Good points, Ted and Forrest!
I recently received information from a good friend who has ties to one of the institutional investors who attended one of the AXC presentations sponsored by the Pennyslvania Merchant Group. I also received a copy of the 1/13/97 PMG progress report that attempts to quantify the size of the inductive and MR markets thru 1999 and the value of KM assuming a blend of licensing, manufacturing and reselling keepered disks.
Somebody else who went to the presentation already indicated here that AXC's target is $1.00/platter. PMG constructed a matrix of potential fully taxed (at 40%) EPS from KM assuming x profit per platter and y share of the market in 1999:
$ 0.30 profit per platter + 10% market share = $ 0.22 (lowest estimate)
$ 0.70 profit per platter + 30% market share = $ 1.56 (TFI = 30% of market)
$ 1.00 profit per platter + 30% market share = $ 2.23 (axc target+TFI only)
$ 1.00 profit per platter + 90% market share = $ 6.68 (axc target+ TFI/MR)
$ 1.50 profit per platter + 100%market share = $11.13 (highest estimate)
Note: Platter market expected to go from 335 M in 1996 to 600 M in 1999. MR is expected to have 70% market share while TFI retains 30%.
I get the sense that AXC's plans are flexible, but there are clear indications that AXC is aggressively pricing the technology to let it become an industry standard. Currently, AXC's target is based on a blend between the following:
1) licensing (lowest risk, lowest return)
2) reselling (some risk, better returns)
3) manufacturing (highest risk, highest return)
AXC currently assumes that licensing and reselling will account for most of the KM revenue stream with manufacturing (gross margins in the 30-45% range) eventually coming online. I am beginning to think that this low risk (and low returns) strategy is prudent considering the quality of the products in their R&D pipeline.
There is much more about Maxtor (increased pricing flexibility with KM, increased drive production capacity), the MR bogeyman [sorry Salim, but EMC is your own personal bogeyman....doesn't compete directly with AXC), the expansion in DST products (telecommunications) and marketing, and the other products in development that I will post as soon as I find more time later today. |
