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Message: Focus on NRE

I recall mention of $75 million in initial revenue from a first client and potential for $400 million over the following 3-4(?) years, used as an example in a prior investor meeting with IBK. That was a measured response. 

The NRE revs should offer the best guess at guidance we will see for the time being.   If a company is willing to invest $x million in NRE to develop an OI enhanced device, is it unreasonable to believe they are anticipating $x100 million in product sales over the next 3-4 years? Not unreasonable at all.

On the flip side, why would POET engage in development for a client for, say, $3 million in NRE, to develop a product that may result in “only” $25 million in sales?I highly doubt it at this stage.

They have repeatedly stated they are dealing with Tier 1 client solutions. These are companies worth hundreds of billions of dollars, whose needs will be in the hundreds of millions of dollars, perhaps billions cumulatively, over the coming years.

Bottom line: POET has limited design/development resources at this time. Those resources will be deployed for only the optimal circumstances, those projects that they can complete that will garner the highest volume, margins, and revenues within an acceptable period of time for these Tier 1 clients. 

So, these NRE deals will not be signed based on the NRE to be received, but for the agreed volume of sales that POET can be expected to receive in production revenues over the coming years upon completion of the designing the client’s OI application. Let’s see what NRE comes over the next 6 months or so. 

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