RE: Is SyQuest Making a Profit on the 3GB Deal?
Chris,
You say >> I will assume that they are still making a profit with this deal <<, yet you also say >> Personally, I don't believe they are selling enough Syjets to become profitable. <<
Which is it?
I think it's VERY safe to assume that they AREN'T making a profit on the 3GB deal. In their most recent quarter, their gross margin was 3% (yes, THREE PERCENT), and that was before the 3GB deal. Since SyJet made up a large part of their revenue, I think it's very safe to assume that the SyJet gross margin is about the same. After throwing in a free cartridge, it's bound to be a negative gross margin.
But the biggest loss comes later. I'm surprised nobody has discussed this yet. Tie ratios are lower with larger capacity drives. Historically, SyQuest has had a 5:1 tie ratio (16 million cartridges, 3 million drives). But that's an average--what is it on their highest capacity drive? 4:1? 3:1?
Now, the customer already has two cartridges. Instead of buying two or three more, they will be buying one or two more. That's a HUGE decrease. I think that the impact on future sales AND margins will be large.
Comments, anyone?
Your friendly bear,
- Michael Coley
- i1.net |
