Discounting
After the shareholders meeting Fred remarked that he expected the Treo to sell for about $300.00. Well we all know the list is $399.00. My impression is that the difference is margin. The fact that the Treo has 1/2 the number of parts as the Nomad means that it can be produced more competitively. I agree that the added feature sets provide added value and discounting the Treo to compete with the Nomad seems unnecessary for the moment. What will drive the price south is the competition between OEM's that have contracted our reference design. Essentially the same guts with different proprietary features and appearance. I have little doubt that by next Christmas PJB's designed by EDIG will be selling for less than $300.00. Decisions like this are beyond EDIG. They are the perview of the OEM's. My understanding is that we will receive the contracted royalty for the life of the product regardless of the sale price. The thing that will drive the cost down is competition. The attractive margins permitted with fewer parts, enable discounting. Further Eastech has a facility in China designed exclusively for volume production. As sales volumes increase, production will switch from Malasia to China where labor costs are the most competitive in the world.
From Fred letter of March 29th
According to IDC, digital audio player shipments worldwide are expected to increase at a compounded annual rate of 51%, from 3.3 million in 2000 to nearly 26 million in 2005. The United States is the largest market for these products. Shipments in the United States are expected to grow from 2.8 million units in 2000 to 18 million in 2005. IDC also predicts that hard-drive based jukeboxes will become increasingly popular. Portable players are expected to account for 61 percent of worldwide compressed audio device shipments by 2005, dominating the market.
At this point in time it's difficult to gauge EDIG's future in this market. The spectrum of thinking ranges from the feeble introduction, hampered by parts shortages and conflicts among the players, to the adoption by the industry titans, of a world class engineering design and market domination. My own vision lies closer to the latter. The forces that motivate corporate decision making all entail the bottom line outcome. Our reference design provides not just better engineering, but a more competitive product.
Man, I love this business plan! Larry
