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there is certainly a lot of room for creativity in bundling, royalties, eras sharing, and so on that may well have been underexplored. certainly flag planting has been explored, but anything that creates an oem interest in Wave product success (e.g. eras kickback) and hence mutual interest would be a new chapter to the extent of my knowledge.
alea, it well be more assertive flag planting, or perhaps flag planting plus. with Dell and others bundling was per unit shipped but it was recognized that 99%+ of users were not using the feature. by coupling this bundle to a coupon code it would seem Wave may have been able to negotiate a deal where they get a token royalty on those devices were the user actually uses that aspect of the product. for the time being I am going to presume that model. sandisk gets to differentiate its product, but only provide a kickback to Wave for those users who actually use the difference. it gets active users into Wave's database as well, something that the passive dell bundling did not.
opt-in bundle
it seems with some continued reading that the Sandisk "bundle" is a coupon code for a download. it is easy to imagine that the royalty may well be coupled to use of the coupon. in that case the royalty may be higher than pennies (e.g. nickles instead, or even dimes) but no payment on those units where the user does not exercise the download. It seems some of the issue with Dell and the royalty re-work was that dell was paying for a whole bunch of bundling that was never used and that nobody cared about. coupon bundling may get around that. they can offer the value bundled to all, but only pay for it for those who give a hoot and use it (as measured by using the download coupon. higher royalty per event, fewer events.
I think it is just a matter or meeting quota.
tango, thanks,
That seems it must be a royalty per unit thing.
Another OEM bundle? That seems hard to believe for a product so far down the margin chain - a place where pennies really count. Nevertheless, that is what it looks like.
Perhaps a much more aggressive version of flag planting albeit one with revenue and one for which the margin for Wave is north of 95%.
A few things:
Funded development MU. an expense offset
Bundled Samsung. pennies per unit
Bundled Sandisk. pennies per unit
Royalty agreement WYY. dollars per seat
I have always been concerned that Wave would fail to gain non-Dell traction before Dell went away, the window of opportunity argument. Given that the dell revs are on fumes, it looks like one can see a collection of other arrangements replacing that revenue. In the absence of that evidence the future wold look rather dark. There is hope.
Is the Sandisk announcement a bloatware agreement?
Is this a click and then pay if you want it thingy, or is it prepaid accessory (a bundled utility).
Bloatware or bundle?
tkc, fair enough, but keep in mind,
I'm not educating, I'm making stuff I consistent with my opinions.
Regarding Wave's cut. Imagine the govt was going to buy a fleet of cars with a particular set of capabilities. GM or any other reasonable outfit might determine that they can reasonably expect to sell said car to the gov for 20k each. Wave makes tires, CSP tires. It doesn't mean a wack if yesterday CSP tires were selling for 15k, 30k of 90k. The car has a total value, 20k. Tires are just a partm the value of the whole solution is the starting size of the pie of which the value of that application of tires is determined.
And for a number of reasons, none of them good, I'm thinking $1-9 for the CSP component of the WYY solution in this case.
I think that is meaningful, it would meet the "meaningful" level stated by Solms IMO. "meaningful" is very very similar language to what SKS used to describe PwC is a very similar use case.
tkc, I'm thinking WYY is looking at comfortably double digit dollars per seat, I am not trying to say that would be Wave's piece.
Smart card solutions can run from, say, $20-$200 a seat depending on type of card and other support issues.
It may well be in error to refer to this as a VSC solution, but the point is to be able to leverage the current TPM base to be able generate and store keys and "avoid the cost and retrofit of additional hardware". Wave's contribution, the CSP, provides "unique accessibility to the cryptographic capabilities of existing customer devices that have TPMs".
WYY provides the solution.
Wave provides WYY with the CSP abstraction layer to leverage TPMs allowing a more cost competitive offering.
WYY bags the lions share of the revenue.
I would expect Wave to recover from $1-9/seat (not double digits).
But this is all just me guessing around on all of this.
