceptions, Inc. (NETP)
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To: Carl R. who wrote (2558)7/26/2000 8:18:29 AM
From: rupert1   of 2908
 
Carl : We are not in fundamenal disagreement - I just like poking fun at what appeared to be your logic.

Obviously, NETP's business plan is not to create a loss-making company. To make a judgement about the appropriate size of its R&D budget is to have some idea of an omega point - a point at which the start-up nature of the company has passed and one can start analysing it as an ongoing concern with self-generating growth. Unless NETP publishes the criteria for such an omega point we have to guess and the criteria will be arbitrary. I suppose the date it turns profitable is a candidate but I would think 12 months after that date is more reasonable.

By that date - or any reasonable date - revenues ought to be substantially larger than they are now. Whatever the R&D budget was, it will have declined as a percentage and at that date, one could start making comparisons between NETP and the industry norm. This is different logically from saying that NETP's R&D budget is higher than the industry norm and it will have to grow sales to bring it down.

I could see that R&D will have to keep up with the proliferation of product lines. NETP will always have to improve, upgrade, find ways of making its software compatible with new software coming unto the market. I have no idea whether this incremental increase in R&D will be above or below the industry norm. However, much of the pioneering R&D design has been done over the last seven years first by the University of Minnesota and then for the last five years by the University and NETP working together on the 23 patents applied for. So it is conceivable that there may not need to be increases in this core stuff and perhaps a slight decrease. But I have no real idea - I have never heard it discussed by the company. Maybe we should ask them what their R&D goals are - but like you said - why should they tip their hand in public?
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