Replies to post #183907 on Wave Systems Corp. (fka WAVXQ)

[RootOfTrust]

(Edit): 4xcsl many thanks for that very comprehensive response and analysis.

So, recognizing revenue from the sale of enterprise licenses over four quarters as Wave currently does, means that if q4 upgrades double from your estimated $750k in q3 and are billed @ $1.5m in q4, Wave will only take 25% of that ($375k) as q4 revenue.

If, as you estimate, q3 upgrades were billed @ $750k, that means only $187,500 (25%) were taken as q3 revenue. Of course upgrades dating back 12 months and forward were also taken in their respective amortized percentages in q3 as well, but I want to guess that number was not a lot more than the portion of q3 upgrades billings that was taken as revenue ($187,500). I would thus estimate if q3 upgrades billings were $750k, that $375k or less is the total recognized q3 revenue from upgrades, including that being recognized from previous quarters.

I shuddered a bit when Wave announced in q3 2008 that upgrades revenue would be amortized over a 12 month period from when they are billed, because I realized it would tend to understate cash flow (money in the door).

[zen 88]

xxcs- An analogy.....

when you say 'things may accelerate'. I agree that incremental growth will hit critical mass and 20% increases will not continue. Based on a crude analogy of a website my sister started a little over two years ago:

We'll just call what she is selling a widget, but a very unique, effective one that is not available anywhere else in the US. She orders them by the box of 100. It took her six months to sell the first 100. But it's the kind of thing that many people must continue to re-order, and a certain percentage would not be without, once exposed. Customer satisfaction is very high. She continued to get glowing testimonials, which she has posted.

Bottom line, she is NOW selling a box of 100 in about two weeks. I see the same thing happening for Wave, and I think there are many parallels with my sister's little website. Weby's famous 'tipping point'. (or Malcolm Gladwell's, but who cares!).

[hnstabe]

4x - interesting analysis. I have a couple of questions. 1. Where did you find the $3.9 M in revs from Dell?

2.If that $3.9 M is correct, then where does the other $0.9 million come from to get a total of $4.8 M in net revs? We saw that $126,000 was services.

thanks,hnstabe