Deswell Industries (DSWL) Message Board

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Technology Stocks : Deswell Industries (DSWL)

DSWL 3.630

-0.8%

Nov 28 9:30 AM EST

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To: David Seltzer who wrote (646)	4/15/1998 4:24:00 PM
From: Ron Bower	of 1418

David, If you'll read my post on the relationship between Deswell and their customers, I make the point that Deswell's operation builds a relationship with their customers. The revenue from this would obviously rise and decline with economies, but be much more stable than a company that is always seeking new business. It also requires less overhead from a smaller sales force. IMO - An operation like Deswell should keep customers by dependably supplying high quality products at a 'competitive' price. A well satisfied customer is far less likely to take the risk of a new supplier that may not be as dependable. This would allow Deswell to contract at slightly higher gross margins, but the continued stream of production would result in much higher net earnings. They are building a reputation that will aid them in attracting new business. They have no financial problems and, when a contract is signed, the supply is virtually guaranteed. The fact that they aren't out there trying to get all the business is actually a plus to their customers. Very few customers are attracted and kept thru low pricing. They have indicated that they will concentrate most of their efforts in telecom, a sector that should show steady growth. They have been steadily adding customers as they add production capacity and I get the impression that they have actually declined sales. I don't think we need to be concerned about their sales ability. Have you noticed they seem to concentrate on mid sized growth companies instead of the BIG companies? The BIG companies will give you a BIG order, then nothing (re Namtai & TI). The small companies want steady delivery over a period of time to replace the inventory they've sold. Much more stable revenue for Deswell and easier planning of future production needs. It's a matter of a million units this month, or an estimated 85,000 units a month for the next year. Do we want explosive revenues or explosive earnings? Let's keep that margin up there for Deswell and see ELAMF get theirs up. Thanks for the response per ELAMF. For what it's worth, Ron I must learn to say what I want to say with less words!!!

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