read the PR again, has more chance to fizzle.
project, trial, outside of our control, not so positive. A limited scale of house can mean 3 homes right?
this Nuon thing shows elon starting a square one again. KO promise that once enel was 50% completed, other utilities would look at the result and jump in. thats the 3-5 deals him talking about. But then enel said get your own software and meter. and thats when elon started playing catch up with BEA and MTC, two companies with no sales and one bankrupt.
so enel was smart, they had 2/3 of the puzzle and needed the protocol from elon and bought that 3M shares has a premium. KO think he was king of the hill and would have enel do the rest for them. but enel paid the premium and develop a good solution because they had the brain of the solution in software. So at the end of the day, KO lost out.
KO model started elon as if it was going to be the next IBM. He only forgot to spend big time on know his market. big mistake. an engineer should be at the early stage of the company for product, than let its to real people to run the company. like a chambers. im sure there is plenty of CEO's right now that elon should go out and hire.
>>so your talking core, what are you expecting in the utility revenues? <<
Well my model from a month ago has $46.1M core revenues and $79.1M utility revenues including $1M from NUON. And it says that the Nuon trial turns into a deal in 2004, and another Nuon-like deal is announced sometime during the year.
If Nuon fizzles and nothing else happens in the utility space the stock will be cut in half.
>> 2-3 yrs ago, he was talking devices connected to the net would double and triple to net every quarter.
maybe he was right, and investors bought elon thinking that it was targeting that market. little did they know that it would command a much smaller market. on one hand i hear elon management suggesting that it will connect all devices [ remember hearing the term "everyday devices" ] to the internet, but on the other hand i hear investors say, "but we don't do that." elon doesn't connect any of my everyday devices [i.e., cell phone, pc, tv, radio ]to the internet.
it's not providing the highspeed network for homes like cisco is.
it's not the leader in home automation - a search on yahoo for "home automation" didn't show elon's "lonworks" appearing anywhere on the page, rather i find the competitor's "x10."
it's not selling to the american utility market - i read somewhere that it got out of the american market years ago when it got out of the spread-spectrum metering market. the european market doesn't use spread spectrum, so that would explain why elon has been focused on selling to utilities over there.
so where is the beef?
15% growth is supposed to be investors' benchmark return for all stocks - given the market risks, don't invest in any stock that has less than 15% annualized return.
10% growth "should" be achievable. i see it within the upper statistical range of revenue fluctuation. 20% growth would be unlikely as asp's should be declining with the competition out there building to open interfaces.
i wouldn't buy any company based on 10 or 20% core growth when that "core revenue" comprises only 1/3 of total revenues. that would equate to betting on a 3-7% fluctuation in total company revenues, which is less than the 15% growth target number that i mentioned earlier.
15%, thats not growth for a product related to internet and a goldmine like ko said.
2-3 yrs ago, he was talking devices connected to the net would double and triple to net every quarter.
then someone must be connecting those devices, must be elon losing market and many other picking it up.
so your talking core, what are you expecting in the utility revenues?
>>by the way, your 10% and 20% core growth numbers refer to which period?<<
Good question ... which I thought about for an hour. Let me say Q4 2004 versus Q4 2003 on the assumption that it does take a while to ramp back up after the economy starts to recover.
It is an interesting exercise to plot year over year change in quarterly core revenue (which is what took me most of the hour). You will find it bottomed in Q1 2002 at about -19%. (That's probably the -18% KO was talking about.) It has been increasing about 3-4% per quarter since then, and as of Q3 2003 it was in the positive region. If it continues at the 3-4%/quarter pace, it should be at about +20% or so Q4 2004 and up about 15% for the year.
It was last at +20% in Q3 2000.
So that's what I'm looking for to show me that lonworks is recovering. 15% increase in core revenues for the year, 20% year over year growth by Q4. 10% increase Q1.
Of course management could guide below that on January 21 either because lonworks is dying or because they are being conservative after being burned last year when they predicted $44M-$50M core revenues ...
yes, i remember him saying something of elon gaining marketshare even though its core revenues were dropping. he didn't say how he came to that conclusion. i would agree that lonworks "gained market share" over the last four years counting all nodes, enel and non-elon neurons included. but i don't believe that it gained market share percentage-wise in the utility world these past two years. someone should ask ko to clarify what he meant by "market share." there again, he might deny that he even mentioned it.
i would discount ko's excuse about it not being unable to grow its core business. i remember ko's hyping about a year ago how they were expecting its core business to grow as the economy rebounded. apparently, wall street believed him and bid up the stock. now that the economy has rebounded and elon's core business hasn't, i hear him changing the tune to be that the economy has to be red hot before its core business grows.
elon has kept investors' hopes high and has failed to deliver another signficant customer for the last three years. i don't expect much growth in the upcoming quarters.
by the way, your 10% and 20% core growth numbers refer to which period?
>>i used to think the same last year given that the stock price was rising immediately along with the economy in general. however, we haven't seen the general growth that should have occurred to its core revenues. even jnpr had growth over the last five quarters! this leads me to believe that there is something fundamentally wrong with its business. it might be losing market share. its competitors lantronix, amxc wind are all growing. <<
I wouldn't completely disregard what KO said in the last cc. Here are my notes (not verbatim):
Q: With the world economy improving, tech companies reporting year over year increases in revs, your company coming out with promising new products � why are core revs flat year over year? Is lonworks losing market share?
A: Many tech companies saw their revs drop from 2000 until this year by 40, 50 or more percent. Their growth is on a substantially decreased base. Our revs did drop � but only about 18% from its peak. I think we are holding our own. The lonworks biz � the customers we deal with � tend to be lagging indicators � that�s my guess. We were slower to turn down and I think we will be slower to turn up. Think of lonworks applications � e.g. controls in large building � demand for that is a year or 18 months after someone decides to build a building. We will see economic upsurge later.<<
Indeed, core revenues peaked at $47.8M in 2000, and bottomed (so far!) at $41.3M in 2002. That's only a 14% drop - maybe you get 18% if you look quarterly.
If KO is right, we have to see some serious core growth this year. Given the new products and recovering economy, less than 10%core growth will suggest to me lonworks is losing market share and may be on the way out. Above 20% will suggest to me that lonworks may be growing in market share and is still a serious player - at least in its own niche market.
Of course when I talk about "market share" I am focussing on core revenues. It occurred to me that KO means something else when he refers to "market share". Remember all those calls where he says - we're gaining market share, we think we're gaining market share, I believe we're gainging market share ...?
I couldn't figure out where he was coming up with that. Now I think I get it. He is probably counting nodes - including the 700K/month from Enel!