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Strategies & Market Trends : Bill Wexler's Profits of DOOM -- Ignore unavailable to you. Want to Upgrade?

To: Bob Trocchi who wrote (1398)	7/9/1998 2:20:00 PM
From: CalculatedRisk	Respond to of 4634

Bob, to be fair to TAVA, they claim to have obtained $25M in Y2K orders last quarter. They also have a core business of about $10M per quarter (and shrinking). This translates to $35M in revenue per quarter (TAVA thinks they can maintain this level of sales) X 4 quarters = $140M / 500 employees = $280K per employee. IMO, this is decent for a consulting company. Of course, TAVA continues to "build the organization to support this level of business" ... so they still need more people! Remember when DDIM put out a similar news release? This is the beginning of the end. Regards, Bill

To: Bob Trocchi who wrote (1398)	7/10/1998 11:51:00 AM
From: John Howell	Read Replies (1) \| Respond to of 4634

I agree in general with your assessment of TAVA as a good short. I think your revenue expectations for software companies in general are too high. Most software companies have significantly less revenue per employee. Since the primary expense of a software house is R&D, employee salary constitutes the largest percentage of expenditure. If they do approach the 500K per employee level they are raking in dough. The same is true for service companies. Figure 100-120% in overhead per employee; the rest is gross. Given that most service companies have margins in the 5-15% range and that would put revenue at 120-200K per employee. Just a rough cut at it. Even if we assumed that my numbers are in the general ballpark, TAVA is still in a world of hurt if they only pull in $36M for that size organization.