Trimble is outsourcing production of state of the art complex equipment -- not relatively fungible, mass produced chip technology. So the outsources have a learning curve. (Unlike Dell, etc., I don't believe TRMB has been outsourcing as a common practice, with experienced subs.)
As far as prices falling, well, that's what we need to see for GPS to get mainstreamed. TRMB is hoping for a higher-volume, lower margin business in the future that will result in greater EPS. In fact, they'd be very happy to license their designs as much as possible.
It's more than OK to have lower margins on an individual unit if you are selling 10 or 50 times the units in the future. Take car navigation, for instance. We need to see these units drop under $500 for large scale profits to flow in. Right now, they are at about $2000 (heading down to about $1300 in the Auto PC), but not enough get sold. Most of these car nav costs, by the way, are not related to the GPS engine, which goes for more like $125 per unit. |