Missing in all of this for me is ERAS, is WYY providing the ERAS like management of the devices, it seems so. Perhaps this was the stumbling block. Perhaps SKS wanted WYY to take ESC/CSP + ERAS and give a bigger cut and perhaps WYY feels fine about managing the devices as long as they can talk to the TPMs effectively (enter CSP). Again, this is reminiscent of PwC to me. It seems folks that manage digital certificates already have software ...to ... manage ... digital... certificates. It is talking to the TPM that PwC and now apparently WYY would like some help with. Not the whole enchilada, just some of the filling. I am curios if this notion is correct and if SKS insisted on swinging for the fences, getting the whole thing, and would suffer any amount of dilution to get there. Bill said screw it, we have a product they want, they have said so, lets go ahead and move some product.
>> back to revenue. It appears from the WYY Q&A that Wave is getting development funding in its agreement with MU, not something I was previously aware of.
**tkc, the WP thing looks like a VSC implementation. I would imagine a VSC solution is well into double digit dollars per seat, and it is a matter of breaking up the pie on that and the role of ESC/CSP. It is not millions of miles away from PwC and the CSP deal with them in some ways. I would guess it a $1-9/seat. WP is going most of the heavy lifting on this, Wave provide a vital component. PwC did the heavy lifting for their own internal solution, wave provided a vital component and that is the ball-park I was led to believe was the rate Wave enjoyed in that instance.
edit, as far as "what is ESC going for these days" I think this is an example of old dell OEM model versus new OEM-model talk in the CC. Rather than Wave selling ESC for a price so to speak, Wave provides components to a solution (e.g. VSC), the solution is what is priced. Diamonds used in wedding rings and diamonds used on drill bits both are diamonds. the point is to provide a solution, the solution competes with other solutions, that competition determines the value of the solution, the partnership determines the value of the component. I'm not considering WP a OEM, but just saying that sticker price interpretation of a Wave asset like ESC might be dated.
tkc (and Waveway)
tck I was referring to this from you
"Wave's acct'g has always been extreemly difficult to interpret. At any rate if 10% non-Dell did occur in Q1 then Dell's contribution in Q2 will fall, meaning non-Dell will need to increase even more to avoid financing."
and just inserting the notion that while in the CC Wave spoke to non-OEM sales, and we are observing declining Dell, that some of the declining Dell and "non-Dell will need even more" might get offset by Samsung, which would still be OEM, but be non-Dell OEM, something that really hasn't existed for some time.
waveway. the severance is Feeney which is a cash expense, but non-recurring, so the effort it to give a understanding of core recurring expenses versus unusual one time expenses. the non-cash thingy has do do with writing off some Safend goodwill i.e. stating that Safend isn't worth as much as they thought, but in so doing and saying one must enter such an event as an expense although no cash was involved, it is part of the phantom non-cash bookeeping that shows up in GAPP numbers (e.g. depreciation, amortization) best explained by those other than I. Wave's efforts in that comment it to convey a core cash reality less phantoms included by GAAP necessity which might give an impression much worse than what one sees if they look at money moving into and out of the treasury or what one might project to be the case next Q.
The 1/3rd rule seems pretty plastic (and other things)
from the Q1 rep:
"As of May 6, 2014, approximately $11,675,000 in gross proceeds remains under the 2013 shelf registration statement, however Wave is restricted to $10,515,000 as of such date due to the one-third rule."
and from the previous 10K
"As of March 11, 2014, approximately $11,718,000 in gross proceeds remains under the 2013 shelf registration statement, however Wave is restricted to $6,721,000 as of such date due to the one-third rule. The total funds available under the 2013 shelf registration statement are all allocated to the At the Market Sales Agreement with MLV which may be utilized for future financings."
It seems the 1/3rd rule is not posing a significant barrier. It seems that current management is planning to reach cfbe within the confines of the current shelf. As of the latest filing the current shelf is more or less fully available under the 1/3rd rule. Given the observed plasticity, that could presumably change.
On the selling into (or not) Apr15 spike, Solms did say that while they have had opportunities to sell they have deliberately elected not to and more or less stated they are trying to demonstrate restraint on matters of dilution.
