Mxl- green alert>15c, page-4

Mxl traded extremely well today. The market depth kept on improving throughout the day and the stock finished at its high of 14cents. The market is now rerating the stock and everyone is trying to get back in after its retracement back to 10cents just last week. The last few announcements especially the Microsoft announcement are being appreciated now and people are now chasing mxl. Volume today was also a good 4million shares.

A year ago when I first started writing on mxl when it was about 5cents, I did a calculation based on projected revenue at that time, based very much just on the UK market, and came up with a valuation of 15cents. We have since moved significantly into out markets namely:

- Aust market is becoming a big potential
- UK market is in a more matured stage of marketing
- Russian market
- US market thru the new UK contract
- Asian market which has yet to be announced but certainly more tangible than a year ago
- mxl is venturing outside the traditional tertiary education system
- and finally, a big plus integration of its product into microsft product, and also potential distribution of existing product thru the microsoft nerwork

All these and a few other successes which I have not mentioned were achieved in a year- how many companies based on a skeleton staff (and minimal burn rate of cash) have achied such successes? If we look at these achievemnents and at this stage I have not gone thru to revise all the potential revenue that we now have looking at the different possibilities, as a rough estimate we must have achieved potentially a doubling (if not tripling) of revenue compared to last years numbers. Remember that in this busines cost does not double as revenue doubles. In fact the business should achieve economies of scale as more revenue is generated. The only additional costs, which I did get an indication from my last conversation with mxl, come from the software enhancement- the cost to develop the new version 4 and integration, but I understnd although it does run into thousands of dollars, it is not ridiculously high bearing in mind the potential of new business with an enhanced product. I will try to put some numbers together and get an indication of the value. At this stage based on what we can see (and for those of you who have read the announcements they do indicate a number of millions of dollars coming from the various regions). Mxl has not attempted to project the value coming from the Microsoft venture, and rightly so as I think it is not possible to quantify with certainty at this stage but this is potentially huge. If we at this stage ignore microsoft and on the basis that the revenue could more than double with not too much hit to the costs then most of the revenue will go toward the bottom line.

My 15cents valuation would now appear conservative. If we double based on revenue more than doubling, ie 28cents and take a 10% market risk discount then a value of say 25cents on mxl is not unreasonable. I will try to put the numbers together to justify this valuation but I think mxl has sufficient potential to justify this level. Hopefully we can see this coming true over the next few weeks to Christmas.

I believe there will be a number of positive announcements to come:
- positive outcome from the Microsoft venture, probably some news within Aust
- Russia will probably wait till early next year as the version 4 is being translated
- Asian distribution network and indication of potential
- may well be some news from the US
- more Aust contracts
- more UK contracts

Also remember the options expire in Dec and mxl would want the options to be very much in the money. I think with so much excitement to come over the coming weeks, a green alert to 20cents is again a possibility- and we have been forecasting that for a number of months now and I feel in the last 6 weeks alone mxl has enough now to take it there.

Research yourself and see if you agree.
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