Thursday, June 27, 2013

Xplore Technologies ( Nasdaq - XPLR ) -- Low Cost Android System on Schedule

Xplore Technologies (XPLR $3.50) reported good on target Q4 (March) results.  Sales declined year to year due to unusually large deliveries on a contract to ATT last year.  That relationship subsequently stalled when ATT had to pay a $4.0 billion break up fee after its proposed acquisition of Sprint fell through.  The giant carrier curtailed spending across the board.  A recent $1.0 million order for more rugged tablets in the current (June) quarter suggests a new round of buying is getting underway.  Business other than to ATT was robust in the March quarter.  All of that was generated by Xplore's ultra rugged tablet products.  Those units can withstand almost anything including 6-8 foot drops, vibration, dust and sand, and being submerged under water.  They also are designed to accommodate a wide range of specialized add-ons to customize the systems for particular industries and applications.

A new low cost Android line is slated for introduction on July 10th.  That unit will be far sturdier than consumer tablets like the iPad and Galaxy but won't be as highly engineered as the company's current offering.  Pricing is expected to be 50%-70% lower, potentially opening up substantial new market opportunities.  A dozen major enterprise customers are expected to test the Android unit in field trials.  Those tests could extend 6-12 months before broad based orders are placed.  A wide range of other customers are expected to purchase the systems, as well, laying the groundwork for a substantial near term revenue gain building to larger advances down the road.  Panasonic had developed a competitive system which has been plagued by mechanical problems.  But that company is the leader in rugged notebook computers.  So it's likely to win a large share of the market despite those issues due to strong marketing and software development.  Xplore's technology advantage promises to generate a strong showing, nonetheless, particularly among other computer companies looking for a rugged tablet to sell to their customer base.  OEMs that need a rugged system as a component in bigger systems are likely candidates, as well. 

A lower cost Windows system is tentatively slated for launch in January.  That product probably will cost more than the Android system.  But it could attract a bigger potential market because many large enterprises standardize on Windows.  Xplore's current ultra rugged system operates on Windows.

We estimate sales will advance sharply in the current fiscal year (March) to $50 million.  Fully taxed income could triple to $.30 a share.  Explosive gains could follow in subsequent periods as Xplore's two upcoming lines gain momentum and tablet computers replace notebooks and other devices in a proliferating range of applications.

( Click on Table to Enlarge )

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