Mind you, I'm not promising $500 a share! So don't sue me or gripe about it when they fall short (if they fall short ;-) !), but I'm just trying to get my pea brain around the size of the parameters here for the huge possible increase in share price. Fear and greed are our pocketbook enemies when the price finally starts rising. As far as the far future goes, our hope is that KM will be an easy gravy train of profits that can fund future growth opportunities that they've either got on the shelf, in the lab, or just in their minds right now.
Here's the quote of the post I promised, off of AOL. It was graciously sent to me personally by e-mail but not to this board so I won't reveal the source just in case they didn't want to be identified. Anyways, here on the mega bull AXC soapbox is one mysterious "lsscbd" on AOL, 1-15-97 at 22:40. Anyone else who's got AOL connections can check to confirm, please do and cut and paste any other info!
"Had the opportunity to attend an early stop on the AXC road show and talk with Craig McKibben, AXC's CFO. I found him to be informative, extremely intelligent & knowledgeable about both AXC and the #'s and bullish w/o puffery- exactly as I'd hoped he'd be, plus. Here are a few items that might answer prior inquiries or be of general interest.
1)The recent filing updating a shelf reg. was required pursuant to an agreement w/ holders of unregistered shares & isn't indication of an imminent sale. My impression is that the company(and certainly McKibben) think the stock is underpriced at these levels- as know from last summer's shelf, AXC would like to raise some equity at higher #'s.
2)AXC is quite clear that Maxtor is the perfect candidate to be the 1st KM customer by reason of: small 8% market share
losing recent record
a consequent need to increase not only volumes but margins.
I don't think the co has much doubt that Maxtor is completely committed to KM but in any event the contract is cancellable by AXC if Maxtor doesn't attain certain minimum levels by 3/98.
3)It appears that KM has a very substantial chance to become market dominant within the next several years. The average drive sells for $180 with the OEM attaining a miniscule pretax profit of about $5.40 or 3%. With KM spluttered on IR (inductive read?) heads there'll be less read heads necessary and the same capacity and sales price will result in pretax profit margin approximately doubling, maybe slightly less depending on AXC's price. Since margins are small it would appear almost impossible for OEM's to ignore this savings once their competition attains this edge.
4)The KM market should be 600M platters by 1999. 2/3 are anticipated to be MR by this time and KM hasn't finally proved to be commercially feasible on MR altho it clearly does work with MR. However, if commercial feasibility isn't attained it appears that MR probably will have less usage (than currently forecast)because they won't be price competitive.How many of you know what type of head is in your drive- I sure don't. Depending on market share, pricing and whether AXC manufactures, purchases or licenses most of KM its earnings according to an analysis from Pennsylvania Merchant Group could be anywhere from .22(assuming only .30 profit pre platter and 10% market share) to up to $11(assuming $1.50 profit per platter and 100% market share). I don't think either scenario is likely but I'd sure split the difference at about $5.40 a share after taxes just from KM. McKibben didn't give the foregoing #'s but he did indicate that AXC's target is a blended return of $1 per platter. AXC is in discussions with ALL remaining drive OEM's.
5)AXC continues to invest 17% of sales in R&D. They try to get a fair mix between: commercializing already developed technologies
just brainstorming
and overall development of items.
6)In summary, I got a very good feeling about the prospects and focus of AXC. What was said about other products and technologies(including tremendous growth in DST) more than justifies the present price in my analysis. In evaluating AXC please don't forget the royalty stream(which should be increasing and in which the company incurred a .09/share expense in 96). We should all keep in mind the share price has multiplied 5x in 21 months. I think we have a cheaper stock now than when we did last January at $5."
Whew, I've got to learn more about cutting and pasting! In summary, it's all great news! Fills in some of the numerous blanks we were wondering about. Seems AXC is on a road show sponsored by either PA Merchant Group, Genesis Group or Dabney/Resnick. How I'd love to be at one of them! I'm also wondering about going to the annual meeting which last year was held in CA in June, but wonder if it'd be of any value??? Maybe in 99 they can hold the annual meeting on whoever gets their island first!
Again, I'm not predicting or forecasting that all of these wonderful events WILL happen, but am trying to gauge market's response if several of them DO happen. I plan on borrowing more on up to $20. My chief fear right now is of big dips before then that might trigger a margin call for my very extended position.
Waiting for that second OEM, this time much bigger player most probably, because they're all probably bigger than Maxtor with the exception of Micropolis. We just have to outwait the snail speed and sloth intelligence of big money to "discover" AXC.
What are your thoughts on all of this? As I said in my previous post, taking 2/3 of $11, since AXC is gunning for $1 per platter versus PA's merchant groups guess of $1.50, still leaves with potential for $7+ eps solely from KM in 99. Sometime some big players are going to sit up and take notice!!!! |
