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Technology Stocks : TAVA Technologies (TAVA-NASDAQ)
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To: Mr Logic who wrote (12563)3/13/1998 1:12:00 PM
From: Jack Zahran   of 31646
 
Patrick, I think that your points 1 and 2 can't be separate. You need to understand how TAVA makes their profits in order to properly categorize Y2K work as either one time or recurring. Here is my reasoning on this:

TAVA (the company) makes their profits on labor services. So far the embedded systems work is resulting in replacement of parts as opposed to fixing current components. The company considers replacements and new integration work as part of their core. Why? Because any new equipment and systems they initially installed, they will be doing the services work for the life of that product. In fact Tava makes an insignificant profit on hardware/software sales (very few companies do anymore). They make their money on the labor component. With the sale of new equipment come the maintenance agreements and the services profits from installation onward.

The only component of TAVA's Y2K solution that some can argue should receive a P/E of 1 is probably the initial CD sale. But there is an existing school of thought that TAVA will be able to leverage their corporate knowledge of their cliets to exploit other opportunities. This is another area of potential high growth. With this area you need to consider that the company has been able to execute their ideas very quickly into reality. The Y2K venture was high risk for them and very speculative, yet they made $2Mil on it within a couple of months since its introduction, three months sooner then they forecast.

To, the Y2K work has enabled them to become an International presence. And what value do we put on that. Their market place went from National to International, with real international clients overnight.

Jack Zahran
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