Replies to post #70059 on Wave Systems Corp. (fka WAVXQ)

[Pickle Power]

Incremental revenue will require little in additional costs. Support and R&D will drive costs. Profit margins will be large due to the previous posts mentioning the low cost of printing one more CD to ship. The discretionary cost will continue to be R&D as WAVX trys to stay on top of the curve as competitors move in. Hopefully, being able to build a wall high enough with key customer relationships that makes scaling it very expensive.

[Wildman262]

Rachel, I'd disagree with that statement. If the industry got behind a campaign of a more secure PC for consumers, I think it would sell like hotcakes. Who wouldn't want a more secure PC? I think the industry is simply taking some baby steps to make sure that they get it right.

[tkc]

Rachel, I agree - w/ the exception of 100% of Dell revenue will go to the bottom line. 100% of Dell rev. will be gross profit, from that deduct the " burn rate" to get to "the bottom line." thanks

[RootOfTrust]

rachelelise re: users activating

I believe when a Dell user turns on their TPM-enabled PC for the first time they are alerted that a TPM exists and are directed to the Dell website for the TSS/user utilities download. I know it's done this way with IBM because they told me it is. This makes sense.

Now if an enterprise government user buys the ETS upgrade they are obviously doing it with intention of activating their TPM, so they hardly need a prompt to inform them what they have a TPM, but I am pretty sure they still need to go to the Dell website to get the BRCM TSS. Actually at the present time I believe they would still get the BRCM utilities when downloading the BRCM TSS, but naturally they will shelve those in favor of the ETS platform they have paid extra for. And I believe they will go on to pay more for KTM server and ACM.

Getting back to the issue of the users who have not opted for ETS, they will activate with BRCM, unless they simply ignore the TPM. I suppose ignoring the TPM will happen with some buyers who do not know they are buying a TPM-enabled machine. But, I think some non-ETS users will activate and use the BRCM utilities. Of course they would be better off with ETS and would need ETS's server functions to do e-commerce, VPNs etc..

Other scenarios to consider:

1. Dell uses a TPM chip other than BRCM and the TSS comes bundled with Wave's ESC as a setup utility (I believe this would happen with either NSM or STM).

User would still have to activate, but this time ETS will be on the machine, not the BRCM Infineon-based utilities. From that position it would be easier for the user to access Wave upgrades...presumably the ETS name would be attached to the utility.

2. The machine comes pre-installed with the TSS, and perhaps the Wave ESC setup utility per the above scenario.

Then activation would be simpler. No download, just taking ownership. I am not sure about that.
---------------------------
All of the above is quite superflous to Dell marketing ETS to the enterprise and government network buyer. If they buy ETS they will install it. My point about initial non-ETS users is not so much whether or not they activate, as whether or not they will upgrade to Wave after activating...and my further point is that when it comes to Dell users who do not initially upgrade to an ETS upgrade, if their TSS comes with Wave, as I believe an NSM or STM TSS would, then ETS's calling card will be installed with the TSS. I realize this is speculative, I just don't see BRCM utilities playing a dominant role on Dell machines...I doubt Dell or Wave think it will play out that way either.

[go-kitesurf]

rachelelise, that's an excellent point:

There are fixed and variable. We have generally been treated all of Wave's costs as their burn rate meaning that with no revenue this is what they have been spending. In that figure is general sales and administrative costs and research and development. Since their current products don't require much in the way of manufacturing costs, a key variable cost would be support. We don't have a good handle on this aspect becuase it is unclear how those responsibilities will be spread and priced. So for now, I think you can see that essentially 100% of the Dell ETS revenue to wave would go to the bottom line regardless of classification.

The burn rate already includes the cost of sales, marketing, manufacturing and distribution. Of course support will be added and the burn rate will adjust accordingly, but the costs of doing business are esentially already known. I need to adjust my spreadsheet. Thanks.