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Technology Stocks : Wind River going up, up, up!
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To: Peter Church who wrote (4890)4/15/1999 6:38:00 PM
From: Jay Nitschke  Read Replies (1) of 10309
 
Re: Back end loading.

Take a hypothetical tech company that sells large dollar contracts to big customers (as opposed to a company selling a product to retail customers). Let's say the quarter's sales are $30 million. They might breakdown like this:
January $7 million
February $8 million
March 1-15: $5 million
March 15-31: $10 million

This is because a savvy buyer will wait until March 16 to call his sales rep to consumate a deal. The reps have only sold $20 million of product so far in the quarter and the end of the quarter is only two weeks away!!! So they are likely to make a better deal late in the quarter.

Now, from the seller's viewpoint, this creates a visibility problem. How do you predict sales for the quarter? You know that in every quarter up to now, much of your sales is done in the last two weeks. But if you announce to the public that you are on track for the quarter on March 1, and sales fall through in March, you have a big credibility gap. How could you say sales were okay, when you had only sold 50% of the target in two months??

Since most companies don't like to advertise to shareholders or customers that they hold "sales" the last two weeks of a quarter to make quota, the problem is even more difficult.

Hope that helps. Jay
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