X-Virus-Scanned: clean according to Sophos on Logan.com X-SpamCatcher-Score: 10 [X] Return-Path: Sender: To: lml Date: Sun, 24 Dec 2006 20:32:53 -0500 Message-ID: X-Original-Return-Path: Received: from imo-d04.mx.aol.com ([205.188.157.36] verified) by logan.com (CommuniGate Pro SMTP 5.1.4) with ESMTP id 1712369 for lml@lancaironline.net; Sun, 24 Dec 2006 18:25:28 -0500 Received-SPF: pass receiver=logan.com; client-ip=205.188.157.36; envelope-from=Sky2high@aol.com Received: from Sky2high@aol.com by imo-d04.mx.aol.com (mail_out_v38_r7.6.) id q.d24.362d816 (41812) for ; Sun, 24 Dec 2006 18:24:34 -0500 (EST) From: Sky2high@aol.com X-Original-Message-ID: X-Original-Date: Sun, 24 Dec 2006 18:24:32 EST Subject: Re: [LML] Re: D2 Update X-Original-To: lml@lancaironline.net MIME-Version: 1.0 Content-Type: multipart/alternative; boundary="-----------------------------1167002672" X-Mailer: 9.0 Security Edition for Windows sub 5358 X-Spam-Flag: NO -------------------------------1167002672 Content-Type: text/plain; charset="US-ASCII" Content-Transfer-Encoding: 7bit In a message dated 12/24/2006 2:39:18 P.M. Central Standard Time, brent@regandesigns.com writes: Scott, Chelton (formerly Sierra Flight Systems) wasn't "lured" into the experimental market, they started in the experimental market over 8 years ago. Their primary market now is retrofit as is evidenced by their ~500 STCs. Retrofit is a much larger market than new aircraft but you need an STC for each installation, a 1M$- 5M$ proposition, so the barriers to entry are quite high. That is why Garmin focuses on the manufacturers where the manufacturers handle the STC leg work. Selling to retrofit, or experimental, takes many times the support effort per sale. It is one thing to justify comprehensive customer support when you have a relatively simple device (handheld GPS) that you have sold 500K units and quite another to justify initial engineering, STC efforts and comprehensive customer support for a complex system that you may sell a couple hundred a year. With Garmin making all their money in the consumer markets it makes the retrofit and experimental look even more obscure. Garmin has just started climbing the barriers to the retrofit market while Chelton sits comfortably on the other side. Then there is the liability. At least when you are selling to a manufacturer you have an insulating layer, but when you are selling to the end user.... Hamid is right, the bean counters won't freely tolerate retrograde expansion once the numbers come in. Of course I could be wrong. Garmin could be making a strategic move on Chelton in response to Chelton winning OEM contracts (Bell and others) with their new 10.4 inch IDU. It will be interesting to watch. Brent, I guess it depends on one's perspective. SFS/Chelton abandoned the experimental market for some time before returning to it - I am sure that one of the reasons was that indeed D2 would be handling the support. There is every reason to infer from your arguments (and Hamid's) that Chelton will abandon the experimental market once again when they realize that it may have been the support side costs that brought down D2. I would also guess that Garmin now has a very favorable position with the FAA relative to all the products it has successfully delivered to the aviation community - even if it has gone out of the house for some products and components (UPS, SIRF, etc). Having control over interconnected avionics is certainly a positive and can reduce costs on newly introduced components. Of course, Garmin does not directly support the end user since it has a large number of avionics shops to take care of that function. Chelton may be in for a surprise when it takes on the tasks that D2 was performing. Garmin has vaulted the OEM, retrofit and experimental quite handily with all its panel mount avionics. One can find them everywhere. Admittedly, it would seem much more difficult to obtain STCs for one box that does everything but eat (DEBE) than ones that serve narrower objectives. Garmin sold the 430/530 to "experimenters" (in addition to certificated avionics shops) shortly after the FAA did not require an FAA signoff for each "/G" installation. Support aside, generally, high tech items have high R&D costs and low reproduction costs, especially if the hardware components come from certain overseas countries. Also, one of the ways to lower the R&D costs is to spread them over different products in the same line. These days, the big difference is in the software - high development costs, almost zero reproduction costs and controllable maintenance costs if somebody else is on the front line. What surprises me is that fancy avionics developers haven't figured out a way to charge yearly for "maintenance". For example, turning over database updating to Jepp cost Garmin a continuing income pipeline after the original GPS products were sold. Of course, maybe I just can't get my head out of mainframe software business practices. Oh well, sorry to see D2 crumble. Kirk and his skilled staff should be able to find positions in the industry. Good luck to Chelton. And certainly, good luck to the D2/Chelton customers. Scott -------------------------------1167002672 Content-Type: text/html; charset="US-ASCII" Content-Transfer-Encoding: quoted-printable
In a message dated 12/24/2006 2:39:18 P.M. Central Standard Time,=20 brent@regandesigns.com writes:
<= FONT=20 style=3D"BACKGROUND-COLOR: transparent" face=3DArial color=3D#000000 size= =3D2>Scott,=20 Chelton (formerly Sierra Flight Systems) wasn't "lured" into the experimen= tal=20 market, they started in the experimental market over 8 years ago.  Th= eir=20 primary market now is retrofit as is evidenced by their ~500 STCs. Retrofi= t is=20 a much larger market than new aircraft but you need an STC for each=20 installation, a 1M$- 5M$ proposition, so the barriers to entry are quite h= igh.=20 That is why Garmin focuses on the manufacturers where the manufacturers ha= ndle=20 the STC leg work.  Selling to retrofit, or experimental, takes many t= imes=20 the support effort per sale. It is one thing to justify comprehensive cust= omer=20 support when you have a relatively simple device (handheld GPS) that you h= ave=20 sold 500K units and quite another to justify initial engineering, STC effo= rts=20 and comprehensive customer support for a complex system that  you may= =20 sell a couple hundred a year. With Garmin making all their money in the=20 consumer markets it makes the retrofit and experimental look even more=20 obscure. Garmin has just started climbing the barriers to the retrofit mar= ket=20 while Chelton sits comfortably on the other side. Then there is the liabil= ity.=20 At least when you are selling to a manufacturer you have an insulating lay= er,=20 but when you are selling to the end user....  Hamid is right, the bea= n=20 counters won't freely tolerate retrograde expansion once the numbers come=20 in.

