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Technology Stocks : Trading TAVA -- Ignore unavailable to you. Want to Upgrade?

To: S.C. Barnard who wrote (596)	8/12/1998 9:05:00 AM
From: Rick Bullotta	Respond to of 655

I, too, feel that the pieces are in place for some solid (albeit temporary - next 4 or 5 quarters) earnings. Even for the quarter ended in June, I can't imagine how they couldn't beat estimates unless something seriously awful is going on behind the scenes... Here's what could stand in the way (short term): 1. Inability to hire personnel. They're still in need of about 150 people per a direct source at TAVA. This could be a ticking bomb over the long haul if the people they hire aren't of the same skill set and caliber as they will need post-Y2K. Also, I was impressed with TAVA's very low "per-head" costs of hiring last quarter...can't imagine they'll be able to keep it that low given demand. 2. Customers find economies of scale in their Y2K assessment activities, and the billable hours on plants 2,3,4 and so on don't generate nearly as much revenue. 3. Competition enters the game more aggressively and erodes the rate structure. Believe it or not, there are lots of stupid people in the systems integration market out there undercutting rates to get Y2K business, which is nuts because it isn't price sensitive! Nevertheless, it is happening. The good news is that most of the major systems integration firms find Y2K work so incredibly boring and monotonous that it would cost them more in lost employee morale and turnover than it would be worth. 4. A failure to keep the eye on the cost-cutting/cost-management ball. This is an ongoing effort in any company, and I hope they don't forget about it! Longer term challenges: 1. There will be a natural shift back to lower margin work post Y2K. 2. There will be personnel costs (severance, hiring) to realign with post Y2K skill set requirements (getting rid of lightweights, hiring more technical talent in the MES/Enterprise integration space). 3. It might be difficult getting back into project business! They will have to be careful not to lose the ability to sell, quote, and execute project work, which is their bread and butter. 4. Management interest and enthusiasm. Temptation might be strong to cash out.