Here is the full "Frontline Now" announcement
borland.com
A question that occurs to me is whether this new arrangement will tend to increase, or decrease, Borland's revenue and/or profitability from its US channel.
On the face of it, the same people who ran Borland's channel yesterday, will run it tomorrow. So the likelihood of an increase in revenue due solely to the outsourcing is low.
They will have to operate on some kind of margin, so on a comparable unit basis, the revenue to Borland will also be lower. It is also likely to impact profitability.
Time-and-place distributors (wholesalers, really) get by on a 7-10% retention rate. According to Mr Floisand, 50% of current Borland sales are through this avenue, let's say that's $11m per quarter (50% of ww revenue) for the sake of argument, which would be about $20m at SRP (est. channel price SRP*0.55). If we assume FN buy at SRP*0.48, giving them their 7% retention, the same unit volume will generate $9.6m, a reduction of $1.4m. I doubt if this would be balanced by the savings generated by the departure of 40 staff.
I may have missed it, but who exactly owns Frontline Now? Could be a significant factor in their ability to attract additional sources of supply.
It will be interesting to hear the post-results discussion on this. Will anybody here be taking notes?
david |