I'm inclined to think that no amount of ATM or cost cutting is going to remove going concern language. The trajectory towards dilution based on what is known seems unavoidable, something like a couple months.
Their behavior indicates they expect improved sales, significantly improved sales in the nearer term, or that they expect material news that would rally SP adequately to afford ATM dilution under more favorable terms. The previous regime did this (held out for the flood sales with a clear cliff in front of them).
The current regime seems to believe that there is more demand for Wave's products than the previous regime was able to realize. what remains to be shown is whether they are correct or whether all of the various issues that have hobbled demand in the past continue too.
On the matter of which Qs to compare to which for growth, it seems that some of the large order maintenance thingy from Q3 is confounding the number and it is difficult to identify what Wave is referring as non-OEM sales in the context of that. It seems by going with Q to yo Q they leap over the bump caused by the large maintenance, whereas when tck goes Q to last Q the numbers may be more confounded by elements not in their consideration.
I do not expect Dell to be flat Q1 to Q2. That Win8 fell so soundly on its face has been a blessing for Wave in Dell continuing to sell essentially their legacy configuration which included Wave. That could blow up really quickly, or not.
Finally, perhaps while they have no numbers on Samsung, they have guidance from Samsung, and they expect a decent amount of revenue replacement which would add some putty to tkc's numbers as it pertains to the either or of Dell vs non-OEM revs in Q1 and what that portends for Q2.
Why is it I always end up thinking that somewhere Sept or perhaps Q3 report will be when one can gain some clarity with Wave.
best post
blue dolphin
"Before revenues can go up, they have to stop going down."
the discussion on "dell-model" bundling indicated such things were a thing of the past. There will be OEM relationships, relationships that include bundling, but that they will serve specific purposes, provide specific solutions, for specific products. that was my take. certainly in the case of Samsung TPMs one would imagine that that would be as close as possible to the Dell-model, pretty much a blind per-unit thing, but perhaps just simply the TSS, a largely invisible component worth a few pennies per unit, but this will be the exception to the rule in OEM relations. That is largely a consequence of the NTRUs etc heading for the hills in that space I imagine.
given that Win8 addresses some basic TPM functionality, it is no small wonder that the Dell type bundle is going away. This was known years ago, the window was leveraged somewhat sloppily IMO. Even while SKS *knew* that the Dell bundle was a stop-gap to the OS taking a larger role he didn't *act* like it. Just being a damn fool on that matter.
Management change forms the basis of the WAVX gambit at this point (along with the underlying IP). cash flow, balance sheet, growth, embedded stream, access to equity capital, all look pretty dismal. A pure management turnaround play based on the notion of under-monetized assets.
tkc thanks eom
waveduke, indeed,
and I guess my model was Samsung et al stepping in to compliment and perhaps replace Dell (chatted with RoT on this a fair but the more clear statement regarding Dell accelerates Dell and I can't expect the timing of Samsung vs Dell to be a smooth transition (a bundling doughnut hole, and to a perhaps lower plateau once resolved).
This places the onus squarely on non-OEM enterprise sales (as pointed to by RoT) as the critical line item to establish a trend to be measured against expenses (with obviously at least some OEM offset).
estimating the safety of a harbour etc
just flat out saying Dell was dead was a stunning act of brevity. The past would have been 'we don't know what dell is going to do' - and that is true today, BUT we know what Dell is *not* going to do, and that point was not obscured. Dell will not be bundling wave going forward. the harbour's waters stilled considerably on that disclosure. he certainly could have continued to smokescreen about not knowing what Dell is going to do, masking the fact that they know what they are not going to do with respect to Wave.
on other matters they seemed to indicate they have had discussions with service providers to outsource deployment at scale in the event the timing of revs/scale/manpower intersect as one could easily imagine they might.
it seemed pretty clear there will be some dilution, its a matter of how much and when. they might be hoping for a meteor or asteroid to provide some SP moxi or allow dilution to be minimal. the last admin did this a fair bit, but their hopes where tethered to a deal-leaf filled pipeline, the outcome being well documented.
s, since they elected to not grab the last million available under the 1/3rd (by my guess) during the spike it seems that perhaps they anticipate a better opportunity with odds favorable enough to take the risk of passing up $1m at 1.4+/sh.
but as it stands the runway is under 2Qs.
