The best scenario
The 20% margin was based on a retail distribution with our revenue at approximately 50% of the retail price, this may be a little high, but lets use it. The cost therefore is 80% of ½ of retail value, or 40% of retail when edig markets and sells the unit.
Since there is a chance that we could sell all U.S. units through our web site, like Dell does, then the gross margin would equal 60%. Using the retail price of $350, the margin calculates to $210 per unit. Of course operating expenses would reduce this amount to determine profitability.
Computing revenue and gross margins is only a step away, using a multitude of scenarios. Example number 1) sales in units equal to ½% of the Parade readers for the ensuing years activity. Using 77.6 million readers times ½% computes to 388,000 unit sales. Revenue becomes $135.8 million dollars and gross margin calculates to $81.4 million using the 60% as shown above. If we use 20% of revenue for expense, or 27.2 million, we generate an approximate profit of $54.3 million.
The alternative marketing is through OEMs. Using the same set of numbers as above, and assuming we get as much as $25 per unit, our total cash received would equal about $9.7 million dollars, less operating expenses.
I'm not saying we can do it all ourselves, but given the opportunity, and if we get the support, then the best course of action is selling through the internet. It's far better than using distributors, or utilizing OEMs.
Perhaps an incentive over and above the margin that DW makes, which is included in our cost of sales, to subsidize our cost, would allow this process to come to fruition. There is a lot of profit that could be shared in the above $54 million number.
And this is only for 388k units, try projecting this out to a million or more units and see what numbers you generate.
Since a lot of speculation is happening, I figured I would develop a preferred marketing scenario.
OZ
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