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Technology Stocks : SYQUEST -- Ignore unavailable to you. Want to Upgrade?

To: Michael Coley who wrote (5628)	2/22/1998 2:33:00 AM
From: Andrew Shih	Read Replies (1) \| Respond to of 7685

>>I think that a pretty good chunk of the SparQ COGS was probably some one-time or fixed-cost elements that will be missing next quarter or will not need to increase as production increase, but I agree that it's far less than the $10-$15 million mentioned. Maybe more like $3-$5 million. We could be wrong, though. Q2 should give us a much better view of SparQ's cost and margins.<< If they truly spent $10-15 million for SparQ start-up costs, then I'd have to really reevaluate the sanity of the management. SparQ drives & cartridges only sold 40K units last quarter. Let's change that to a yearly number of around 200K units (being generous), and that would peg the start-up cost at > $50 per drive/disk combo... (assuming no ramping of production) -Andrew

To: Michael Coley who wrote (5628)	2/22/1998 11:50:00 PM
From: MoonBrother	Read Replies (2) \| Respond to of 7685

Joon and Micheal, here is my response to your questions posted on Yahoo message board. -------------- First of all, thanks everyone for paying attention to my previous posting #5377. One positive side effect from that posting is that I noticed that the number of what I called garbage-postings have significantly reduced since that posting, and more and more serious discussions about SYQT on this board are coming back. Let's keep this positive trend going. Now back to business. My #5377 posting has two parts. 1) is the March qtr sales projection. I used every number that I could find and carefully calculated the potential March qtr sales, and got a $54.4mil revenue projection. The sales figure were largely based on the SparQ's current known selling pace, therefore is a fairly convincing number. Even IOM bulls have little dispute on it. 2) is the EPS projection. That part gave an estimate for March qtr's COGS and SG&A, and concluded that March qtr's loss might be reduced to -18c a share. I estimated that the startup cost for SparQ in Dec. qtr was between $10 - $15mil. It is this number some IOM bulls are having difficulty to agree with. Therefore I'd like to spend a little more time to explain how I made that conclusion. If you read SYQT's June and Sep. 97's qtrly results, you know that SYQT had gross profits of $0.8mil and $0.4mil respectively for the qtrs on the sales of $31mil and $25mil. These numbers showed that SyQuest's existing products have roughly brought even the gross margin. With increased SyJet sales in Dec. qtr, and no new ramp up costs for SyJet, but negative impact from price reductions, we could think that Dec. qtr's gross margin for the products other than SparQ might continue be roughly break even, that leaves SparQ related COGS for about $15mils. We know that SparQ is designed as a low cost mass production products, the unit cost should never been more than 80% of the unit selling price of roughly $160/unit, therefore the direct cost for producing 40,000 units were about $6.4 x 80% = $5mil, that left startup costs for SparQ at about $10mil. Another number that supports this guess is that, the Company announced the completion of $30mil financing program, and said that this amount will be used to ramp up the SparQ productions. We can roughly estimate that the startup cost for SparQ for the current production scale should not be less than $10mil. One extra point, in my previous note, I used a wrong SG&A number of $25.5mil, which is $2mil higher than the actual Dec. cost. Among $23.7mil SG&A cost, Ad and marketing costs were $14mils. The company said that March qtr will not reach to that extend. Giving a half of that number, $7mil, March qtr SG&A will be roughly $9.7 + $7 = $16.7mil, which will help a better overall loss picture than my previous estimate. All in all, I think the most important figure the company has to accomplish in March qtr is the significantly increased sales revenue. If the revenue can reach $45mil, plus the overall loss below -30c a share, I would think that the Street will take it as a huge improvement on the right direction. As the result, the stock price will hit 52 week high of $6 again! Your constructive comments are welcomed! MB