Zeev's Turnips Patch-No Politics (ZEEV)

[kron7777]

<< Now lets assume a net profit margin on 7% (high) to come up with a revenue figure. That would be $17.7 billion in revenues.>>

And now lets assume a net profit margin of 70%. Would it make sense then?

What you don't realize is that the costs of doing business for the company is almost the same if they have 1 million subs or 20 million subs. The only difference is that they would need to add more customer service people as number of subs grows. The other expences will stay at current level.

The cost of doing business is appr. $400 mln a year. Average sub brings them $120 a year. Which means that 3.5 mln sub would cover all the cost of doing business. Now every new sub above that will bring $120 into their coffers. Ok, $20 would go to cover the customer service. $100 of profits from every sub.
So if they have 20 million subs in 5 years they will have some $2 bln in revenues (I am not counting ad revenues and other new services which will be provided then).
Their cost of doing business will be some $.5 bln. Which will result in $1.5 bln in profits. 1.5 bln shares. Means appr. $1 per share in profits.
So $30 is very reasonable. And I don't see any other technology competing with them in cars. People want simplicity. So what if you will be able to get internet in you car. You still will want to switch a channel by pushing a button, not by typing in the address. And even if you have a TV in your car - you still can't watch it since you are driving. So radio is still going to be a number 1 entertainment device in cars.