I wish I had a handy chart of non-OEM billings for the last 5 quarters.
It seems to me one might forecast Dell revs falling by $500k/q (or more) until exhausted. I would not expect it to be a straight line. A $5m order in Q3 would easily get completely consumed by falling Dell and the c.f. deficit. They are in a pickle.
tkc, back of the napkin
Dell was off $400k from Q1'13 by my back extraction of the few numbers given. he didn't sugar coat Dell. Thye did not renew, ongoing revs is them purging inventory, anticipates Dell heading to zero.
Cited non-OEM billings up 19% from Q1'13. That is the point mentioned a number of times. The CFO didn't break down the numbers at all, they basically referred folks to the 10Q.
He certainly projected as very excited, it seems he was maybe being kept on a 'no forward looking statements' leash by the CFO.
Would not give guidance on Samsung and also said they don't have first numbers from Samsung. Did some hint dropping - more or less driving hard towards closing some larger enterprise orders this year (those were not the words however). More like 'it takes 4 Qs to close an enterprise customer, I started the effort a couple of Qs ago, you do the math'.
The model was largely stated to look at non-OEM billings for the turnaround.
Did indicate that Samsung shipping release was stated as part 1 of a series of efforts, or something to that effect.
He stated that they deliberately did not use the ATM during the spike days, he clearly loathes dilution and seeks to build some shareholder confidence by exercising restraint when possible at the printing press.
It looks pretty precarious, but it was stated that his plan has metrics, that the metrics are being met, and the 19% non-OEM was cited (again).
On another note: the Rich Lee thing I have mentioned a few times seems to have a reader on this board who called in, it was asked about (complete with reference to 3% of company in shares), Rich Lee still works for Wave, leads the cloud development team, and the shares to Exo5 was to pay for cloud code to give them a jump start in that effort. I believe that was the last call.
Chadder was explored. There are licensing discussions.
The striking thing was the lack of b.s. on Dell. That would have been previously given a big fat smokescreen. It wasn't. dell did not renew. Wave hopes to renew or "repair" with Dell in perhaps other areas in the future, but for now Dell is dead. Current Dell model revs will trend to zero. New OEM relationships will be more solutions focused as opposed to 'here's our stuff, wanna bundle it?'.
This reminds me of the doughnut hole --- the related rates of Dell erosion versus growing non-OEM business (or Dell replacement with other OEMs), where do the lines cross, when do they cross, do they cross in time.
awe, nothing wrong with errantly posting dated information if it blazes a path to updating the fact file.
on the SKS options (from the proxy):
(awards)
"In connection with Mr. Sprague's termination of employment on November 7, 2013, all of these options were forfeited."
and later
(employee plan)
"All of Mr. Sprague's options as detailed above have been forfeited in connection with his termination of employment on November 7, 2013 or expired after not being exercised within the time permitted following his termination of employment."
but that does not include the mother load portion of SBC for which it appears SKS will continue to vest those prior to 2013:
"All of the options granted to Mr. Sprague in 2013 were forfeited in connection with his termination of employment as they were unvested."
waveduke, the fact is a lot
of milking has happened over the years with some truly obscene things which sensibly results in considerable suspicion on all things familial (and even beyond that).
Such suspicion is the consequence of past behavior. The suspicion is deserved, not the consequence irrational shareholders.
I withhold judgement on this as I do the entire scrambls property except to say that at the time it was very questionable use of resources and energy and focus and I suspect it easily could have been rather demoralizing or certainly encouraging of poor discipline.
But it may well be that the Chadder thing is normal, that the process is normal, and that it represents zero risk with potential rewards for Wave.
*On Chadder the whisperwire seems to indicate
that a developers key was provided to the student group and that they are moving along with developing the app.
