BORL: Time to BUY! Message Board

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Technology Stocks : BORL: Time to BUY!

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To: David Miller who wrote (7989)	12/10/1997 11:37:00 PM
From: shane forbes	Read Replies (3) of 10836

RE: If the answer is greater than one, this is called cannibalisation. David that's not exactly right. Consider: a pool of 100 developers 5 of which are ORCL developers Say BORL has 20% market share Then of the 5 ORCL developers BORL would have expected to sell 1 copy of JBuilder. So the 5 ORCL developers would generate 1x revenue for BORL. BUT because of Valhalla now all 5 ORCL developers use JBuilder. So BORL gains 4 developers. Suppose each Valhalla purchase generates 0.1x revenue for BORL. Then BORL has gained 0.5x. NET the loss is 0.5x not 1x as you suggest. --- In other words gained volume cannot be neglected. --- Besides the more important issue is not revenue but earnings. Consider that the 0.5x used 0 packaging, 0 SG&A... Thus more of the 0.5x as a percentage flows to the bottom line than the 1x regular sale. In fact I might venture to say that it's possible that the 0.5x would generate more profit than the 1x regular sale. ---- In other words "the quality of the earnings" should not be ignored. ---- Besides in the war of competing recently introduced products I'll say market share is crucial. And any gains here are to be welcomed. It's the "guarantee" of renewal sales when the new product gets upgraded. So it's beneficial down the line for mitigating risk. Yet another point is that it introduces JBuilder to the hardcore corporate ORCL developer. "Corporate" being BORL's targeted buzz-word. ---- And in the intangibles arena it validates that BORL has gained a point in the "credibility" department. Del himself raised this point when he said that the relationships with companies like IBM, ORCL, SUN etc were important to BORL. ---- And finally consider this : What if ORCL had chosen to use Symantec's Visual Cafe instead? (In addition to "sucking" this would have caused BORL to lose 1 sale to the 5 developers. Thus if BORL had not signed the agreement BORL's loss would have been 1x!!! Think about that. ORCL had to use someone's product! Therefore compared to this situation you could argue that BORL has gained from the deal overall.... even from a pure revenue based argument. ) ---- Even though much of what I raised can be debated till the cows come home the point is: it's not as simple as "cannabilization".

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