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Technology Stocks : TAVA Technologies (TAVA-NASDAQ) -- Ignore unavailable to you. Want to Upgrade?

To: Kathy Riley who wrote (15844)	5/2/1998 2:00:00 AM
From: David Howe	Respond to of 31646

I've been playing with the numbers relative to the cost of new hires, margin on the aforementioned billable rate of $160 per hour, revenue and earnings projections for fiscal year 6/98 - 6/99 and of course the share price that could potentially transpire. The following posts (total of 3) are my thoughts (earlier posts on AOL) Please comment. Dave -------------------------------------------------------------------- Subject: Costs of a new employee Date: Sat, May 2, 1998 00:40 EDT From: RUPEH Message-id: <1998050204402600.AAA23589@ladder03.news.aol.com> Melbeap and I have been discussing the costs of training. Mel thinks that the following is a possible way to estimate the costs of a new employee. For each engineer (cost of new engineer over one year period) 2 weeks of salary plus payroll taxes = 2 x 40hrs x $50 x 1.23 (taxes and burdens) = $4920 Transportation plus moving cost reimbursements = $7500 Instructor (1 per 15 engineers) for 2 weeks = $4000 / 15 = $270 For every 10 engineers a promotion (higher salaries) for someone to manage them = $10000 / 10 = $1000 Total cost to add one engineer = 4920 + 7500 + 270 + 1000 = $13,690 Let's use $14,000 If they added 70 engineers during the last qtr the total cost would be = $980,000 The revenue earned by the 70 engineers for the next year would be approximately = 70 x 40 hrs x 52 wks x $160 per hr x .80 (utilization factor) = $18,636,800.00 = .74 share Summary: New employees hurt the bottom line at first but substantially add to revenue and earnings over the fiscal year. Hire more, there is no shortage of work. Dave

To: Kathy Riley who wrote (15844)	5/2/1998 2:14:00 AM
From: David Howe	Respond to of 31646

2nd of 3. This one addresses the margin that can be applied to the billable rate of $160 per hour. -------------------------------------------------------------------- Subject: Revised Revenue Estimate Date: Sat, May 2, 1998 01:25 EDT From: RUPEH Message-id: I've received some advice on how to determine the margin that can be attributed to the income from technical services. Thanks Mel (I increased the wage rate and payroll taxes but calculated income taxes on the net earnings) Invoiced rate per hour = $160 Direct cost (wage) = $50 PR taxes 23% = $11.5 Sales expense 10% = $5.0 Management 10% = $5.0 Other 4% = $2.0 Net cost per hour before taxes = $73.5 Total Gross margin = $160 - 73.5 = $86.5 Gross margin = 54% of sales Income tax = 40% of $86.5 per hour = $34.6 $160 - $73.5 - $34.6 = $51.9 per hour (Net income = 32% of revenue) When TomorrowCast estimated that the "Coke" deal was worth $67 million in revenue and $1 per share in earnings they were projecting a net income rate of around 37%. That is calculated by turning total revenue into per share revenue = $67 mm / 25 mm shares = $2.68 per share revenue. $1 / $2.68 is about 37% (a little higher than my estimate) Dave

To: Kathy Riley who wrote (15844)	5/2/1998 2:23:00 AM
From: David Howe	Read Replies (2) \| Respond to of 31646

3rd of 3. An attempt at calculating revenue, earnings and share price. -------------------------------------------------------------------- Subject: Revised Projection Date: Sat, May 2, 1998 01:46 EDT From: RUPEH Message-id: All calculations are for fiscal year 6/98 through 6/99 I went back and read the last qtrs earnings report and the transcript from the conference call. I found a few things that cause me to lower my estimates. 1) Total number of engineers that are likely to be on staff - lowered from 600 to 500 2) Margin on invoiced hours - using 35% (between my estimate and TomorrowCast's estimate) 3) Total number of shares outstanding - raised from 20,250,000 to 25,000,000. 500 Eng x 40 Hrs/Week x .80 (utilization factor) x 52 Weeks x 160 $/Hr = $133,120,000 Revenue per year At 35% margin the Earnings will equal 0.35 x 133.1 mm = $46,592,000 = $1.86 per share x PE of 20 = share price of 37. On the subject of CD sales. Wonderware ordered 30,000 CDs for the first batch. The revenue to TAVA is around $5000.00 per CD (simplification of a complex sales process). If they only sold 1/2 of the CDs they would bring in $75,000,000.00 in revenue. What's the margin on that? The CDs have been developed and manufactured already. Further assistance on the part of TAVA is billable. Let's go with 50%. Another $37,500,000 in earnings. Around $1.8 per share x a PE of 20 = an increase in share price of 36 pts? 37 + 36 = 73 bucks a share Oversimplified? yes. A rough gauge of the potential share price? maybe. Increasing my bullish sentiment on TAVA? yes. Keep commenting. Good luck talking me down to 13 per share. Dave