The Mark L. Analysis: TAVA's share price indicates that his analysis prevails on Wall St. It is a "show me the money" stance, requiring TAVA to prove that it is more than a Y2K company.
1. Industrial trends: US industry is consolidating. Industrial sectors are converging on a few major players. There are fewer local and regional companies, more national and super-national companies. Support services must follow this trend. This underlies the CEO's vision. Jenkins correctly began his tenure at TAVA implementing a vision of "a national company with a local presence". Step outside SI work. Look at electronic contract manufacturing. If you want to succeed in this arena, you have to locate your factory near your client. Your client may have a dozen locations spread across the US in order to distribute product efficiently. You've got to locate near your client's local factories, but be able to coordinate on a national scale - "national company, local presence". That's not just the TAVA vision. It is a powerful trend in motion. As industrial sectors consolidate, the mom and pop SI companies can no longer compete. They become available to TAVA on favorable terms because a trend has made the local franchise less valuable. The locals may be reduced to such price slashing that they make the fatal mistake - they don't deliver, and the contract penalties kick in, driving them into insolvency. TAVA is likely to have its pick of favorable small acquisitions if it wants to continue "growth by small acquisitions".
2. The view of TAVA as a Y2K company discounts the value of TAVA as a database company. The database has grown from 4,000 items to well over 100,000 unique items. Chuck out 20% of these as date-reliant items. There are still over 80,000 useful items in the database, and it is proprietary. TAVA has already announced that it is finding new uses for its database. Will it find a single use that is as lucrative as Y2K? Probably not. But will it find multiple uses that add up to Y2K levels. I think so. With Y2K, a client uses the TAVA database for one purpose - discover the date-reliant chips. But there is no reason TAVA cannot develop uses for the database that brings a single client back for multiple uses. Again, step outside SI for perspective. Think about the massive USPS "change-of-address" database. Direct mail companies come back to that database year after year (paying fees) for NCOA cleaning of their lists. It is TAVA's job to find uses for their unique database beyond Y2K, and I think they will. Were I JJ, I certainly would, and so would legions of others. To discount the TAVA database is either to not understand it, or to discount JJ's ability to assign a productive R&D team to the database.
3. Utility deregulation. What's bigger than Y2K, already in motion, and will be around a lot longer than Y2K? Utility deregulation. During the last recession (1990), one of the few industries that went full tilt boogie right through the recession was telecommunications. And it is still booming. Utility deregulation will be on the scale of telecommunications deregulation with this difference for TAVA shareholders. TAVA is in on the ground floor. If you want to know what TAVA will be doing after Y2K is a distant memory, spend some time reading up on the power industry, and the coming changes.
4. Will TAVA be a dollar producing engine? JJ's record says "yes". During the first round of acquisitions (before Plant Y2K hit), he laid out a plan (I heard him do it) to make TAVA profitable. He gave me a date when TAVA would go profitable. He hit the date right on. Then the Y2K opportunity arose. He seized it, and had to spend money to make money. Pre-Y2K, he showed himself to be fiscally tough. When Y2K hit, he showed himself to be fiscally smart. Again, the prevailing Wall St. view sells JJ way short.
5. Management. JJ has recruited a smart team. Give JJ credit for doing it, and give the team credit for making the most of the Y2K accelator. Assuming that JJ and the team will turn into pumpkins on 1/1/00 is a sceptical attitude that I do not share. I assume that they are skilled enough and bright enough to dedicate TAVA resources now to building TAVA's post Y2K future. |
