Brian
I believe that QC's infrastructure business was generating an annual operating loss in, or around, $150mm. Why so big? First, the R&D investment was enormous, particularly in light of the limited revenue generation. Second, the company had to invest in a sales infrastructure, i.e. SG&A, in every market where it hoped to conduct business. Despite all the dollars committed to SG&A, these efforts produced insufficient revenue to support the overhead. Third, overall low volume levels results in depressed gross profit margins due to poor absorption of manufacturing overhead.
Think about it this way. Assume QC generated $350mm in infrastructure revenue over the last four quarters, with 15% gross profit margin. This results in just $53mm in gross profit. Substract from this, approximately $130mm in R&D expense and and $70mm in global SG&A, and you get an operating loss near $150mm. You get the idea.
Best regards,
Gregg |
