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

To: Heroic who wrote (23949)	10/13/1998 1:57:00 PM
From: Rick Bullotta	Read Replies (1) \| Respond to of 31646

Here's more thoughts: Confusing items: 1) No financial terms presented. On the upside for TAVA investors, I'd be surprised if the deal was more than $1-2MM for a 70 person shop. 2) Mangan provides low-level (low margin) plant floor integration, not consistent with the stated desire to grow into higher margin business segments between the plant floor and ERP, and certainly not something that will help maintain Y2K-like margins after 2000 3) The company had essentially no open positions in their HR page, which doesn't indicate that they're overworked! 4) No mention of their role in Y2K work 5) TAVA already has an office in SoCal (what used to be Vision Engineering) The good parts of this acquisition are: 1) 70 additional bodies - if you consider that headhunter & training costs can easily be $15-25K per head, it's a nice way to buy bodies "ready to wear" 2) Mangan will bring expertise in DCS systems that was a bit thin within TAVA Figure that these guys were probably netting $250K-$750K a year at 70 people. And let's suppose it was $1.5MM stock (400K shares) and $500K cash. End result is that it'll have a short term negative EPS impact through this sensitive next quarter or two, long term positive impact. JDN can probably explain better how this would be accounted for (when any bottom line charges would likely be applied). You'll find that most of TAVA's acquisitions in this space will be (and have been) surprisingly affordable. Most owners of this small-to-mid-size integration firms don't really have an exit strategy, aren't pulling out much cash year to year, and therefore any chance to walk away with enough to retire comfortably is welcomed! As an investor, I would prefer to see TAVA acquiring more talent/expertise in the IT space than the plant floor control space, whether it be an integration firm with a higher-level skillset than Mangan or a small ERP integration shop. They won't come as cheap, but the reward is bigger. TAVA has the genesis of true "organic" growth (and a shift into higher margin work) with their TAVA consulting initiative, and I'd like to see that get more attention from an acquisition/investment standpoint. That's all.