Eric, thanks for your contributions.
I hope the Harris numbers are correct, however, that means that the conversion is a $5 billion market. I am thinking that that is either optimistic, or reflects the entire cost, only some of which will come to the transmitter manufacturers. I also have to question an earlier post, - whether 1% of the market is an acceptable level of penetration. If there are apprx 1600 HP US customers out there, 1% represents 16 HP sales over the next 8 years, or two sales per year. At an average of $750k per HP transmitter, I don't think any of us are looking at $1.5mm per year as the reason we invested in this co. I don't think that the company can survive on those kind of numbers. Besides, any broadcaster with ACT problems and any brains, will realize that from Acrodyne you get two transmitters in one, an analog replacement and a digital machine without the need for dual antennas and other duplicate equipment. What sense does it make for a broadcaster to buy just a digital transmitter that will require another antenna and duplicate post final AMP, cables, etc., when they can get a solid state pre-amp ACT machine and use their old analog as a back-up. Then look at the power costs for ACT companies, more than twice the costs, twice the maintance, and twice the headaches. Besides, the cost savings in the Diacrode technology in its own regard versus IOT makes Acrodyne transmitters attractive for the ACT and non-ACT analog and DTV crowd. If I were a broadcaster, I would be hoping that I was assigned an ACT. It would allow me to get into digital with very little serious capital costs for the transmitter, and my only big costs would be for the other production equipment. This is especially true for the 5-10% per year of the ACT HP group that will need to replace their analog equipment anyways. Average 7.5% * 8 years = 60% of the ACT market where it makes overwhelming economic sense to use the Acro Diacrode solution. 60% of the ACT HP market is 240 transmitters, or 30 transmitters per year.
Given the economics, ACRO makes a better, cheaper transmitter that reduces by 50% or more the costs to 360 ACT stations. It makes a better and cheaper Transmitter for anyone looking at the costs of tube replacement, down time, and power costs over the life of the transmitter. What ACRO doesn't have yet is a convincing track record that the sheep can follow. I am hoping that the first few sales of DTV and ACT are soon to be unfolding, and I am also hoping that the industry will begin to take some notice with those sales. Combine the confidence that actual purchases creates in other fencesitters, the hopefully positive write-ups in the trade publications, and the results of upcoming professional meetings and subsequent on site tours of the facility with demo's of the current transmitter technology, and I am hoping that sales with accelerate.
My concerns are: a) enough capital to make this thing work (I still think that the Vulture group (or whatever their name is) got a terrific deal, I hope that they contributed enough capital to ensure the financial strength and viability for the company), b) the need for a competant and convincing integrator for a turnkey operation for those stations that don't want any technical challenges.
I am hoping for at least 10%, if not 20% of the DTV build out. 10% of 1600 * apprx $750,000 per transmitter = $120 million over 8 years, or $15 million in sales per year to the HP domestic market. Add some analog replacement, costs of add ons, and other MP and LP sales and I am hoping for to reach $40 million in sales per year by 2001. If there is a 35% margin on these before SG&A, then we will be seeing $14 mm in profit - $5 million SG&A, and - $2.5 million taxes. That leaves us with $6.5 million profit on 5 mmm shares or $1.15 per share. I think that will put the stock at about $15- $20 conservatively. (Actually I am hoping for higher sales, closer to 20% of the market with higher costs and higher margins. I think that a crush of demand will be unleashed when the broadcasters all become nervous simultaneously. The broadcasters will have created a very adverse market for the themselves and a very postivie one for us.)
Bob |
