Matridigm Big Lie #2: A billion lines of code = a billion dollars
The following gem comes from David (con artist, crook, internet hypemonger) Stewart's "report" on Zitel corporation.
Note how he throws around insane numbers and makes off-the-cuff calculations without once examining any fundamental assumptions. Con artists understand that if you are going to tell a lie, the bigger the lie, the better. The Bre-X crooks understood this also, that's why they kept raising their estimates on the amount of gold in their phony gold mine.
Unfortunatley, Just like the Bre-X shareholders who were left holding the bag, Zitel shareholders are going to find out the hard way about the realities of the software business.
For your amusement, here is David Stewart's big lie:
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Get out your biggest calculator. The formula is straight-forward enough. In fact, it's almost identical to the one Chiang will use to figure his taxes (using an HP35, no doubt). The math's simple, too; it's just that there are soooo many zeroes.
Three-Year Earnings Model:
A. TIME Calculations -- 24 hours in a day times 365 days in a year times 3 years = 26,280 (the sum total of hours remaining between a Jan. 1, 1997, start date and midnight, Year 2000 -- the mandatory deadline for becoming date-change compliant)
B. RATE Calculations -- 26,280 total hours times 1 million conversion lines per hour at $1 per line = $26.28 billion (the gross revenues of a single solution-system factory over a three-year period)
C. PERCENTAGE Reductions -- $26.28 billion times 50% gross margin times roughly 37% combined state and federal corporate tax rate times Zitel's 37.5% ownership of the Company divided by 7.4 million Zitel shares = $699 per share.
Bottom Line: Zitel's three-year net for its investment would look like $699 in cash per share. |
