<< A machine returned is worse than a machine not sold>>
How true! The trick for the company I think, will be to get out into the field and work with the early adopters. Newer and better video tapes, sales materials, working with the distributors' sales people, live demonstrations at dental shows, and a lot of plain old shoe leather is called for. I met one of the company's 10 regional sales reps at a meeting of dentists the other night at which a dentist user (one of a number of evangelists who is hooked on the product) demonstrated and lectured on the wand for the benefit of the others present. If the company's other sales reps are as good as this one was, Milestone then is very well represented in the field. Meanwhile you hear anecdotal stories of dentists talking about the product and giving each other injections. Amazingly, to me, not one of the dentists present would volunteer for a wand injection. I guess they all give painless injections, but won't take any. :-))))
The company has made some product engineering and design improvements. Some have complained the beeper was too loud, so a mechanism has been designed to give each user the ability to control the beeper volume. Also a design change has been incorporated in the newer models to cut the aspiration time nearly in half, from approximately 15-16 seconds to 7-8 seconds. (After initial penetration of the tissue witht the needle, the plunger must be pulled back to make sure there is no blood and the dentist hasn't hit a blood vessel by mistake.)
I don't necessarily agree that this is a make or break quarter. I don't think it will either make or break the company, but it should provide some valuable clues as to the trend of the business. It should be a good quarter regardless, because a fair amount of product was shipped in April to catch up with back orders. May and June will be more normal months, but it is still early in the launch cycle to make any long term judgements, in my opinion. In the meantime, management is adopting what they think is a conservative accounting treatment for returns. The have set up a 10% reserve, or reduction, against sales as a reserve against returned product and have penalized reported earnings for that amount. (Reminds me to ask what they do with inventory reserves since used goods coming back in open boxes can not be resold as new product?)
There was some confusion at this and at the last conference call, as to the accounting treatment for the 1000 units which were shipped last December without having disposable wands to go with them. It involved some $600,000 of potential sales. I am told by the company's new accounting officer that they did the right thing by not taking the units into revenues last year, because they could not be resold by the customers. I believe the accounting entries resulted in those sales being booked in the first quarter on 1998, with a 10% reserve for returns.
I think we all should remember this is still a very young company with but a few people, experiencing growth pains typical in situations like these. We should expect pit stops along the way. |
