Mr. hman,
Perhaps this will help. I just posted it to RB.
Mr. read120,
Welcome! It is obvious from your recent postings that you have spent a lot of time and effort researching your investment in both SNMM and WINR. There are a few vagaries, however that I would like to take this opportunity to attempt to clarify.
1.) You wrote: “ The transaction service can range from free (SNMM) up to 1% (CRY and Boss Media) of the processing amount, and for WINR's case the charge will be more likely in the high end of this range - 1%.”
My Response: It has been reported by the company that WINR's %/transaction for gaming ventures ranges from 2%-4%, both in and out. Also, annual license fees range from $50,000 to $100,000. Of course, these standards would be negotiable based on size and structure of any new client. In other words, the larger the revenue stream and client base you bring to the table the better the deal you are liable to get. Leverage I believe they call it.
2.)You Wrote: “As for other revenue, Skinner stated that the majority of revenue still came from I-gaming business, and we also know that there might be a one-time gain by selling the right to CMS to use the processing software. My best guess is that there was a lump sum amount associated with CMS's purchasing the right, and the arrangement of payment will be split into several payments, say in the next 6 months with 50K each month.”
My Response: This is an issue I feel needs to be further clarified by Mr. Skinner (perhaps in this months question list to the CEO). However I will attempt to give you my understanding of the software “deal” between WINR and the CMS. In the CC Mr. Skinner, as I understood him, explained that the software was NOT sold to the CMS but rather the exclusive rights to use Winners software in the banking arena was “granted” to the CMS for concessions. What concessions? Look to the PR dated June 24, 1999 for this statement...”Under the terms of the agreement, WINR has sold its rights to the software but has retained 50% of the rights for processing. The terms will be that WINR and the CyberBank will be co-owners of the processing company to be called CyberLink Systems, Est. In addition, CyberLink Monetary Systems has agreed to relinquish 100% of their rights in the SecureNet-Plus Network to WINR and all processing for the financial network will be the exclusive property of WINR.”……and, this from the June 8, 1999 Pr....”. The CyberLink Monetary System as part of this agreement has eliminated the royalty processing percentage that WINR had previously agreed to share for CyberLink contribution. Mr. Skinner stated that this alone would reduce Expenses by 40% in addition to the expanded market for both processing and advertising.”... So it is my understanding that WINR did not sell anything! Rather the made a trade. That trade being the grant of exclusive rights to use WINR processing software in the banking arena through a separate processing company (of which WINR will be 50% owners) Named CyberLink Systems, Est. For these exclusive rights CMS has waived royalty processing percentage on all other E-commerce and gaming ventures that were formerly in place, which will reduce WINR operating expense by 40% ad infinitum. Also, as a term of this agreement WINR gained total control of the SecureNet-Plus network and all revenues derived from same. In other words there was no cash sale of software, but rather a corporate restructuring based on concessions, of which I feel at this time, WINR got by far the better end of a win/win situation.
3.)You wrote: “As for third Q, here is my estimation (be noted that CEO estimated double digit growth Q/Q for the rest of 1999):
wagers processed for casino and sportbook: 80 millions, processing revenue: 0.8 millions wagers processed for lottery: 4 millions, processing revenue 0.12 millions
Licensing fee from 3 new licensees: 0.15 millions
Continuing payment from CMS: 0.15 millions (?)
revenue from ichargeit (5.5%) and other income: 80K
Total 3nd Q revenue: 1.3 millions
Expenses: 0.35-0.4 millions
Net earnings: 0.9-0.95 millions
EPS: 6 cents
My Response: Although the derivitive nature you used is somewhat different than what I used the results are close to identical. I have no argument with your projections, these are mine.
Q3 Q4 FY99
Gross Revenue..1.5 million 2.8 million 5.5 million
Expenses.......0.5 million 1.0 million 2.0 million
Net Revenue....1.0 million 1.8 million 3.5 million
EPS............6.6 cent/sh 12cent/sh 23.33cents/sh
*Note that my total revenues for the year indicate 5 ½ million. Obviously this is based on past history, and without inside knowledge of forthcoming events that are likely to increase/decrease revenues and earnings substantially. In the CC Mr. Skinner stated that he was still comfortable with, and it was still the company's goal to realize, projected earnings in the .20 to .30 range (which appears easily do-able), and projected revenues in the 9.0 – 11.5 million range. If Mr. Skinner is still comfortable with 9.0 million in revenues, based on recent performance, this year it tells me he is expecting a lot of new revenue streams up and running well before the end of 1999.
4.) You wrote: “The management strategy is also clear, gradually switching their focus from only providing gaming service to full-range E-commerce. The market they want to tap is very very bright with millions of small to median sized companies preparing to go on internet while without technical resource to support the online venture. They will become a good fit to partner with WINR. WINR can either recruit them as a partner collection certain percentage of processing service charge, or sell the software directly to them to integrate with these company's web page.”
My Response: I agree entirely, until the last sentence. I don't doubt that management has considered, or is considering, software distribution as a potential business strategy. But I don't feel this course is on their plate as yet. As evidence I use this quote from PR dated June 24, 1999... “We will adhere to all rules and regulations as they develop, but it was decided that the software processing was the business that we are in.”....And why sell the software, and take on all the added production and staffing expenses related, If you are able to continue to grow and draw an audience to a closed system where you also derive nearly expense free revenue streams from advertising? Just my opinion!
