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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: spiral3 who wrote (19668)	3/11/2000 3:01:00 PM
From: wopr1	Read Replies (1) \| Respond to of 54805

ELON's Revenue Stream: Thank you for all the work you did compiling ELON revenue stream information. When I read it, I became concerned that Elon's revenue model could become a King Game rather than a Gorilla Game. Its my rookie understanding that a Gorilla makes money from selling products based on its open proprietary standard. For example, MSFT sells Windows, QCOM "sells" its intellectual property rights to CDMA. With ELON, I became concerned when I read: 1) Echelon does have patents on the protocol, but Echelon licenses such patents without license fees or royalties. 2) Will Elon earn Royalties from Neuron Chip sales.? These royalties are not material to Echelon's long term revenue. Thus, it appears that the very thing that no other company could generate money from, ELON has decided to give it away, or sell it at cost. Its as if MSFT decided to sell Windows at cost to make money on its Flight Simulator, or QCOM licensing for free CDMA, hoping to make money on its hand sets. I was encouraged to see that ELON was trying to create its own Operating System. For example, when customers ship products that incorporate the Company's LNS(tm) network operating system, Echelon is entitled to royalties Obiviously, an operating system can be a GG. However, this is a different or "new" GG within ELON. Previous posts on ELON assumed that ELON's Gorilladom would be based on the Open Standard. But, if we are relying on the operating system for revenue, it would appear that we need to wait and see if the operating system is adopted and not just the LON Works Standard. For example, it doesnt matter if GE or Honeywell adopt Lon Works, the issue for the investor is whether they adopt ELON's operating system. As an aside, it does appear that ELON's operating system does have a chance of becoming the standard. Is there other software out there that could do what LNS does? - paraphrasing here: yes and no. There are some solutions that may do some of what LNS can do, but none are as robust, complete, competitive. Assuming, for argument, that LON works is adopted, but the Operating system is not, doesn't that leave Elon in a Kings Game? ELON sells you its servers, and transceivers, but so is every other OEM. With the open standard, doesn't this becomes an execution game? I did not know how to interpret this part: Each LONWORKS node has a unique 48-bit ID. Echelon will administer these IDs. Licenseeswill pay Echelon, or at Echelon's option, the LONMARK Interoperability Association, US $0.15 per ID assigned. . . . Their comment was that they hoped to be able to earn a lot more than $0.15 per node id, through hardware and software sales. As I understood it before, this is where ELON will have its exclusive opportunity to make money off of LON Works. Is this where will will see the Gorilla Growth, and fat margins? Also, does anyone know if ELON as "Phase in" strategy? For example, they keep all licensing revenue at a minimum until LON Works was adopted, then, once all are hooked, raise rates? Thanks again for all the work, and any reply would be appreciated. -wopr