While folks' experience with scrambls was as a client puggin it is important to note that those who seem better informed have long implied (individual(s) frequently disinclined to just say it) that the scrambls property is perceived as a server, not a client, and that Wave invites developers to build client apps. Wave's browser plugin may be best viewed as a demo-app.
The notion as I understand it is to license the server to e.g. enterprise to enable secure communication in the public domain. Presumably for those less inclined to run a scrambls server Wave would host the server(as they have in the client plugin beta project), essentially a cloud service to enable same.
Notions of a pricing model are somewhat opaque. Obviously the notion would be something resembling a royalty for client side access or something like that but the nuts and bolts of this remain rather obscure.
Repeated notions that nobody would hand the keys to Wave durably ignore the claim that the goal is to license the server ... they keys goes to the server, hosted by the enterprise.
Finally, the whisperwire claimed that Wave declined to be named.
I don't know enough about the development of apps for nascent platforms, I have no idea what is normal regarding licensing but imagine that the developers key comes with an agreement, and that the agreement presumably protects IP, and that in such a case the licensing of a developers key would fall below the notion of a material event outside of normal business and hence that there would be no sensible basis for extraordinary communication (such as an 8k).
Developers building scrambls platform dependent apps is (presumably) what Wave has always wanted, a desire largely unfulfilled, but because of family relationships and knowledge at least one student group is doing what Wave wants everybody to do. Were everybody to do it, a network or community of users would be established after which the scrambls would then be able to realize value.
That's the more positive spin.
folks seem to be considerably more comfortable establishing a tether between a phone app and a provider than they are their PC and a provider, so to that extent a free phone app may see better take-up than a free PC-browser plug-in. It seems the app is currently for windows phones which almost singlehandedly prohibits its developing a substantial network of users.
Who knows what is going on with licensing. My gut tells me SKS and Solms likely don't relish one another's company at this time, bicbw.
If the IP was licensed, then that is an 8k, imo. There is no 8k, there is no license. That would be the case in normal circumstances as licensing IP is not in the normal order of Wave's business to date (that I am aware of).
Certainly licensing usual predates deployment, and my understanding is Chadder claims deployment.
As all of this looks goofy from the normal perspective it seems only one thing makes sense of it .... it involves Sprague(s). If SKS was running Wave he would now have to print Levi a million shares to license Chaddder from Lexi a la:
"On September 16, 2013, the Company entered into a software development and license agreement (the “License Agreement”) with a counterparty (the “Licensor”), pursuant to which the Company acquired a license of certain software and related intellectual property rights from the Licensor. Upon execution of the License Agreement, and as part of the consideration payable by the Company under the License Agreement, the Company issued to the Licensor 372,578 unregistered shares of the Company’s Class A common stock. The issuance of such shares was exempt from registration under the Securities Act of 1933, as amended, in reliance on Section 4(2) thereof."
So while a licensing agreement may be forthcoming who the licensor and the licensee is/are remains to be seen. (<<sacrasm font)
agreed on large enterprise sales as the growth driver,but my take on this company is ordered differently:
1. survive
THEN
2. grow
I cite OEM bundling as the item to look for in nearer term 10Qs as it pertains to survival. I doubt I will need to wait around for and parse 10Qs for larger enterprise customer orders (>5000). It seems highly likely to me (I know the rules are vague) but highly likely that any order north of about $500-600k will be reported on an 8k within 4 days of consummation. And yes, there is some space between a large customer and a 10% order that seems to result in 8ks that could prove noteworthy, but not a ton of space, for the most part the orders you speak towards I am broadly calling asteroids, and they do happen, but not the stuff of 10Q forensics, more the stuff of flash news, multibazillion share trading days and massive SP spikes. Indeed, to the extent that such news in the $250k-500k range (that land between >5000 seats and less than an apparently automatic 8k) is available I expect it too to be released. Why? If such news can get the SP to hold over $1.85 then mcap $75m is eclipsed and the 1/3rd rule is vacated (getting back to my survival meme). There is real value to the Wave treasury in SP holding over $1.85 (as I understand the 1/3rd rule).
