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Technology Stocks : Vari-L (VARL) -- Ignore unavailable to you. Want to Upgrade?

To: Dutch who wrote (1131)	7/30/1999 11:03:00 AM
From: J Stone	Read Replies (4) \| Respond to of 2702

Dutch, Robert is more informed than I, however, let me try to answer your question. First, Vari-L grabbed 75% of the base station market from the Japanese by having superior technology and staff and by continuing to invest in it. All things considered, the base station market is still early in its life cycle, and VARL has 55% gross margins. It's hard to position a product much better than that for a fast-growing market. The wireless market is probably not more profitable per VCO (and may be even less profitable) simply because its greater size creates more pricing pressure. However, if even margins dropped to 50% or even 45% on 20,000,000 units/annually in the subscriber market, we'd all cry ourselves silly watching our stock value quadruple. You can be your own judge as to the growth of the cell phone market. I resisted for years and then got 1 for my wife because her sense of direction is non-existent. Every 2 years I've gotten her a new phone for free by negotiating a new phone contract. Now I can add 3 extra users to our same account and get 600 minutes of calls/month for $40. So, I can get myself a phone and 1 for my mother and 1 for my mother-in-law. The phone company will basically sell me $100 phones at $30 so why not? Everywhere I go I see people using their cell phones. My cousin just got 1 for her son in college, so she can always reach him. 5 years ago, I couldn't have imagined any of this. FWIW Jeff

To: Dutch who wrote (1131)	7/30/1999 12:48:00 PM
From: Robert Sheldon	Respond to of 2702

Vari-L was able to capture 75% market share and lose shareholder value. Please bear with me . . . could you explain how you see that shareholder value was lost? If you are speaking of share price that is one thing, but the folks at VARL have emerged with a stronger company (Gross margins have moved from 42% in 1993 up to 55%* recently, and net margins moved from 3% in 1993 to 15% recently!) than before “raiding” and conquering the base station market. Dilution has dampened earnings results, but look at it like this: Although the new shares have diluted earnings per share in the short term, the cash received from the offering will provide VARL with a cash infusion that will likely match up nicely with needs for capital expenditures for inevitable handset VCO capacity expansions (as I mentioned before, VARL can get new lines purchased and in operation very quickly). Despite reservations about the dilution of shareholder value, if growth in subscriber product demand accelerates the warrant offering could prove to be a stroke of genius over the longer term. Anyway, VARL has emerged from competition with the Japanese unscathed, and is STILL pricing its products at a ~15% PREMIUM to that of the Japanese! (Now, that's impressive!) *as volume for handsets ramp gross margins should decline a bit from the high volumes and expected price discounts but net margins should rise to the 20%+ range. Sincerely, Robert