First of all Bill, don't fall into the Mudge trap in thinking that anything posted here makes a squat of difference in the stock price.
If you believe this, then rather than an earnest and valuable discussion of pros and cons, this forum is reduced to a meaningless PR battlezone -
<..It's obvious I have to question every detail in your post. Westell's margins went DOWN ~2% over the last 6 months... now you want to slam Westell by ~12% on margins for the next year....
Keeping the above in mind, you are welcome to question any detail in
ALL of my posts (as I'm sure you would have me do of yours). But my point, seemingly consistent with WSTL's own PR, is that competitive pressures are prevailing. And based on this, I am simply GUESTIMATING that into 1999, margins will be in the low 20s. Question it OR ignore it, it is simply my opinion which I CONTINUE to acknowledge may be wrong. Time alone will tell.
<..Several posts back you indicated that you MAY purchase Westell in the $8-$9 range, but you really don't have an agenda? You're looking to purchase Westell, but you really don't have an agenda... OK...>
That's right. I have no interest in owning WSTL at this time. I made the point, that as a TRADE, I MIGHT consider buying some shares if it got to the $8-9 region - and only IF there was not some reason for concern at that time for it BEING there.
But *I* am not under the delusion that anything I might say in this forum would effect the stock price - and certainly not under the pretension of being able to consequently buy shares cheaper. If YOU are working under this assumption, I doubt we'll have a productive interaction here.
<I've stated: 1) cable modem pressure is GOOD for Westell,..>
And my opinion (again) is that this could be a two edged sword, also slowing down/discouraging full rollouts due to market/pricing pressures... at LEAST until the rebundling issue is resolved.
<..2) The HFC plant is at 10%, and for you to give me a single URL
supporting your numbers...>
I DID! It was the url that YOU gave (and I RE-posted) - that ALSO stated (from Forrester Research) that Cable modems passed 11MM customers now, and that it is expected that by 2001 cable will have 7MM customers. What other urls do you want?
<Provide the math... I get ~$40/share with 36.5MM share.>
Again, all our "number playing" as you have acknowledged is pretty inaccurate. And for THIS reason, I simply defer to FC projections. Could THEY be wrong? OF course. But I don't have reason to think that MY numbers are better. Imn fact, I will clearly maintain, that they are NOT - since I DON'T talk to the company regularly, nor to any of their customers. And I DON'T follow and integrate all of the financials and various marketing/developmental costs in my modeling.
However, the formula I used is pretty straight forward. The difference between our "numbers" is simply what variables we plug in. If our variables disagree, our numbers will. And we already know that.
But if you want to know again how I came up with (one of) MY shirtcuff numbers, it is:
assuming 175K lines for WSTL in 98-99 (and this could be higher or lower), at $400/line. This yields sales of $70MM. Gross margins of, say, 25% equate to post tax margins of 12.5%, for net profits of $8.75MM. $8.75MM/36.3MM shares out = .24/share. A growth rate of 35% then yields a PEG price expectation of WSTL of $8.42. Conservatively, this would be considered fair valuation - TTM - in the 1999CY.
But as I said, I am dubious that these numbers are anywhere near correct. WSTL is not expected to be profitable until 2000, which, as I already clarified, doesn't allow a PEG valuation model to be accurately used for deriving current valuations.
Hope this helps.
Now, off to other things-
Steve |
