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Technology Stocks : Net Perceptions, Inc. (NETP)
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To: rupert1 who wrote (2551)7/25/2000 10:09:25 PM
From: Carl R.  Read Replies (1) of 2908
 
My comment on the large R&D was merely an observation, and was not in any way judgemental. Why are you so quick to put words in my mouth? As you point out, there are good things about having a large R&D budget, and I agree with your comments. There are also bad things, that being primarily that it makes it more difficult to achieve breakeven.

As for your comment on Dell/CPQ, I also agree with those comments as well. I find it curious that they don't spend more on Sales and Marketing in addition to the high R&D budget. Their ratio of Sales/Market expense over R&D expense is the lowest I can think of for a software company. Most software companies are in the 3-4 range, and some companies are even higher than that. Note that for most software companies Sales and Marketing runs about 50% of sales, and NETP is at about that level. Usually startups and smaller companies like NETP run higher than the norm in both R&D and Sales; the odd thing about NETP is that only the R&D budget is high.

In the end they will be judged by whether or not sales continue to grow rapidly, whether they dominate their niche, and whether or not they are profitable. The fact that their R&D budget is unusually high is interesting, but doesn't really do more than give us an insight into their strategy for the future. I will add that in my opinion it takes longer for R&D increases to produce results than it does for marketing increases. Thus the fact that they increased R&D earlier and faster than normal may give them an advantage at some point in the future.

Carl
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