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Technology Stocks : Information Architects (IARC): E-Commerce & EIP -- Ignore unavailable to you. Want to Upgrade?

To: Tech Master who wrote (3322)	11/17/1997 4:59:00 PM
From: JDN	Respond to of 10786

Dear Tech Master: Sometimes the truth is SO CRUEL. JDN

To: Tech Master who wrote (3322)	11/18/1997 10:32:00 AM
From: tech	Read Replies (1) \| Respond to of 10786

had a very interesting chat with ALYD's CFO yesterday I recently compared ALYD's 10Q filings for Q2 and the recent Q3. If we look at ALYD's filing for Q2 sec.gov We would see that ALYD reported the following: ===================================== 3 MONTHS ENDED JUNE 30, 1997 ----------------------- ------------------ Avg. # Employees 240 ----------------------- ------------------ Avg. Space Occupied 50K sq.ft. ----------------------- ------------------ Revenues $2.1 million ----------------------- ------------------ Payroll and related costs $3,629,629 ==================================== Now if we compare that to the recent Q3 filing : sec.gov =================================== 3 MONTHS ENDED SEPT. 30, 1997 ----------------------- ------------------ Avg. # Employees 300 ----------------------- ------------------ Avg. Space Occupied 62K sq.ft. ----------------------- ------------------ Revenues $2.26 million ----------------------- ------------------ Payroll and related costs $2,975,586 ================================== We see that even though ALYD added approx. 60 people ! between Q2 and Q3, their payroll and related cost figures went down. ???? I found that very strange and I called the CFO to see what the explanation was. I was told that ALYD had to outsouce for employees in the previous Q and as those employees were moved in to salary positions, it helped reduce some of their costs. I was also informed that ALYD is hiring kids right out of college who have limited to ZIPO experience. They are also planning to add an additional 150 people in the next 6 to 8 months. Conclusions: Although Jeff Mitchell and others on this thread would quickly point out that ALYD's payroll expense went down, they leave out the most important facts. 1. ALYD's payroll expenses were originally inflated since their huge need for bodies caused them to have to outsouce. As these employees were moved into full time salary positions, ALYD's payroll expenses were lowered since the outsourceing costs were negated. 2. When ALYD continues to hire more employees, and we all know they will, their payroll costs will continue to rise. If ALYD has to outsouce for those additional employees, then expect a huge jump once again in payroll costs. No matter what happens ALYD can't contain their need for bodies and the additional expenses of adding them. 3. ALYD's practice of hiring unskilled workers will lead to big problems. I believe that we have already seen a glimpse of this problem. Note the recent admissions by ALYD that they are having "packaging" problems, both with clients and internally. 4. These same unskilled, fresh out of college, employees will more than likely make many many mistakes in converting code. I would hate to see what ALYD's error rate is going to be. If they are already running into problems with packaging, image the problems they are going to run into down the road. 5. Another key thing to notice is how ALYD's revenue per employee figure went DOWN between Q2 and Q3. Q2 - [ $2.1 million / 240 employees ] = $8,750 per employee Q3- [ $2.26 million / 300 employees ] = $7,533 per employee Between Q2 and Q3 ALYD's revenue per employee went down about ($1,200 ) As Briefing.com said "Growth ? WHAT GROWTH ?" I am now thoroughly convinced that ALYD is a pure body shop, that not only depends on bodies to increase their capacity, but is using a practice of hiring unskilled workers right out of college. It is also a fact that between Q2 and Q3 all these extra bodies had a negative effect on productivity. This stock still has some way to go ! DOWN THAT IS. BTW- Last trade $13 1/8 DOWN - 5/8