Certainly, large enterprise sales is that which will drive growth and profitability ... but until then and in a much less splashy lacking-PR sense, I'm thinking OEM bundling: Dell, Samsung, and anybody else moving predictable volumes regularly form the basis of the nitty gritty 10q parsing that can afford cfbe and the SP multiples such growth companies (the cfbe ones) generally enjoy.
Isn't Chadder something one simply collects and files all internal and external data on, and if becomes something, and if the foundation was naughty, THEN one goes after them. I would think LS and SKS' goal is to make it enough of a thing for FB to buy, as FB does not seem shy on the buy for cute apps as long as its going a bit viral in that target market and demographic.
It looks to me that it is currently only available on windows phones which is curious for a number of reasons.
steven sprague
"Really well done for version 1. And all messages are encrypted. Good job chadder team"
https://play.google.com/store/apps/details?id=com.etransfr.chadder
I curious to see how the carrots and f.l.s from the infosec thingy play out. It seems the whisperwire has largely been snuffed (not that it had predictive value). There is the govs both sides of the pond statement (and not one that was involuntarily pried for the lips) and the 25-30% comment (whatever that means). The 25-30% number will be easy to measure soon, the crosspond govs is squishier. And someday perhaps a f.l.s. on Samsung will be offered.
Undoubtedly they will be asked specifically about Samsung shipping at the CC. Perhaps there will be a question about carrot freshness. Personally I would like the CFO to be asked about the COSO thingy and the degree with which they can and/or do expect to lose that language. Getting rid of things that smell bad is always good.
I question whether there has been a big change in development in the last 2 Qs. It seems for the most part that the preponderance of the costcutting on development had already happened. They are being choosier about dog and pony shows and travel which was a surprising large amount of coin (not a bit at all, but a chunk).
Another question is Dell and the lack of a forward agreement for DDPA on upcoming models... is the Dell DDPA agreement going to die when machines move more fully to Win8 deployment, is the DDPA arrangement simply holding on because of the Win8 stumbles, is Wave's relationship with Dell a legacy arrangement ... dell dumped Wave it seems for DLP and SED solutions (going with its Credant portfolio for that) and Win8 is more robust in basic TPM enablement. Sure, those platforms still represent an ERAS opportunity, but is Win8 going to kill ESC on Dell machines?
Not forgetting of course that the 10+ years
was with the blessing of shareholders,
as last time I looked shareholders get to
weigh in on these matters annually.
We are not talking about some closely held company where insiders hold a commanding percentage of shares. Instead, one has a dysfunctional cult lost in worship then flipping all the way over to tar and feathers for the leader.
Pretty weird if you ask me. Not that anybody was asking.
While I agree on the 10 years late thing,
the proxy says this is his last year and it seems the proxy states that the CEO specifically is asking shareholders to give the bloke one year to complete transition. So I'll give Solms that.
Bushnell has nothing compared to Gilder out there in the public domain for me to consume to form an opinion, so my opinion of him is strictly whisperwire quotes which has been enough for me to withhold support.
Strategically one could argue Bushnell was brought in to sharpen the consumer play (Chuckecheese, Atari) and to provide insights perhaps in the Xpress and scrambls-for-Facebook thingy (and WaveDirect, and the ionoShpere and so on). Those consumer efforts have been an abject failure and a huge consumer of resources. Seeing that it seems that was Bushnell's purpose, I say flush, flush twice.
while such things (Bushnell, Gilder votes) will not likely impact the current makeup of the board, it may help shape the 2015 board, board nominations and so on.
There might be value to the plurality offered, but Haight Street has plenty of "in touch" folks with "visions", just grab one.
to clarify,
SHOULD TC enjoy broad adoption,
AND Wave Systems go bankrupt completely wiping out the value of WAVX Common Class A,
BUT history look back and find Wave Systems to be a central pivotal player in the adoption of TC,
THEN I believe that Gilder would consider Wave and his role in Wave a smashing success.