Of course I could be wrong. Garmin could be making a strategic=20= move=20 on Chelton in response to Chelton winning OEM contracts (Bell and others)=20= with=20 their new 10.4 inch IDU. It will be interesting to=20 watch.
Brent,
 
I guess it depends on one's perspective.  SFS/Chelton abandoned th= e=20 experimental market for some time before returning to it - I am sure that on= e of=20 the reasons was that indeed D2 would be handling the support.  There is= =20 every reason to infer from your arguments (and Hamid's) that Chelton wi= ll=20 abandon the experimental market once again when they realize that it may hav= e=20 been the support side costs that brought down D2.
 
I would also guess that Garmin now has a very favorable position with t= he=20 FAA relative to all the products it has successfully delivered to the aviati= on=20 community - even if it has gone out of the house for some products and=20 components (UPS, SIRF, etc).  Having control over interconnected avioni= cs=20 is certainly a positive and can reduce costs on newly introduced=20 components.  Of course, Garmin does not directly support the end user s= ince=20 it has a large number of avionics shops to take care of that function. = =20 Chelton may be in for a surprise when it takes on the tasks that D2 was=20 performing.
 
Garmin has vaulted the OEM, retrofit and experimental quite handil= y=20 with all its panel mount avionics.  One can find them everywhere. = =20 Admittedly, it would seem much more difficult to obtain STCs for one box tha= t=20 does everything but eat (DEBE) than ones that serve narrower objectives.&nbs= p;=20 Garmin sold the 430/530 to "experimenters" (in addition to=20 certificated avionics shops) shortly after the FAA did not require= an=20 FAA signoff for each "/G" installation.
 
Support aside, generally, high tech items have high R&D costs=20 and low reproduction costs, especially if the hardware components come=20= from=20 certain overseas countries.  Also, one of the ways to lower the R&D= =20 costs is to spread them over different products in the same line.  Thes= e=20 days, the big difference is in the software - high development costs, almost= =20 zero reproduction costs and controllable maintenance costs if somebody else=20= is=20 on the front line.
 
What surprises me is that fancy avionics developers haven't figured out= a=20 way to charge yearly for "maintenance".  For example, turning=20 over database updating to Jepp cost Garmin a continuing income=20 pipeline after the original GPS products were sold.  Of course, maybe I= =20 just can't get my head out of mainframe software business practices.
 
Oh well, sorry to see D2 crumble.  Kirk and his skilled staff=20 should be able to find positions in the industry.  Good luck to=20 Chelton. And certainly, good luck to the D2/Chelton customers.
 
Scott
 
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