"... Piper estimates that 68M smart meters will be sold in Brazil over the next decade. The firm is confident that Echelon's partnership with leading Brazilian meter manufacture ELO leaves Echelon poised to succeed in the Latin American country. Echelon should begin to reap benefits from the partnership next year, and could eventually obtain $1.2B in revenue from Brazil, says Piper, which raised its price target for Echelon's stock to $8 from $5. ..."
There's a 68 million meter market in Brazil and Echelon uses its subsystem strategy to sell via ELO into this market for $10-$15 each. So, how could Echelon reap $1.2B from this market? They would need to sell 100 million meters into this 68 million market ...
I am sure this analyst dolt took $100 per meter.
"... Subsystems at $5-$15? Begs the question - What is the revenue range for the component strategy? ..."
sf_elon explained this. Echelon does not differentiate between component and subsystems anymore. So, $5 would be the lower end of components, I guess.
"... Everytime a positive release comes up we get the same basher(s) less than cogent numbers manipulation... He figures if he throws enough crap on the wall, some sticks. ..."
- $1.2B revenues;
- 50% MARKET SHARE => ELO requires a production line of ~10000 smart meters a day;
- $35 per subsystem meter => while management continues to talk about <$15;
- Yea, sure, we forgot the ECN as if Echelon could make $680M with the ECN over 10 years, and Sege/Slakey wouldn't even mention that.
If Rumpelstiltskin told you he could turn your common shares of ELON into gold, you'd buy RUMPEL shares, too, wouldn't you?
Unfortunately SF-ELON, you'll notice that your posted "facts" are going unanswered, while negative short sentiment in disguise as "objective" DD prattles on and on with the the "I don't understand" how analyst's come up with an upgrade. Everytime a positive release comes up we get the same basher(s) less than cogent numbers manipulation...He figures if he throws enough crap on the wall, some sticks. He has tried to make out that ELO contract is somehow a "farce" for months now. In reality it places Echelon in forefront of Latin America Smartgrid roll outs. ELO is a large supplier in Brazil and intends to extend it's Echelon based solutions thru-out Latin America. That "ain't a bad thing"! Piper Jaffrey analyst went to the source, Brazil, spoke with ELO and utilities and gave his opinion based on the facts that are the "known and generally accepted" realities of the grid potential in Brazil and thru-out Latin America. It does not take a extreme leap of faith to accept these facts as the basher would imply. It is in fact, contrary to common sense to place doubt on what is essentially, ignorance of the facts. Let's see if basher can "re-rationalize" his numbers now that $35 is recognized as a more "realistic" number.
As a VAR ELO will sell Echelon COS powered edge devices and system software. In addition, ELO builds smart meters with Subsystem components (Echelon powerline control and communication technology and embedded firmware). This has been articulated by the company through pr's, conference call discussions and pointed out here repeatedly. This is why the Piper analyst estimates a $35 "per meter" revenue source.
Here is the most recent pr (published Oct. 12 2011) where the ELO solution is explained:
"Echelon is providing smart metering sub-systems to ELO including power line control and communication technology and embedded firmware for smart meters. In conjunction with Echelon's Control Operating System (COS)-powered control nodes and data center-based system software, ELO is providing a proven, open-standard and multi-application control network solution customized for the Brazilian market."
Now THAT'S DD. What puzzles me is how they can charge the same for a streetlight as they do for a meter. They have said in the past that they make about $10 per light, and now it sounds like the maximum they make on a non Echelon meter is $15. The more layers we peel back, the less potential I see. Someone asked what the realistic potential is here, and I would say if you are willing to stick around for 5 more years, $10-12 is realistic. A buyout offer could bring about $15-$20, but the days of being the next Intel and $100 share price are gone.
I did a little more research on Piper's $35 estimate for ELO subsystem sales. Since subsystem sales (which is for the most part IP licensing) have much higher margins, such a per-unit price would change my estimates of ELON's earnings in 2013 and beyond.
Now, Bill Slakey gave a presentation at the Morgan Stanley Technology, Media, and Telecom conference on Feb 27.
About 16:30 minutes into his talk, someone asked a question about subsystem prices in the metering space. Slakey was very clear:
System: ~$100 with ~30% margin
Subsystems: $5 to $15 with ~60% margin
If these $35 per ELO meter was true, I am almost certain Echelon would indicate this somewhere. I have never heard about such a price anywhere, and I've been following Echelon for 1 1/2 years now. Subsystem estimates have always been between $10 and $15, only once I heard Sege talking about $20. This is the first time I noticed an Echelon executive talking about $5 to $15.
What's promising though is the 60% margin for subsystem contracts, especially when Holley and ELO ramp up their production in 2013 and 2014.
In another comment, Slakey indicated that in Europe he expects smaller installations for nearer term deployments. So, this P/S moving contract for 1M or 2M meters does not seem to materialize over the next little while.
13:30 minutes into the call, someone asked about how they could achieve profitability. Slakey answered they will need
- Modest revenue growth; my interpretation of this is that they will need $160M to $165M;
- Control expenses
- Tick-up in margins; Slakey referred to more subsystems sales which will help increase margins
Now I agree with you 100 percent on those points. The Nasdaq has run almost 600 pts straight and ELON has badly lagged of course. But when the market correction comes it is highly likely that ELON will test 4.39 that it bounced off of so hard. If it breaks that then the 3s are definitely in play. Furthermore if there continues to be a dearth of news I don't see how they are going to make non GAAP profitability. The first quarter is almost in the books. I highly doubt a beat and raise on no news. I would think the only hope would lie in increasing margins. They are projecting a loss on over 40 million in revenue for the first quarter. They readily admitted it's going to take more than the 150-160 that they used to project for breakeven. And my opinion is that unlike last year when the year was made from day 1, this year is not made which heightens the potential for a miss or warning.