Hi Jaime,
The money trail goes from Autoliv to Simula. However, it was BMW that made the original determination to install the ITS in its line. Autoliv is publicly known to have recommended another solution, the curtain.
The reason for that is obvious to anyone who has made a living in a large organization: "Not invented here." Of course, this is further complicated by the fact that Autoliv would prefer not to have to pay an outsider for product, or commit itself to a licensing fee even if it brought production in house.
That is the "difficulty" that Simula has historically faced, and all of the impatient investors that have sold stock both prior to BMW's introduction of its line *or* the signing of additional agreements have been worn out by that very problem.
However, although it doesn't happen all the time, most often the "best" product wins, and Simula's ITS is far better than the curtain or padding in dealing with the Standard 201 problem. For starters, ITS is designed to be more effective against secondary impacts, as the tubular structure stays inflated for 5-6 seconds, versus less than .5 seconds for the curtain. (Each rollover takes approximately one second to complete!) The price is somewhat less than that of the curtain, and ITS works well in both angular and 90 degree accidents, something the curtain can not claim. Moreover, ITS will keep you *inside* a vehicle that is rolling whether or not the doors or windows are actually intact. The curtain can not accomplish that either.
As for "fireworks", my guess is that they will start immediately following the *first* additional ITS announcement. Another announcement would give the product line credibility, and I am strongly convinced that once a new agreement is signed, further agreements will not take as long to ink.
Moreover, each agreement is most probably going to phase in following an additional 15-18 month wait, so the analytic community will be able to reasonably judge the probable sales rates (and profit margins!) for several years into the future.
Such visibility is very rare, even in a high growth company, and my own belief is that the P/E ratio associated with this technology will be quite high once it is clear that the product will garner a reasonable market share.
To that end, my best guess is that initial agreements will be for both luxury autos (which need to have the marketing benefit of a "high-end" solution) and Sports Utility Vehicles, which are normally driven somewhat aggressively and exhibit high rollover rates. Even if such vehicles were the only type to utilize this protective device, market penetration will be comfortably north of ten percent, and earnings growth would be explosive going forward (as after breakeven, production of this product will have very high profit margins because its manufacture is relatively simple due to the limited number of individual parts).
In short...I am making the following prediction...if Simula signs 3 ITS contracts by the end of June/98, the stock will be at least double the current price irrespective of market conditions at the time.
OK...I guess that means I am committed. I only hope that the rest of you don't think that I *ought* to be committed. <G>
Have a good weekend. |
