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

To: Roadkill who wrote (880)	7/23/2001 1:54:38 AM
From: akmike	Respond to of 7249

Hello RK, I believe that the intent of your post was to dampen over-optimistic expectations for the current sensor business. If so, you may have inadvertently added fuel to the fire of optimism that is engulfing some of us. The current sensor market for KVH will consist of new high voltage power stations and a replacement of old iron-core sensors. It might be reasonable to assume that the demand for replacement would be favorably impacted by your assumption of lower prices. Let's assume, however, that your lower revenue of 20 mil. is attained. At a 60% gross margin, nominal selling costs, a provision for R & D in line with guidance for 2002 and a tax provision of 39%, we calculate that after-tax margins on this product will be 28%. This means after-tax profits of 5.6 mil or over 50 cents per share from the current sensor alone. Needham is projecting total company eps in 2002 of .13 and they have rated the stock a BUY. If they buy into your 20 mil. of current sensor revenue, they will need to adjust upward the total of 8.4 mil. they have projected for all the fiber revenues. (Presumably they have some of the ActiveFiber revenues from the optic modulator in that total) When the existing FOG revenues are factored in, they must add 15-16 mil. in revenues and .40-.43 to eps. Maybe they will raise us up to STRONG BUY?? <gg> The above demonstrates the considerable leverage for KVHI from just this one product initiative. As Martin pointed out in the cc, by selling the product to one customer only, there will be the highest operating margins in the company attained. When I heard that the only thing left to do to bring the product to market is to complete the software compatibility to the partner's sub-station equipment, I was a little taken aback, for it was the first time I realized that the current sensor was going to be marketed as part of a package and not as a stand-alone product. When I did some industry checking I was floored by the size of the overall market that the "package" will be sold to. If we can eventually attain 20-25% of this market, the resultant profits will exceed today's entire revenues. Martin has told us that he expects the fiber products to be the largest of the market segments for the company. Needham projects that communication sales will be 23.4 mil in 2002 and growing rapidly. For fiber to exceed that in the future from a base of 1.7 mil. last year, this will prove to be a rewarding investment.

To: Roadkill who wrote (880)	7/23/2001 6:09:33 AM
From: Roy F	Read Replies (1) \| Respond to of 7249

RK! Hi, On the CC, near the end there's a number of questions regarding the size of the market and KVH's potential share. Around the 47 minute mark, Martin states that the size of the market, if KVH had 100% of it, would be $450mm (in KVH $$). The price of the unit, which is basically a FOG, will be $2K - $3K, replacing units that cost $3-4K, but doing a much better job... smaller... et al. They do eventually expect to dominate the market over time... Regards, Roy