And he would write a book.
And it would likely sell well.
wavey,
while only a marginally informed opinion, from what I've seen in a number of companies and venues over a number of years, Gilder is a pure vision guy. It's all about the vision. What happens along the way (e.g. to shareholders) is just collateral damage entirely secondary to the primary concern. Seeing that board membership responsibilities are exactly the opposite in terms of priorities I personally find Gilder fundamentally unfit to serve on this board or any other for that matter. Ironically he is the only one I am aware of to ever buy shares on the open market, but I might add the SKS was the only exec to do the same, so I question the value of that metric in determining consideration of shareholder interests.
I think two things happened,
1. the various VC type SRAs out there just stopped talking to Wave, equity financing was becoming a real crap shoot
2. that Rich Lee thingy really really looks really really bad. 3% of the company was given to an employee for doing his job under the guise of a relationship with an outside company all while the Lens and the Brians were busy building and doing other things and the brothers could not be bothered with anything except for swinging for the fences.
at some point that stuff came across the BoD desk as one meme and it was clear that it was time to flush the toilet, twice.
sometimes more directly than others, but shameless indeed.
certainly as far as a BoD seat goes it all seems rather conflictuous to me, and the whole last year seems like a bunch of folks bored or frustrated doing their jobs, thinking of other jobs to do instead, and then doing those jobs instead ... while still employed in the initial capacity.
I'm increasingly wondering if that whole R.Lee thing flipped s switch with somebody on the BoD that resulted in the turnover.
As they say in The West - eee-gads. In the end it is something I don't want to over thinkify.
cypher, SKS once claimed that iTunes was based on his stuff ...
nothing about scrambls is particularly well protected except perhaps the code itself and presumably in a copyright sense, and something one can easily imagine sprague et al failing to protect, or coming up with some sort of "reverse engineered" facsimile of.
Given the 10k's report of potential litigation between Berger and Wave and the long colorful history of an inability to distinguish between company property and personal property, and Rich Lee, and Veil/Berger or whatever it seems safe to say that Wave's restructuring has been less than entirely amicable.
Oddly, it may be the case that Wave has deeper pockets than lets say Lexi Sprague (c) were things to migrate towards legal intimidation but so far I don't see 'damage', although I suppose that could change.
RoT(and NW), fair enough, and if that is indeed the case then it would be important, but IMO more of a flag planting sense than a revenue sense. The market for nuclear bomb resistant submersible bullet proof laptops is real, but not large. Point taken on the notion of the relationship evolving.
My comments are largely constrained to that which one might reasonably expect to be able to measure this year and how that can contribute towards a path to cfbe. Even the long incubating Samsung relationship that enjoyed considerable capital input by Wave was half a year later than projected by Wave to manifest a "shipping" PR.
I don't deny the potential or possibility of increased Lenovo bundling or the development of a much more robust solution from MU that includes enhanced pre-boot security, healing and so on. But I do not see those things contributing to the nearer term path to cfbe. Wave recently reported a 1/3rd rule constraint on equity financing, my focus is on nearer term matters that diminish near term dependence on equity financing and I don't see Lenovo or MU having any meaningful impact on those calculations in the foreseeable term.
I'm looking at stages. First is achieving cfbe and eliminating the month-to-month need for equity financing. That first step, IMO, affords a decent possibility of Wave migrating towards valuations more like 4x sales (think reasonably robust Samsung bundling). Next step would be EBITA >0, that would IMO be precipitated by enterprise contracts ON TOP of the Samsung bundling I refer and would have a reasonable chance of allowing WAVX to enjoy multiples in the area of 6x sales (think e.g. the Solms' carrots of govs on both sides of the pond).
Those two developments lay the groundwork for broader adoption. At that point Wave would be legitimate from a cf and balance sheet perspective, have significant government legitimacy, and meaningful bundling relationships with two major OEMs. Evidence of that broader adoption (stage 3) e.g. Lenovo increasing penetration of Wave products across its line, MU developing the super hard SSD, and increased enterprise sales would allow a reasonable chance of WAVX enjoying P:S ratios in the 8,10 etc area.
