Novice Investing - LeapFrog ready to fly?

Date: Sunday 20th 2008f July 2008 12:35:52 PM

LeapFrog ready to fly? - 10/08/2005

By: Novice Investing Staff

It has been a while since we wrote about Leapfrog Enterprises Inc.(LF). Nope, we haven't forgotten about them. It is just that there were nothing quite new that was worth discussing about. How about now? Yes, we do have something interesting to say. Stay tuned.

Way back in 2004, Our revenue estimate for Q -1 and Q-2 2005 is $ 71.6 M and $ 80.8 M. The actual revenue was: $ 71.8 M and $ 87.1 M. Gross margin came horrible, less than the 50% that we predicted. However, we still feel that it is achievable, considering that LeapFrog will release its new FLY pentop product in mid October 2005. How much potential revenue will it garner? We will analyze it based on internet traffic to pentop website.

We use Alexa to estimate traffic. This stuff is simple. First you go to alexa home page: www.alexa.com. Type FLY's website, www.liveonthefly.com , on the search box. You would see FLY's traffic ranking. It is around 70,000 - 80,000. Next, click on Traffic Details and scroll down. For the last three months, FLY website is visited by 29 visitors per million of internet users. How much visitors use the internet daily? We are not so sure. However, on its July press release, company official announced that nearly 200,000 users have logged on into the site in the first few days. Using 5 days as an estimate of 'first few days', we estimate traffic to FLY's website to be 40,000 visitors daily. If you looked at the graph provided in Alexa, you can see that traffic's average has declined slightly since then.

Let's assume daily visitor traffic of 37,500. The website was launched at around July 20th 2005. The 90th day will fall on October 20th 2005. By then, FLY product will be available at the retail stores. Using the internet statistics above, FLY will attract 3.4 million visitors by October 20th.

Now, converting this traffic into revenue is rather tricky. Revenue figure will vary depending on the assumptions we use for our estimate. We think that the previous estimate here was too optimistic. Perhaps, only 15% of those visitors will buy pentop. Each pentop costs $ 100. Therefore, we estimate additional revenue from Pentop product launch to be $ 51 Million.

Please note that the analysis is based on internet traffic for three months. Additional yearly revenue figure will most likely be higher than $ 51 Million.

END

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Leapfrog Enterprises Inc..(LF) or other securities.

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