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

To: Bill Day who wrote (2654)	7/30/1998 11:29:00 PM
From: arun gera	Read Replies (3) \| Respond to of 3506

Bill: Interesting that you don't think surveying is a big market. The truth is that surveying contributes quite a chunk of Trimble's revenue and gross margins. But Trimble's growth is quite stagnant in that business. The revenue has been stuck around $75-85 M a year. Hopefully Japan will pick up! The excuse last year was that Japanese Govt. had not approved RTK. The last quarter was blamed on the Asia crises. Hopefully, both these trends will be in the right direction for the next few quarters. You are right that construction, mining, agriculture, and other geo- based activities may be bigger markets. Actually, surveying is becoming a smaller and smaller part of the commercial systems revenues for Trimble. However, users in the new markets are just getting to be educated about the GPS market. Unlike the surveying market, where most surveyors in developed countries have already adopted GPS as a tool. I am sure there is an untapped market in developing countries, but the price is a big factor in countries where wages are lower. The market for GPS chip-sets/boards could boom if the price of a car navigation unit drops below $500. But Trimble is waiting for somebody else and the Moore's law to bring that about. Although GPS is an important part of the future air navigation system, in terms of total dollars it will only be a small fraction of the overall avionics market. The avionics market is said to be a $30-40 billion per year business. And the barrier to entry for the top echelon of this market is high. And Trimble has been trying to break that barrier in the last two years. The teething troubles have definitely affected the bottom line. But the avionics business is a very profitable buisness for the companies that are in that market. The avionics sector of both Honeywell and Rockwell contributes a disproportionately high amount of profit for the companies in comparion to the fraction of overall revenues the sector represents. Hopefully, Trimble has learned some good lessons in that last few quarters and can become a profitable and growing avionics company. Even in GPS there are some boom markets possible as WAAS becomes operational. In the general aviation market, Trimble's competitor Allied Signal is really strong , partly because of its full repertoire in its avionics suite that binds the individual pilot. Basically, whoever owns the cockpit will get the best chance to also sell the GPS receiver to the pilot. So, Trimble is building its whole avionics suite. In the high end airlines market, Honeywell and Rockwell/Collins own the cockpit depending on the type of aircraft. Trimble/Honeywell alliance takes a big chunk of that GPS business. The rest will only be available if and when Rockwell gets out of the GPS business. Rockwell has surrendered in the Agri market and the car navigation market, to name a few. The timing market will see the best growth in the next one year. Primarily due to CDMA buildouts in most parts of the world. The defense market is a little iffy right now. It could be in trouble unless a big CUGR order comes along. Say for $24 million or so. The "smart bomb" project with Lockheed could be big but is subject to delays before high production rates are required. Arun

To: Bill Day who wrote (2654)	8/5/1998 2:16:00 PM
From: Yin Shih	Respond to of 3506

Bill - While I am most interested in aviation applications, I have not had much expectation that aviation will be the "killer-app" that takes TRMB over $1B. You know what they say: if you want to make a small fortune in aviation, start with a large fortune. The basic problem with aviation is that there are so many requirements, certifications, tests, overhead costs, insurance for liabilities, etc at every level that, even though the end product has high $ value, the profit is distributed throughout the chain and not many companies succeed at making consistently high profits out of it. To a large extent killer-apps are unlikely to include car-nav as, even though the volume is high for high total revenue, the margins are necessarily lower. So if we are complaining about margins now, I don't see how more units at lower margins will help us. That's the: we're losing $10 per unit, but we'll make it up in volume joke all over again. So I think the most likely areas for success are the innovative apps that sell at good margin, better than niche volume, and have good IP protection. This includes apps like agriculture, smart munitions, cell station timebases, etc. I've also noticed that one counter-intuitive model for making big money in software these days (excluding the special case of Microsoft) seems to be to give away the blades and make money on the razor :-) . Netscape, Adobe, RealAudio, etc give away their players in high volume, establishing a "standard" in that niche, and make money on relatively low volumes from the content creators that need to buy the full version that can create the source files used by the now "standard" readers. This can only work with products that are virtually all IP as the cost of shipping another player approaches 0. I've wondered if there is anything TRMB can make out of this business model.