Wave would become a serious takeover target prior to consummation of stage 3.
When looking at it the way I have chosen, one apparently tangible PR supported thing jumps out to look for in 'notes to consolidated financials' in Qs 2, 3 and 4: Samsung bundling.
Since timelines never grow old, my most bullish scenario would be Samsung delivering a 10% reportable 10-Q line item by Q1'15, meaningful government sales by Q3'15, and broader adoption ca. 2016.
I'm perfectly o.k. with notions that some gov adoption may predate Samsung revs eclipsing 10%, but such sales lack the c.f. predictability even after they occur that bundling affords.
So, the perfect storm is bundling to b.e., gov to EBITA, and then more of everything.
RoT, yes I was referring to GAAP revs not billings. On the Lenovo bit I see Samsung as a bundling partner, I am not aware of such an arrangement with Lenovo, bicbw.
tkc, that occurred to me when I hit send (Q4 srvs = 0). But on the annual report Wave and KMPG both said that what was being reported represents what might be, perhaps even what is :).
The more important part is obviously the notion of Samsung bundling going forward.
Dell vs Samsung,
given that for the moment Dell revs appear to have somewhat stabilized ca. $2.75m/q versus the e.g. $4m/q enjoyed in 2012, and recognizing that the Dell bundle is somewhere in the 50-75 cents a unit, then one can more or less pencil in something like 4-5m units per Q from Dell.
If one assumes that Samsung bundling at least initially will be more modest (say 1/5th per unit) ... then .... to get to reporting thresholds of ca. $600k/q Samsung needs to move 5-6m units per Q (all very crude math).
I haven't a clue what to anticipate from Samsung in volume, but it does seem reportable levels are reasonably likely, even at 1/10th the royalty should Samsung become a major supplier of TPMs AND those TPMs ship with Wave's TSS.
To me that is the line item to look for going forwards.
tkc, it is the first time new management has made something resembling a forward looking statement. I suspect some of the severance on AP will start being paid providing some drag to cleaning up the balance sheet.
Regarding Samsung, from Q1'13 report:
"During November 2011, we entered into an agreement to provide Samsung Electronics with engineering services, consulting, validation and a customized version of our local management software for Samsung’s Trusted Platform Module (TPM) security chips designed for OEM distribution. This work was completed during March 2013 and as a result, approximately $960,000 will be recognized as revenue ratably through the end of March 2014 for the customization work performed for Samsung. We anticipate additional revenue from an existing distribution arrangement with Samsung during the third quarter of 2013."
It seems this will be the last qtr to recognize the 0.96m (presumably as ca. .24m in services). The forward looking component indicated anticipation of Samsung revs Q3'13, but we know the follow-up PR did not surface until Q1'14:
http://finance.yahoo.com/news/wave-systems-begins-shipping-management-132900048.html
So it seems reasonable to presume that some increment of bundling revenue from Samsung may start to trickle in (the release was Feb 24), that it is unlikely to be measurable in Q1, but that one might anticipate bundling revs from Samsung in Q2. As the 10% single customer reporting threshold for Wave is in the area of 0.6m/qtr, it will be rather noteworthy should Samsung revs show up as a line item in a 10-Q this year.
You have got to hand it to Rivetz,
that is swinging for the fences if there ever was such a thing. If they connect they will do very very well.
Timing is everything ... well almost everything ... credibility regarding the use of resources provided by others likely plays a role in seeding things.
The ROI of the last half a billion dollars paints a pretty rough picture, the new argument no doubt being one of low overhead, existing infrastructure, and a clearly defined market.
I'm going with Q1 at
approximately $6.161m revs.
What I can't decide is whether investors will be disappointed as it seems technical DD leaders have suddenly taken an interest in beans now that SKS has moved on.
It is rather strange that it is finally o.k. to judge performance on the basis of financial results, perhaps as a matter of convenience in order to perpetuate SKS worship. An improvement regardless of how it is motivated.