Skeptic, now that we are talking about a specific security that has been heavily researched, I think it is self-defeating to geralize TPRO as a Y2K company. Any internal growth in staffing will result in increased revenue beyond the Y2K revenue. TPRO's business model allows for this. They are not a one product company. Following are my observations on the sources of their growing revenue:
Points (Details follow):
1. Manufacturing Industry is depending more and more on outsorcing to companies such as TPRO.
2. TPRO has been quickly growing since 1995/96 to capitalize on growing marketplace.
3. Y2K is an extension of their core business and adds value to it. TPRO will wind up with more clients, large cash equity to accelerate growth..
4. Y2k will allow TPRO to significantly expand their staff to meet a market where there is more demand than supply. There current contracts will provide residual income as well.
5. Y2K problem is creating a post Y2K crisis. Simply: Necessary work is being delayed till after remediation os complete. TPRO is in best position to fill huge Y2K demand.
6. Y2K revenue will be replaced with growing Service revenue, higher hardware/software re-sale and margins. Other software pruducts such as BevOne which will receive increased exposure.
Here are the details:
7. New Products
Details:
1. Manufacturing Industry trend has been to increasingly outsource their needs. This is characteristic with the "right-sizing" movement. Companies are outsorcing any work not within their core competency. If they are not a Systems Integration (SI) firm, then they will reduce their SI people to the absolute minimum. This trend actually was well documented in 1995. The Manufacturing Industry is one step behind other Industries that began to "righ-size" in the 80's. Skeptic, you are well aware of the positive effects "right-sizing" had and is having on outsourcing companies.
2. This is the ultimate source of TPRO's increased growth. Since the mid-90's TPRO's management made accretive acquisitions to take advantage of this growing oppurtunity. The reality is that there is more demand for Engineers then there are available. We are talking hardware/software type people. Many don't realize that TPRO's people are more than just hardware people, they are a software company as well.
3. Their Y2K offering was just an off-shoot of their core business. They knew it would be a success based on the needs of their own clients. If TPRO had not made additional Y2K investments, they would have returned to profitablity anyway. Their jump into Y2K was to take advantage of a huge oppurtunity to accommodate rapid growth. Will Y2k generate a large cash infusion? All indicator's are positive. And while we read of other Y2K companies landing a contract here and there, TPRO is landing them in groups.
4. More important for their long-term growth is the fact that the company will be increasing their staff significantly over the next few years. In addition, the company will have significant residual income from Maintenance on the contracts they fullfill. The cost life cycle of a product is 20% initial completion, 80% Maintenance for next 5 years.
5. The effects of Y2K remediation will cause other projects to be significantly delayed. TPRO will find itself in the enviable position of landing additional contracts with the same companies they performed Y2K remediation work for. They will have the cash to accellerate their growth and take advantage of the larger industry need for engineers beyond the Y2K era.
6. The decline in revenue from their Y2K tools will be made up for by the increase in revenue from their services business and higher margins on theri re-sale business. In addition, their other successfull software products such as BevOne will gain larger exposure and land more licenses.
7. New products borne out of their growing client base as the Y2K product developed. New products from their increasing talent pool.
Best Regards,
JZ |