5.) You wrote: “Anyway, the weakness of WINR might be their marketing strategy, either aiming at becoming a processing or full-product provider. The conservative attitude of CRY has cost the company gradually falling from the top, even though CRY sill has the highest revenue, earning, and cash reserve in the online gaming industry. Today CRY's stock price has suffered from evidently losing the attractiveness within the investors.”
My Response: From a short-term standpoint your observations and concerns have great merit. From a long-term standpoint I feel the more conservative approach is the better. However, you are correct this is one huge game of chess with multiple strategies. Do you front-end load through expensive PR/Marketing and concessions in an attempt to “capture” market share; or, do you concentrate on product line and profitability having faith that your product superiority will gain market share and consumer confidence through long-term consistency and viability? Neither I nor anyone else knows the answer to these questions at this point. I have pointed to AUD in the past as a good study to parallel what WINR is attempting and the nature in which they are going about it. I think another good analogy would be what the Credit Card industry went through in its infancy. Most retailers did not want to accept VISA, MC, AMX in the beginning. They fought it vehemently. When they started losing customers because they didn't accept any of these Credit facilities what happened? Well, many smaller tier independent retailers (as you have alluded to as being a good fit for WINR system) began accepting the major credit cards. What was the large retailer's response? Their first line of defense was to begin issuing their own “in-store” credit cards (J.C.Penny, Sears, Texaco, ….et al.). But, even though many of these large retailers still have their own “in-house” credit facilities, they soon DISCOVERed (pun intended) that to keep their consumer base they would have to accept the 3 major credit cards. As consumers wanted and enjoyed the ease and accountability of using 1 or 2 central facilities rather than establishing accounts at numerous outlets. I feel Internet E-commerce is in the same infancy stages. And as consumers become more dependent on the internet for day-to-day purchasing they will demand and, flock to, a system where they only enter there credit information once, and have full, up-to-date, 24/7, multi-lingual, multi-currency accountability through ONE central system. As evidence that this may already be in the formative stages I offer this evidence. ragingbull.com This is a post submitted a few days ago by Mr. ai333. It includes an E-mail to/from Planet Poker, one of Winners new clients. Why is this important? Read the response from Planet Poker carefully in particular the statement.. “With regard to our costs - enhancing the financial operations by bringing in Winners does not reduce our costs (the opposite, actually), however, the benefits from a long term perspective remain the focus.”....I read this as, even though it costs us more now we realize that for future consumer considerations of legal, financial, and accountability concerns we would rather make this change sooner rather than later, so as to insure our consumer base in the future. I feel that the momentum pulling these smaller independent players in from both gaming and E-commerce is only beginning and as time passes momentum and consumer base growth will eventually cause even the largest of Internet retailers to provide an option for WINR clientele, or clientele of a similar system. Again just my opinion.
6.) You wrote: “In the conference call on 7/15, I am glad to hear that the company has beefed up the staffing, and I hope these newly hired marketing or programming employees could render WINR with ample power to respond to the swiftly changed internet revolution. Also hopefully the management team has the vision to capture this rare opportunity to make the company success in this new E-commerce world.”
My Response: I agree!
Mr. read120, again welcome to the thread. I will look forward to your insightful and detailed posts in the future, as it is obvious you do it very well. To the rest of the “regulars” I would just say this. For the last year+ I have been a very active and sometimes intolerable proponent of WINR on SI, RB, and Yahoo Clubs. I believe that if you go back and review my postings from the beginning to now you will find that I have been consistently 3-6 months ahead of what WINR was striving towards. On review this may have been bad for the short-term valuation, as much of the surprise was taken from Winners press releases. My original goal was to help build an informed and solid investor base in the company as it grew from development stages into growth. With the advent of the recent CC, new website, new gaming additions, and very positive earnings statement I feel that a very solid foundation has been established. Therefore, from now on I will be posting much less frequently and in much less detail. Many have been asking for my “take” on the CC and earnings. I will only say that I was extremely pleased with both. And, I believe, both gave me some insights as to future potential that have yet to be discovered by investors or the investment community at large. I have been an active buyer up to and including yesterday. I am now “full”. The best advice I could give is go fishing for 3 years and, forget you own WINR. I am. (Fishing for the next WINR that is)! As always…..
Best Wishes,
Swedelo
PS: A lot has been made of audited vs. unaudited and reporting vs. non-reporting status. Unaudited financials are used in quarterly reports; audited financials are used in annuals. Mr. Skinner has already informed me that they have audited financials through FY 1998 and unaudited financials up to the present. All of which will likely be filed with the SEC soon. With the recent earnings release indicating average weighted shares for dilution indicates to me that full financials are prepared and ready for assimilation pertaining to SEC filing. As for reporting, I believe WINR is the most reporting non-reporting company I have ever seen. Surely, you must realize, that being a publicly held company, and by disseminating financial information through press release opens the company to wire and securities fraud (Just as it would if it were SEC filing), if any of these figures were shown to have been manipulated in any illegal fashion. So as far as I am concerned they are a reporting (if not filing) entity because they have presented numbers to investors in a public, and therefore legally regulated format. |
