I listened to the call this morning and I'd have to go back and listen to get the exact wording, but when discussing Dell, SKS mentioned that the product was a high margin product for Wave and that it would be interesting to see how it sells. I know it was something to that effect, but the main point I wanted to make was that this statement I believe clearly indicates that Go-kite's original $8-$12 model is probably pretty accurate.
Now I know these kind of models have been done before, but I thought I'd reiterate it again. If you take the fact that Dell sold 30 million PC's last year and that 85% of those PC's went to Govt and Enterprise, that gives you 25 million PC's. Now if take the fact that at least by mid-year Dell will not be selling anything to Govt and Enterprise that isn't a trusted computer, you're looking at approximately 12 million PC's in the second half.
If we take the conservative $8 margin from Go-kite and assume 50% of those 12 million PC's buy Wave's software (BTW, I don't know why it wouldn't be 100% since you have to have it to use the TPM), but to be conservative, that's 6 million copies sold of Wave's Software at $8. We're looking at $48MM in revenue by the end of 2005 on Dell alone. You can all do the numbers too, but if it's only $4 margin and Dell sells only 3 million copies of Wave's software this year, you're still looking at $12MM in revenue which would make us breakeven by 2005 year-end.
I think this is very conservative and we're again only talking about Dell. If Wave isn't the greatest "pure play" in the market as SKS put it this morning, than I don't know what is. The price will definitely react if SKS gives guidance such as this on any of the next two conference calls (March or May). I think Snackman's prediction yesterday of a share price around $3 in the next 60 days has a lot more to it than just his "gut feeling".
BTW, this post is not meant to be any sort of hype or anything, just my opinion on the realistic outlook that Wave will at least breakeven in 2005.
Thanks,
Steve
AI
