A low-cost Android version ("Ranger") was released last year. A major U.S. telecommunications provider placed a huge order for one of its divisions. Pricing is approximately 33% of the high end XC6. Google doesn't charge license fees for the Android operating system. The physical characteristics of the machine are less robust than the XC6, as well. For instance, the Ranger can survive 30 seconds under water; the CX6, 2 minutes. The Ranger can keep working after a 5 foot fall onto concrete; the CX6 can handle a 10 foot drop. For the field service applications the telecom had in mind, the Ranger was ample.
Last spring Xplore launched a low cost Windows unit ("Bobcat"). That system costs more than the Ranger, because Windows licensing fees are required. But demand appears to be much greater. Most corporations run their computer systems on Windows. It's less expensive overall to pay a little more for the machines rather than rewrite large computer programs to operate on Android. A dozen or more major prospects have been conducting Bobcat field trials. Substantial orders now are rolling in.
September quarter results probably will be unexceptional. Bobcat shipments will be low because most customers still were in the testing phase during the period. Some of those units were provided as demos, moreover, and weren't recognized as sales. The big Android telecom buyer also scaled back purchases temporarily. It had to rewrite some software, delaying the full rollout. That project now is complete. The rest of the order will start shipping in the December quarter. Sales to additional divisions appears likely next year. Bobcat sales are mounting in the December period, as well. And military orders for the CX6 remain vibrant. That machine already is specified by several high profile programs, which are ramping up again as hostilities flare in the Middle East. Xplore's lower cost Bobcat might do the trick but that would require extensive testing, which would delay production.
We estimate sales could approach $15 million in the third (December) quarter. A similar level appears realistic for the March period. For the entire year sales could attain $45 million (+26%) to provide (fully taxed) earnings of $.25 a share. Next year all three lines promise to expand. The Bobcat and Ranger offer the greatest potential. Sales could advance 45% to $65 million. Income could rise faster, as margins expand, to $.60 a share (+140%).
Xplore faces two direct competitors -- Panasonic and a Taiwan computer manufacturer. Neither participates in the Android segment. And while both do well in the Windows area, they sell standard systems at elevated prices. Xplore offers more customized solutions, which appeal to customers with unique applications. The industrial tablet market is approximately $500 million in the United States. Market research forecasts see it expanding to $1-$2 billion over the next 3-5 years, if not sooner. Xplore doesn't do business overseas for now. Export opportunities could emerge down the road.
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