The S3/a contains a lot of positive news. One of the most positive piece of information, I think, is the road map AXC seems to be developing for MR+KM. Having seen this company take KM from the
conceptual stage to lab trials to field trials and now apparently
to the drafts-and-counterproposals stage of negotiations, I am
perfectly willing to give AXC the benefit of the doubt that they
can take MR+KM to fruition more quickly than expected. Last quarter
MR+KM was only a theoretical possibility in that Data Storage
article. Now we have an apparently successful initial limited field trial!
Having cut AXC that slack and assuming that they can use the profits
from KM+inductive head/contact recording to achieve MR+KM
compatibility, then AXC stands to participate in a much larger market
than I think a lot of people, least of all myself, were expecting. Disk/Trend, Dataquest, and Freeman & Associates all use similar
1.6 disk-drives-sold/1.0-PC-sold ratios in their disk drive industry
projections, with growth rates in the 20-30% range.
Granted that this segment of the disk drive component business carries with it the low multiples lingering from the industry wide inventory correction (and some company-specific issues), this new business, I think, will be capacity-constrained right from the start AND quickly above break-even!
Taking it a bit further and accepting the point that the 1997 second
half is the most likely starting point for the KM revenue stream,
the 1998 pro-forma AXC revenue model will show 1)KM, 2)Mass Storage,
and 3) HDTV. I am intentionally leaving aside the VHS/8MM royalty
stream (too inconsistent) and data recorders (fewer and fewer
plane projects, a sunset business). I am looking straight
at a company, which started 1996 on the pink sheets, that
stands to be a very competitive factor (with proprietary technology
in each!) in 3 fast-growing market segments: disk drives (above
20% annual growth), mass storage (above 55% annual growth, the
start of the multimedia relational database wars can only goose
this growth rate even more), and HDTV (potentially a $50 billion
market).
The 9/30/96 10Q actually sounds absolutely tepid now compared to this
filing! |
