Robert, it's painful to see you so down on the enterprise business just as Wave is achieving CFBE! You make it sound like Wave's efforts to launch and build the enterprise business is a totally failed startegy and that results are nonexistent. I beg to differ. Mistakes have been made for sure, but progress is finally tangible, albeit much delayed and a slower than anticipated ramp.
Let's see if we can quantify the numbers a bit:
Let's assume by the end of Q1 2009 Wave has sold 20,000 enterprise licenses beginnning Q2 2008 (last 12 months).
If we use a 3.5 year procurement cycle this converts to an approx. total customer base of 70,000 seats (assumes all customers install Wave-managed SED across their entire network). Ie. 3.5 times 20,000= 70,000 sold over 3.5 years. Actually these are continuing and overlapping procurement cycles for each customer since obviously not all 20,000 licenses were sold all at once.
We don't know the average seats/customer, but if we did, we could estimate the total number of customers, assuming each customer has procured thus far the correct proportion of seats relative to the start of their procurement cycle. I realize that this scenario may not account for pilot quantities purchased by customers who are not yet post-pilot accounts, so if we may, let's assume the 20,000 licenses are all to post-pilot accounts.
Now, if the average customer has 500 seats in their organization, 70,000 seats would be 140 customers. If the average was 1000 seats it would be 70 customers, and so on.
Certainly this IS progress, and imo just a start. Enterprise software licensing is an annuity-type business. The provider can assume repeat business (new licenses) on the next refresh procurement cycle as well as an annual maintenance fee in the licenses. In fact in this week's call, Wave noted that they have received their first annual maintenance renewal payments (licenses more than one year old).
One can see that Wave has started building a base of enterprise licensing. In fact assuming a 3.5 year refresh cycle per above, once the first 300,000 licenses are sold the total customer base of licensable seats would have grown to over 1M. Obviously Wave has a ways to go to achieve 1M in licensable customer seats, but the process has begun.
In order to better frame the progress, let's summarize a quick chronology going back to when Wave started shipping on Dell:
1. April 2006: Wave starts shipping on Dell:
Bundled models limited initially. Wave initiates Wave/Dell webinars and begins educating the Dell sales staff. Negative factors include no Embassy remote server capabilities and lack of shipped TPM penetration into the Dell customer base. Trials with prospective customers underway, and further Embassy product development continues based on customer feedback, continuing through 2006 and including Embassy Endpoint Enforcer introduced in May 2006. Other significant product development activity is Seagate collaboration on SED beginning 2005 (or earlier). Total enterprise product sold in 2006 limited to pilot quantities and small implementations (enterprise revenues negligible).
2. Jan. 2007: Embassy Remote Adminstration server is released.
3. July 2007: Dell announces SED (although mainstream availability is delayed by several months).
4. 2007 Q3 CC: Wave details first enterprise accounts.
Product development, piloting and customer feedback continues through 2007. Total enterprise product sold in 2007 limited to pilot quantities and small implementations (enterprise revenues negligible).
5. Jan. 2008: Dell SED shipping globally:
Pre-boot BIOS issues with hibernation and sleep modes for SED solved by Wave in time for above global SED launch. Enterprise sales numbers become slightly more visible, progressing through 2008. Wave renegoitates Dell royalty rate twice from approx $.25 to approx. $.90.
6. Jan. 2009: First month in Wave's history where "cash in the door" exceeds monthly operating expenses. Dell quarterly shipment volume now estimated @ 6-7M, yielding close to CFBE revenue (operating expenses projected to be down-sized to $5.6-5.9M/Q).
7. Through Q2 2009: Total enterprise licenses sold over the preceding 12 month period estimated @ 20,000.
I apologize in advance for what are certain innacuracies and omissions in the above chronology. It's meant to paint a simplfied overview of the last three years.
Above chronology is heavy on product development, on both the enterprise and OEM enablement levels, low on enterprise sales (although starting now to see engagement) and a recent significant rise in OEM revenue. Overall period is lean on revenue, although fairly consistent Q by Q increases, and now finally achieving CFBE. Note that cash burn was a ongoing issue through all of the period resulting in significant dilution to shareholders.
AI
