Leo, thanks for all the kind words, but this is a discussion board for COOL - so, please try to keep your disappointments to yourself.
Regarding the product margins reported by COOL this last Q, there seems to be much confusion on your part (as well as others). If you go to the Nov 98 10Q, you will see that gross profit on product sales came in at 10.1 percent. COOL just reported the current quarter at 9.65 percent - a significant drop. And cause for concern for a number of reasons.
1. In spite of the enormous competition in the hardware reselling segment, cool management has told us their aim is to improve margins. Well, they were wrong, margins dropped. If they can't be straight with us on this issue, where should we believe them?
2. Management "explained" the margin shortfall on reduced advertising revenues, more commonly known as advertising allowances. Reduced advertising allowances are REAL product cost components, and all reputable companies (including cools accountants) include these when computing product margins. Cool management would like to ignore those advertising components in the current quarter, because it allows them to try to rationalize the drop in overall product margins. It would have been much more refreshing to hear cool tell the real story - margins are dropping in response to competitive forces.
3. Other comparable resellers have product margins in the mid teen percentages. Why can't cool compete at those same margins?
4. At product margins of less than 10 percent, it is not likely that this company can sustain a profit. |
