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Technology Stocks : Concurrent Computer (CCUR) -- Ignore unavailable to you. Want to Upgrade?

To: James M. Bash who wrote (6999)	2/9/1999 3:45:00 PM
From: Goodboy	Read Replies (2) \| Respond to of 21143

Here is what I think White Rock (buying over 2 million shares recently in the $3.50 to $5 range)and SFA (setting a strike price of $5 on 2 million warrants and more based on up to $300 million in sales) see that the people selling the stock today don't. SFA will have 89 head ends installed covering 17 million homes by the end of this quarter. This does not include the Canadian deal announced today or counting the many more that will be announced and installed during the remainder of the year. The cable MSO's will expect that they will deploy an interactive digital set top box to at least 9 to 10 million of these "covered by digital" homes over the next 3 years or so, as well as the availability of boxes retail by mid 2000. Assuming a VOD penetration rate of 15 to 20 percent, we would have roughly a need to deliver 2,000,000 streams (I am using the bullish 10 mil and 20% numbers for this calculation)to these subscribers. Using the number that is close to the actual estimate of cost per stream, $350, we should multiply this by the number of streams needed which is 2,000,000. This would result in the total server market (based on static numbers that only reflect current digital two way covered subs, which is less than 20 percent of all cable subs and does not reflect the eventual build out to over 50 to 70 percent) of roughly $700,000,000 over the next 3 years. Corky has predicted that CCUR could grab 20 percent market share in domestic cable VOD. That would equate to $140 million in sales over the next year. Assume $10 to 15 million in 99, $30 to $50 million in 00 and $90 to $110 million in 01. Maybe even spread it out over 4 years. These numbers would make an analyst extemely bullish on CCUR's prospects. Yet, this is assuming that only 17 million of over 75 million cable subs will ever be covered by two way digital (impossible), That of the 17 million, only 10 million will upgrade to the digital box (even though analog and analog/digital hybrid will not be ordered by MSO's after this summer and boxes from other manufacturers like Philips and Motorola will be sold at retail) and that the penetration rate for VOD will be 20 percent (15 percent would be acceptable here as well, but 20 percent is likely condsidering that VOD will expand beyond simply watching movies). After all these conservative (actually unrealisticaly low) assumptions, the numbers assume that CCUR can only get 20 percent of the market, leaving 80 percent for SEAC and DIVA or whomever happens to pop out of thin air to fill this gap. Under current competitive conditions, 20 percent is a very conservative number, but one that assumes competition will emerge. SFA will be marketing the CCUR VOD server as part of the deal thus saving us some of the traditional marketing and selling expenses. CCUR and SFA will be working closely in this venture as both parties have incentives and will be situated near each other in Atlanta. CCUR is working on 51 percent gross margin and Corky stated he doesn't expect that to change (but always declines to talk about specific hardware product margins). Our fixed costs and R & D will likely go up over the coming years, but Corky has stated that they could handle $20 to $30 million in new sales without much of an increase in overhead. I will let others do the math on how much of the VOD revenue in this example will turn into profits. When analysts feel comfortable that the assumptions I just made are realistic, they will be very excited about this stock and the 3 year potential. Discounting it over 20 percent per year and this stock is very cheap at the $5 level. What is wrong with this analysis? The answer is plenty. It doesn't factor in any potential VOD revenue from the hospitiality area in either domestic or foreign (an area that we recently learned CCUR's first server is installed). This example doesn't factor any VOD revenue from the educational/distance learning market which we have already sold servers and are starting a 15 universtiy tour. It doesn't factor in the flight or transportation markets which may open to CCUR during 1999 or 2000. It ignores the potential that the Telco's using DSL will be buying servers both domestic and foreign. And lastly, it totaly ignores the massive potential of VOD in Canada and Europe where the market may as a whole be larger than the US (and we now know we have a server installed in Telefoncia in Spain). This also assumes no growth in the high margin RT software business or hardware business (although they may be gone bolstering the balance sheet with $100 million in cash by year end). Bottom line is that it is not hard to see that CCUR could generate huge gains in sales and even larger percentage gains in net income. Using this model, it is not hard to figure out that CCUR could easily earn between $.50 to $1 per share during this period on these conservative assumptions. I think Randolph tried to work through these numbers and came up with some almost incredible revenue forecasts. The above assumptions use information that is already known plus inferences regarding our current selections and VOD product superiority. It is for this reason that I am long term invested in this stock and my market and industry research leads me to beleive (along with White Rock and SFA) that CCUR will be one of the VOD leaders and benefit greatly from this digtial wave. We have just washed away another whole group of traders and we are still at the $4 level. I wish those selling their stock out of fear and uncertainty good luck.