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Technology Stocks : Westell WSTL
WSTL 6.070-1.6%Dec 26 9:30 AM EST
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To: mike cobble who wrote (12275)7/24/1998 8:41:00 AM
From: Charlie Smith  Read Replies (2) of 21342
 
mike:

<<WSTL's MZ talked like BA's acquisition cost for the WSTL modems was somewhere between $99-$325/modem. If deploying 2 million modems this year at $200/modem (guess) that would amount to $400 million in revenue. Sounded like the gross margin would be very low, don't know how much profit WSTL would make on this. Do these numbers or the reasoning sound faulty????????>>

You're way off on the revenue number. Remember, 2 million lines is just the initial number of lines accessible. Take rate will probably be less than 5 percent (cable modems are 2 to 3 percent). My guess is 100K modems at $120 gross each to WSTL in the first 9 months, or $12 million in revenue from BA. Assuming flat numbers in the other businesses, minor revenue from BT and decent cost control, I get them to breakeven about the third quarter of next FY (FY2000). Margins are the big question. Which way does the gross margin go in the next year or so? I'm assuming 31 percent range long term. This is the big problem with this company: nothing proprietary so low margin. We need volume.

Their reluctance to talk about GTE makes me think that business is nearly dead. They made positive comments about everything except GTE.

Hope this helps.

Charlie
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