Gegs, Thanks for your input, please feel free to step up to the plate anytime.
Interesting observation about service businesses. I think they are valued less by the Street because margin improvement is so difficult. I have followed the development of PPM's (physician practice managers) over the past five years and always was amused when they were first valued with p/e's of 50-70. I knew they could never enlarge the margins to hit that kind of earnings growth, and it has come to pass that the only way they can grow is through acquisitions. I think the unique nature of service business is that they generally involve human problem solving as opposed to rote productivity. It is estimated that the human visual cortex alone (the part of the brain that processes input from your eyes) processes data at about 7 terabytes per second, Intel has a little way to go to put that in a desktop. That translates to 7,000,000 megahertz, I think Intel is up to 450 megahertz.
In approaching this type of business, one way to increase margins is to increase the value added by your services, and therefore gross revenue per employee. Of course the CD and Y2K will increase gross revenue and margins for a while. I was very encouraged by the last conference call where this approach was alluded to in reference to the core business of TPRO. Jenkins obviously has some ideas about process management that, given the catapult of YK2, could change the margins of TPRO in the years 2001 and beyond.
Oh, and for the TA fans, How 'bout them Bollinger Bands, huh?
Zebra |
