Wave Systems Corp. (fka WAVXQ)

[tkc]

Yes Zen. BUT that requires keeping their margins high. Margins are the % of what you're left w/ after the raw cost of the product you sell. Example: your daughter sells a glass of lemonade for $1, the lemons and sugar cost $.25/glass (that's her COGS-cost of goods sold]. her COGS is 25% giving her Gross Margins of 75%. If she lowers her price to $.80 to attract more sales her COGS is still $.25 her gross margin falls to 69%. Wave
historicaly has had gross margins of 93-94% which is huge (Intel is usual around 60-61%). W/ the launch of Wave's VSC they began incentive pricing- lower pricing means higher COGS and thus lower margins. That means less money to pay operating expenses (SG&A-sales,general & admin + R&D). At lower margins they have to sell more glasses of lemonade to cover those operating expenses. I have no idea how effective Wave's incentive pricing will affect sales and thus the impact on margins. I just guessed they would drop to 85% - if sales increase substantially due to the incentive,margins may drop more. So, don't hang your hat on my $8.2-8.5M swag. Sorry to get into the weeds but there is no simple answer-much depends on variables we just don't know.