Zeev the difference between my stand on AXC and my stand on RMBS is
quite simply that I believe that video on the web will explosively
grow as faster bandwidth becomes available, while I believe that RMBS
memory will never be widely used in PCs, or at best will be used for
only a year or two before the market moves on to something else. SDRAM
did provide a 3% improvement in overall system performance over EDO
systems, but RDRAM does not outperform PC133 SDRAM at all when used
for main system memory, according to reports I have heard. Perhaps
these issues will be resolved and they will be able to achieve a 3%
improvement over SDRAM in the end, but RDRAM will be selling at a
25-50% premium. Even if RDRAM becomes the standard, most memory
standards remain the standard for only a year or two before the market
moves on to something else. Maybe you are right and RDRAM will become
the new standard and will be the standard forever, but I just don't
believe it.
Now back to AXC. As for the level of internet revenues, lets look at
what is know about the various divisions. Let's start with TVoW. We
know that TVoW currently has about 30 channels. A year or two ago they
were offering channels for $125 a month (see the archived Washington
Fireworks program). As recently as a month ago the price quoted in
the fireside chat was $1000-1500 a month. As of last week they were
quoting $2500-5000 a month. This implies to me that they have strong
demand from underwriters. They also have indicated plans to be up to
100 channels by year end. I am fuzzy about ad revenue, but I suspect
that between the ad revenue form advertising, e-commerce, and
underwriting fees, TVoW currently nets about $5,000 per channel per
month, and will net more like $8,000 per channel per month by year
end. TVoW also gets revenue from other sources including production.
Thus I assume that the revenue of TVoW is probably in the range of
$200,000 per month right now, and will be more like $1,000,000 by
year end. These figures do not take into account any revenue from
Malta where TVoW is setting up a pilot project, as well as a
production facility. Therefore by year end revenues could easily
exceed $3 million per quarter which should be enough for an IPO if
desired. I would also guess that TVoW will be profitable by then,
but since we can't see the financials this is all speculative, but
remember, they were apparently profitable in 1998 at a much lower
price per channel.
Next comes Reiter. All we really know is that they are growing fast,
at least at 300% a year. Their revenues will appear on the AXC
financials this quarter, after which time we will be in a better
position to evaluate them. I presume that their revenue per quarter
in probably in excess of $1 million, and will exceed $2 million by
year end, but I really don't know.
The in-house project currently has no revenue at all, but presumably
will grow quickly. If it has revenue of $600,000 this year it is
doing well, I presume, and almost all of it would be in Q4. However
it should grow faster than the others once on stream due to things
learned in the other divisions.
As for AENTV, I have no understanding of their revenue stream at all.
All that is know is that they were profitable in 1998, which implies
that they have some revenue. <G> I assume a moderate revenue, and
moderate growth rate (for an internet).
Therefore I'll make some wild guesses as follows:
Q1 Q2 Q3 Q4 Q100
TVow $.3 $ .6 $1.3 $2.8 $4.6
Reiter $1.0 $1.4 $2.0 $2.8 $3.9
In-house 0 0 .1 .5 1.3
AENTV $.5 $ .7 1.0 1.5 2.3
TOTAL $1.8 $2.7 $4.4 $7.6 $12.1
Thus to value AXC, using the "internut" valuation model of 250 times
current quarter sales, these subsidiaries are worth $675 million.
With AXC owning 51%, AXC's share would be $344.2 less the $7.2 million
they will have to pay to to exercise their options, would be $337
million, or about $5.60 per share. If the royalty stream is worth
$40 million, and Micronet is worth $25 million, and Ampex Data Systems
is worth another $60 million, then the combined value would be $7.70
per share.
Carl
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