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Technology Stocks : KVH Industries, Inc. -- Ignore unavailable to you. Want to Upgrade?

To: robert b furman who wrote (384)	4/16/2000 6:03:00 PM
From: Sector Investor	Read Replies (1) \| Respond to of 7249

I've been spending some time reviewing information in the last several SEC quarterly and annual reports looking at the expense components, especially R&D and Sales and Marketing to gleen where these are going in the future. Both of these items were higher in 1998 and 1999, which combined with mailitary sales, led to the string of losses. The R&D of course is what is allowing the new products (and thus new revenus streams) to become available. Looking this over, and recognizing that they are just scratching the surface on sensor based products and markets, I think R&D will remain high for some time to come. Sales and Marketing may decrease a bit from Q4 through, as I think they may have had some one time expenses due to new product introductions. There are hints the military orders are bouncing back, especially in the Q4 report which said: "Navigation sales decreased 18% in 1999 to $11.4 million from $14.0 million in 1998 due to slow sales during the first half of the year and some delays during the second half of the year in finalizing certain military contracts that had been awarded. " Communications revenues have been consistently increasing, and the Marathon Coach and Delfin contracts have not been felt yet. As such, I am looking for revenue around 7 million in Q1. This information is from the 1999 annual report. Research and Development The Company's research and development efforts are based on its core sensor technologies and focused on developing new products that will have broad application across existing and anticipated strategic markets while improving performance and reducing manufacturing costs for products in the market. A substantial portion of the Company's research and development expenditure is devoted to basic research for core technology development projects. The Company's research and development activities fall into two categories: internally funded research and development and customer-funded research and development. The Company has financed virtually all of the cost of developing the Company's marine navigation and satellite communications products. Prior to 1999, development of the Company's core sensor technologies was subsidized to a large extent by grants under the United States government's SBIR program. Much of the funding used to develop KVH's products for the military navigation market, in which a significant engineering effort to develop enhanced features requested by the customer is frequently involved, also has been derived from government sources. However, in 1999 the Company internally funded a large percentage of its military and FOG research. Customer-funded research and development is included in cost of sales. The Company's total expenditures for research and development during 1999, 1998 and 1997 were as follows: <C> <C> <C> Year ended December 31, 1999 1998 1997 (in thousands) Internally funded R&D $ 4,199 3,991 3,175 Customer funded R&D $ 648 936 630 -------- -------- -------- Total R&D $ 4,847 4,927 3,805 ======== ======== ======== Employees As of December 31, 1999, the Company employed 170 full-time employees. The increase in total employees from 154 at December 31, 1998, resulted primarily from a need to strengthen research and development, customer support and marketing activities related to new products. KVH utilizes the services of temporary or contract personnel within all functional areas to assist on project-related activities. From the 1998 (not the latest) Annual report Several new TACNAV orders that contributed modest revenues in 1998 have potential for more significant sales going forward. The United States Army extended its TACNAV use by installing systems in National Guard vehicles, the first deployment that expanded upon the initial contracted applications. TACNAV systems also were selected in 1998 as a key component for testing in the U.S. Army's Task Force XXI Battle Command Brigade and Below (FBCB2) program. FBCB2 is the digital battlefield effort that the Army has underway to provide battlefield commanders with comprehensive, real-time digital information, electronic coordination and situational awareness through an integrated tactical computer system. Also in 1998, the United States Marine Corps selected TACNAV Light systems for a rebuild of AAV-7's.