Part Two
The call center on site is currently using this equipment. As new call centers are developed at remote locations, this equipment is what will be used. No need to duplicate expensive equipment at each new call center. The Lucent Technologies equipment is the latest and it has the capacity to be utilized by thousands of operators. While someone could argue that Gordon might have overbought, he best sees the road ahead, and after explaining to me these plans, it is more than apparent that he is building an infrastructure to get through the first year or so without the worry of upgrading or updating. There is potential for rapid and very large expansion.
The Company, management.
As you have read in the investors package most of the 1st tier people are new. Not new to the work at hand but new to TSIG. Unfortunately I did not get to meet with all of them. However, their credentials speak loudly. I did get to meet Tim Heidmann, Director of Call Center Operations, an ex AT&T'er with a wealth of experience focused on the call center. As Tim said to me "we have the potential to do almost anything in the industry with the equipment we now have installed." Tim is a man who is anxiously awaiting the launch of a few of the soon to be enterprises. Compact Connections is only one of them. Once again, the Lucent Technology equipment is "owned" by TSIG.
Compact Connections
Should have their web site up and running shortly. I will not add to the timing thing by being more specific than information already released. IMHO, the site "going live," will not be a climax unto itself. According to Rob Gordon, there will be numerous other related events and announcements regarding TSIG's marketing plans about Compact Connection that quite frankly, will continue to dwarf the importance of actual site opening.
The Card will be a dominant force in the CD business. Competition is watching closely and has not figured out exactly how TSIG's The Card will work. IMHO, it is a killer idea with an obscene advantage. It will be easy to underestimate and almost impossible to beat. While others will have had a head start, they will have difficulty in showing a profit after we emerge on the net. Not one of you, me included, have the full picture of how potent this device will be. The competition's marketing costs will continue to eat their lunch. This is why none are predicting profits for the short term. Due to the major marketing costs in the ramp-up.
Darryl Piercy
Had more than 500 distributors in his earlier iteration of CCSI. Yes TSIG only acquired the assets. No, TSIG has not acquired any of the liabilities. With that said, Rob Gordon was having dinner last night Tuesday, 7/28/98, with Darryl Piercy and the outcome of how Mr. Piercy will deal with these disgruntled "distributors" is still up in the air and will once again be discussed. There may be as many as a dozen or so out of 500+ distributors that have a problem. Rob Gordon is keeping an open mind about this issue even though it has nothing to do with TSIG. In my opinion these people's continued attacks upon TSIG however, may have a negative impact, not so much on the stock price, but on the very outcome they personally desire.
The old compact Connections did have more than 1,500,000 customers, a few complaints, and as per a TSIG press release, did a ten-fold increase in business between 1996 and 1997; a total of $11,000,000, with a net of $800,000. Rob Gordon, alluding to the unaudited figures, says that he has little doubt that the audit will confirm these numbers, but evidently wants the audit for other reasons as well as the obvious. (Actually, an audit may produce improved numbers, according to some of the previously released information.) The lag time between the "deal" and the actual site opening will in fact have a negative effect on the positive momentum CCSI had in California. However, it is not expected to be material in any way to the long term business goals and may in fact have only minimum impact on the short-term business. We are right now in the middle of the transfer-of-responsibilities process. There will be bumps until we go "live" and probably a bit thereafter.
At this point if you run the numbers against the known sales volume of CDNow KTel and other such companies that continue to predict losses for the foreseeable future, it's easy to see how undervalued TSIG's share price is. This will change soon. Again IMHO.
TSIG's Core Business
Has been call centers. It would appear that this is still going to be the major revenue source. While the focus is presently on the glitz of the CD businss through the asset acquisition of CompactConnection, don't miss seeing the forest because of the trees. Rob Gordon's strongest asset is that he is an entrepreneur's entrepreneur. Similarly, If Rob Gordon has any weakness it is because he is an entrepreneur's entrepreneur. He sees opportunity and goes for it quickly.
And to that point, he now has a strong management team in place to take these opportunities and implement them into developing revenue streams. (One of the new management people may have not worked out. I have little doubt that RG is actively pursuing candidates to fill this slot ASAP.)
These next few paragraphs may appear to be hype, and I debated as to whether or not to include them. Obviously I have, and you be the judge. The rest of the story is that Rob Gordon alluded to be working on 3 separate upcoming deals. All to happen in August. You should be alert to upcoming PR's. There could very well be a stream of PR's during the ensuing weeks. I don't have any information regards these potential acquisitions. I just believe we may see some strong, catch you off guard announcements, very soon.
I personally believe, yes it is only my opinion, that CCSI will have a $35 million year at worst. And please drop the expectations, and I know we read it in the PR, but drop the expectations of an MTV spot. Not planned to happen at the present time. Originally yes, but has been subsequently decided against. There are alternative methods and venues that will produce as large a bang for lots less buck without the hit to the bottom line that CDNow, KTel, et al suffer from, due to their exorbitant marketing costs. Their business will continue to suffer because Gordon knows something they're quickly learning. The net sector successes will depend heavily upon the low cost producer unlike any time in the history of merchandising. We will/are rapidly becoming a nation of best deal shoppers. Especially when you deal in commodities like CD's.
CCSI made a profit last year, and yes a few disgruntled dealers included, and the high profile guys on the net are not predicting a profit for years. This year, CCSI's marketing costs will be greatly reduced due to the automation of the net and the fact that TSIG owns its own call center. And for all of you who haven't noticed yet, last year CCSI was charging $9.95. The price we are going to market with is 10% higher at $10.95., and still the lowest on the net. Big impact on bottom line revs! IMHO. On top of that we will garner substantial and additional revs from the direct retailing of The Card for the full face value, rather than the discounted wholesaling to distributors.
Infomercial marketing of new products, killer products with obscene margins. These are proprietary and without competition. Also infomercials where we will actually be the marketers as well as the call center. Very special products with large margins saleable to a large audience. Happening as I write.
New call center client to be announced soon.
Down Side of all this is money, or the lack of it and where it will be coming from. RG alluded to PR's that will be coming soon. They will deal with equity vs cash, restrictions, dilution, non dilution etc.
In addition to all of the above, it should be noted that Rob Gordon is purported to have a significant portion of his own funds invested/loaned into TSIG. Rumored, not proven as of yet.
IMHO, if, and here is where BB stocks, and TSIG is no exception, but IF TSIG can do what it appears it is about to do, this stock, all the naysayer help inclusive, (I want to buy more and buy cheaper,) TSIG, IMHO is an easy 10 banger by December. Due to Rob Gordon's colorful past, and TSIG's infancy combined with BB MM machinations it will be a bumpy ride. If one can get in sub $1 these bumps will have little effect on your stomach. As the share price goes north into $2/3+ range things may change. On the other hand, if Rob Gordon's goals are reached, the bumps may be history by the beginning of September. IMHO
I am not an investment advisor and suggest you do all your own DD; Due Diligence. If this investment does well as I suspect it will, I deserve no credit. Similarly, if things go awry I don't want whiners blaming me. I'm just a guy who visited the company, with some background as stated, not meant to make me an expert, but learned and saw enough to continue to invest in TSIG.
Rich
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