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Technology Stocks : e.Digital Corporation(EDIG) - Embedded Digital Technology -- Ignore unavailable to you. Want to Upgrade?

To: JimC1997 who wrote (14373)	8/23/2000 3:26:12 PM
From: Walter Morton	Read Replies (1) \| Respond to of 18366

Are institutions walking away from EDIG? marketguide.com

To: JimC1997 who wrote (14373)	8/23/2000 3:53:25 PM
From: RKHIII	Read Replies (1) \| Respond to of 18366

Jim: I think Korea is the way to go for most forward-thinking manufacturers. There's no secret that the eminent collapse of the North Korean economy, and the recent unprecedented visit by South Korea's leader, have shown that the two will probably reconcile in the future (how soon is anybody's guess). I believe we have the next post-war Japan emerging; a depleted (united) region, bent on economic recovery, that's willing to undercut everyone else's labor price in their manufacturing efforts. OEM's bold enough to take the chance there now will benefit greatly in the future. IMO (I refuse to even USE the word "hum..." anymore. It's been abused too much here.) :)

To: JimC1997 who wrote (14373)	8/24/2000 3:46:04 AM
From: JimC1997	Read Replies (1) \| Respond to of 18366

Thoughts on some implications of the new e.Digital product As both TWOMIL and I have discussed in recent postings, one of the key driving forces which will insure the success of a PC music peripheral product, such as that announced by e.Digital today, is the need to raise profit margins in the very competitive PC marketplace. As features have become standardized market forces have cut PC margins to the bone. The major brands need high margin peripheral add-ons to restore their profit margins. Given the intense interest in internet-delivered digital music by PC users, peripherals which facilitate the acquisition, storage and playback of that music are very likely to have high demand and could command premium prices. e.Digital has been quietly targeting this market for some time now, while most of the attention paid to the company has centered on the portable music player opportunity. How big is the market? IDC publishes PC brand shipment reports and a recent summary was reported by CNET News: news.cnet.com The top six U.S. PC brands and their respective shipments (projected 2000 sales based on Q2 trends on 1999 actuals) 1. Dell 9.48 million units 2. Compaq 6.82 million units 3. Hewlett-Packard 5.74 million units 4. Gateway 4.56 million units 5. IBM 2.67 million units 6. Apple 2.32 million units All Others: 16.86 million units Total Market: 48.45 million units Hewlett-Packard is growing faster than any other brand and may soon overtake Compaq for second place. Sony (in the "Others" category) is also rapidly increasing market share. Assume for the moment that e.Digital is successful in obtaining a contract to supply a custom music jukebox with just one of these brands. What would this mean in revenue? Averaging the units shipped by Compaq, Hewlett-Packard, Gateway and IBM gives 4.95 million units. Next, assume that the manufacturer manages to convince just 10% of its consumers to buy the music peripheral (an absurdly low number, given the reasons cited above.) That would still give e.Digital an order for 495,000 units! Assuming a retail selling price of about $300 per unit, the manufacturer's price would be about $200 and the supplier's (e.Digital) revenue would be at least $100 per unit. Combining these two yields an estimated sales revenue to e.Digital of $50 million! Remember, that is just one PC manufacturer, and assumes a very, very low penetration rate. Now, what are the prospects for a bundled portable music player with that juke box peripheral? Extremely high. Take the above revenue and add at least 50% for the sales generate by a portable player (assuming a $50 wholesale sales price per unit to e.Digital). Now the value of a PC manufacturer contract is at least $75 million (again using very conservative projections.) Remember this is before any revenue from Lanier, other MicroOS applications (coming soon, IMO), Maycom, etc. What would this mean to the value of e.Digital stock? In mid-March I posted an analysis that projected a market value for e.Digital based upon the realization of $100 million in revenue, using the example of Gemstar as a valuation model. (Gemstar has the proprietary VCR+ technology, a very small employee base and very high margins. It commands a price to sales ratio of 71 currently.) Given the change in market desire for technology stocks in general, I would not expect the same price/sales ratios that I projected earlier, however, I believe that it is still plausible to assume a price/sales ratio of 50 for e.Digital once its market position was established. Taking the $75 million revenue projected above and applying a price to sales ratio of 50 yields a market capitalization of $3.75 billion, which equates to $30 per share. Again, this is without the likely revenues from other music players, Lanier, other MicroOS applications, etc. How likely is this scenario? I think that in the next few weeks forthcoming announcements from e.Digital will shed a very happy light on this question. JimC