Scott, you have some interesting analysis.
Here is what I think (not necessarily correct by any means):
<Some of the following comments and discussions are with the aid of
the Q2-97 conference call. The rest are opinions>
1. REVENUE
(i) WordPerfect Suite 8
I think there is a lot of potential but there are lots of unknowns at
the present time. Q2 had shipments of 300,000 units into the channels
at $120 per unit. The initial sell-through is 30% higher than WP7 and
at 50% higher revenues. Q3 shipment into the channels will depend on
how much product moves to the consumer. I don't think we will see a
sell-through of 300,000 units per month but I think a 30% unit growth
rate over WP7 is sustainable.
There may be a lot of users (new and existing) holding off on
purchases waiting for the full product that includes CorelCentral /
Netscape Communicator which is supposed to be available in early
August. This could mean another buying spree.
There could also be a large boost in sales internationally in Q3 with
the release of the language versions. Currently WP sales outside
North America is in the 25-30% range. The CorelDraw model has 50%
international exposure. With the new localization of WP8 and with
sales into the existing international Corel channels, sales outside
North America could grow to 40-45%.
In estimating WP8 revenues for Q3-97, I'm taking 50% of last years
productivity revenues of 62.9M to be that of WP7. Multiply this by
30% for unit growth and by 50% for the price adjustment and you arrive
at 61.3M
(ii) WP Corporate Licensing, WP7 for Win 3.1x, WP7 for Mac ver.4
WP7 for Win 3.1x is another one that is hard to gauge. Over 50% of
the installed base is the 16-bit customer. They haven't had an
upgrade release for 15-16 months. WP7 for Win 3.1x could do well in
this arena but what will the installed base do?
Will they
1. Upgrade to Win95/NT
2. Stay with Win 3.1x
Will the users that move to Win95/NT go with
1. Microsoft or Lotus
2. 32-bit WordPerfect 7 or 8
And finally, will the users that stay with Win 3.1x upgrade to WP7 for
Win 3.1x. I think there is still lots of potential with the 3.1x
platform for Corel. Microsoft is not addressing these users since
they would like them to upgrade to Win95/NT operating systems.
Corporate Licensing is growing quarter over quarter and should
continue in Q3.
The introduction of WP for Mac version 4 should add some sales.
To estimate sales for Corporate Licensing, WP7 for Win 3.1x, and WP
for Mac ver.4, I'll use 50% of last years productivity revenue of
62.9M and apply a year-over-year growth rate of 35%. This gives an
estimate of 42.4M.
(iii) Vertical Markets and other productivity products
The legal version due out in the next week or two already has a
back-log of several million dollars. Also all the vertical suites are
now being engineered into stand-alone "Plus-Packs" so that they can be
added to any version of WP Suite.
I'll guess and say that 7M in revenues is generated from the vertical
markets and the discounted WP7 that will sell for $70 on the street.
Corel could always do another un-announced licensing deal for Office
for Java and add $10M to the picture.
(iv) Graphics Products
The second half of the year is usually the strongest for the graphics
division. If we use 1995 as a model, then we should get a 100% growth
rate in Q3 versus Q2 when multi-media and video is factored out.
With Q2 graphics revenue of 27.6M, Q3 should come in at $55.2M
(v) Revenue Summary
All of the above estimates add to a Q3 revenue projection of 165.9M.
To be conservative, I'm going to use 75% of this number and go with
124.4M
2. COST OF SALES
With the technology write-off, 9M worth of license amortization has
disappeared. Going forward I'm using the Q2 number of 3.7M for
license amortization, 5% for royalties, and 12% for Cost of Goods
Sold.
3. EXPENSES
Use Q2 numbers. Advertising at 20M, SG&A at 21.9%, R&D at 22.2%,
Depreciation & Amortization at 7.2M
4. TAX RATE
Management guidance was 35% for the balance of the year and for 1998.
5. EPS
Applying items 1 through 4:
Sales 124,400 (100%)
License Amort. 3,700 (2.9)
COGS 14,928 (12)
Royalties 6,220 (5)
Gross Profit 99,552 (80)
Advertising 20,000 (16)
SG&A 27,244 (21.9)
R&D 27,617 (22.2)
Depr&Amor 7,200 (5.3)
Income before taxes 17,491 (14.1)
Income taxes @ 35% 6,122
Net Income 11,369 (9.1)
Earnings/share 0.16
fully-diluted
(70,844 shares)
PS - I didn't include WordPerfect Suite 8 Professional in the above
analysis (just in case they don't make it in time). If WP8
Professional is released in Q3, I would take last years 15M that was
pushed into Q4 and add 50% for price and 30% for unit growth for total
revenues of 29.3M
Just think about Scott, if I wasn't being conservative I would be
using 195.2M for Q3 estimates. If Office for Java brings in 10M, I'm
up to 205.2M
...and I thought you were way too high when I read your post <G>
ah |
