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

To: arun gera who wrote (2637)	7/27/1998 3:10:00 PM
From: Yin Shih	Read Replies (2) \| Respond to of 3506

I think you made an error as you haven't accounted for manufacturing staff in the 1100 employees. But the point you made about the bulk of revenues coming from large ticket items is interesting if the numbers are close to what you mentioned. Basically large ticket sales tend to have longer sell times as they require more hand-holding, paper-pushing, higher sign-offs and so on, which does make the revenue stream lumpier as the effect of statistical fluctuations in the buying process are more obvious. Larger ticket items also tend to require more R&D as you need to add the value that justifies the bigger price tag. The tradeoff is that larger ticket items also have the higher gross margins. Trimble's product mix strategy seems to be to make as much money as it can off the big ticket items at high gross margins but let others sell the competitive high-volume stuff by licensing its technology or selling core GPS components to OEM's at higher volumes/lower marketing cost/lower gross margins. Since the OEM's are in effect just a few customers making big total $, critical buying decisions, Trimble has to spend significant marketing effort in making those sales and are just as subject to the revenue fluctuations from them as with their other big ticket items.

To: arun gera who wrote (2637)	7/27/1998 9:31:00 PM
From: David	Read Replies (1) \| Respond to of 3506

Arun, While we are waiting for the arrival of lucrative markets, your Boutique analysis strikes a nerve. We have been operating under the assumption that the high-end supplier in a new field has the advantage over the commodity-end supplier, since it should be easier to get economies of scale on high quality than to make significant qualitative improvements to commodity-level items. That means that the Trimbles of the world should be able to race down to the mass market, value-added, high-enough profit areas before the Garmins can race upward. I think this is generally true. Of course, it presupposes management that can reach economies of scale and identify these large markets. To date, Trimble seems in position in car navigation (although it is a few years off) and telecommunications timing. To our continuing frustration, Trimble seems basically AWOL in the AVL markets. In other areas, as you mentioned, Trimble designs for specific customers at high investment costs. This raises a few questions: (1) Are there markets out there right now that Trimble can race to? Or are we awaiting the winner of the race for a better chip? (2) Does the boutique approach yield some benefits down the road in customers being "locked in" to Trimble products? Are all these custom applications building an expertise base in TRMB that will be applicable to future custom designs (i.e., an "off the rack" solution)? (3) If you are right about the high investment, high margin approach, does that explain why Trimble -- already personnel intensive per sale -- is reluctant to open new offices in distant parts of the world? (4) If the missing link is manufacturing capacity, which seems to be a reasonable conclusion, does this imply a future buyout . . . given that TRMB seems reluctant to hire on outsiders with this specialty?