G'day all - hi, John, yes, I see your points, but at the risk of beating a dead horse <G>, even if it is correct, IMHO, it is at most a short term -ve [and I do want to defer that to you, since mfr is your area of expertise.] While mfr may indeed be elephant burial ground, the reason of outsourcing, in the long run, is to allow the experts to do the expertly things. Also, you are absolutely right about the "groofs" scenario, except that it depends on the contractual agreement, i.e., fix cost or cost plus. Regardless, w/o total control, there can be a delay in product intro if things gone amuck.
I will grant the new suppliers will need to make a profit, let say 15%; however, it would still be a saving to the company if it can cut the mfr budget from let say by 17%! Of course, this is hypothetical.
The upside though is that outsourcing free up a lot of distraction. Also, from the investor's pov, the company will have one fewer ways to bury the mistakes. By looking at it this way, mgt may be willing to do more planning.
As far as NT is concerned, I really don't think the Street was reacting to this piece of news, especially it is stated clearly at the end of the PR that this restructuring will not impact this year earning.
best, Bosco |
