no it is not a naive question. u r right that they could have done that but they really didn't. they kept the expense metrics relativley stable. so going forward, in order to get some margin expansion, they will have to play with the inputs. they have to either get a higher gross margin, (maybe sell some of that software <g>), lower r & d , lower sales and admin, lower tax rate, something. what it tells me is they need more people for more profits. to say it another way, you need to spend money to make money. It looks as if they can't leverage EXISTING resources, they have to add. That's not atypical, in fact its the norm. If they could leverage the operations, the return on CAPITAL would rise, and it isn't. But this may be just a lull.
msft in 1998 and 1999 had LEVERAGE. If you look at their income statement during those years, they REDUCED cost of goods sold ( they went from floppy to CDs) and most of that went to r & d and PROFIT. So suncom will seek to find a way to leverage the OPERATIONS. btw, BEFORE you sell your msft consider this. They're going to leverage the operations AGAIN. How? Like u guys say. Who needs a CD? Well, when msft sells software in three years it WON'T be on CD. They won't have that COST. <g>
As it stands, it looks like margins won't expand like they have. That's not bad, just not optimal.
btw, i think the sell side will upgrade suncom in unison tomorrow. as long as they ALL do it, they will feel safe. when it comes time to downgrade, they will ALL do it, ala Legato and dss. <g> |
