INTERNET--(esecurities.W)--May 29, 1999 - What in the Dell is Hausmann Talk['n Play]ing about?
"Is hardware history?"
Software products represent the future for ThrustMaster
Frank Hausmann started his professional life as an accountant, which shows when the ThrustMaster Inc. chief executive explains the company's change in strategic direction: Just look at the numbers.
In early December, the company's stock was valued at around $4 to $5 per share and it enjoyed a $20 million market capitalization when it was just a maker of hardware--joysticks, flight simulators and steering wheels for computer and video games. Hausmann's decision to re-position ThrustMaster as a maker of software--internet voice communications tools--resulted in Wall Street sending the stock to the low-$20 per share range.
Now the Hillsboro firm enjoys a market capitalization in excess of $110 million.
"Where would you suggest I focus my efforts?" Hausmann asks.
In fact, Hausmann would like to jettison the entire hardware business and concentrate exclusively on the software products, said one analyst. A careful man, Hausmann won't comment on that one. But the analysts, he noted, are in a good position to answer that question. Perhaps more revealing: he doesn't even bother to discuss the strategic importance of the hardware business.
That's probably because he's convinced the numbers point to a clear conclusion, one supported by the company's stock price and the buy ratings it has received. But the company faces challenges beyond finding a way to exit the hardware business.
It has lost money for five straight quarters, and Hausmann doesn't expect the strategic shift to show up in the bottom line until this year's third or fourth quarter. Plus, sales of the internet software products still lag far behind those of its traditional hardware products.
However, Wall Street's endorsement of the direction in which he is taking ThrustMaster will buy him some time. If Hausmann lives up to Wall Street's expectation, the new ThrustMaster may soon make investors forget the trauma of 1998.
As a hardware company, Thrust-Master isn't worth covering, said Damon Yuzon, a technology analyst with Portland-based Black & Co. Inc. It's the internet software business that makes the company interesting, he said.
"Hardware is not a business they want to be in the long run," Yuzon said. "Long run they need to be out of the hardware business." ThrustMaster wouldn't turn up its nose at a good offer for its hardware business, or it could simply slash the business' expenses by relying on low-cost Asian manufacturers to serve as original equipment manufacturers, Yuzon said...Hausmann joined ThrustMaster in October 1998 as chief financial officer...ThrustMaster chairman Norm Winningstad told Hausmann the company needed someone with more business skills than CEO Steve Aanderud, and Winningstad hoped Hausmann could provide the expertise as CFO. But less than two months later, Aanderud was out and Hausmann found himself taking over as chief executive. Aanderud couldn't be reached for comment.
Since then, Hausmann, who is fond of management buzzwords such as "paradigm shift," says ThrustMaster has been in a "cocoon stage" while it "morphs" from a joystick maker to a maker of easy-to-use and inexpensive internet communications tools.
That roughly translates to, "Don't expect big profits any time soon." As is the case with most internet companies, Hausmann is leading ThrustMaster through its "land grab" stage, which involves forsaking short-term profits for the sake of establishing one's self in the marketplace.
That's a common internet strategy, but one that's also unproved.
"Over the next 12 to 18 months there will be a determination of who will be able to create and defend that franchise and growth model," Hausmann said. Wall Street seems to be buying Hausmann's strategy in lieu of profits. The company's stock was trading at around $3.50 in early December. A few days later the Talk ' Play product was announced and the stock closed at over $11 per share. Since then, it's risen steadily to a high of $26 in recent days.
Hausmann, however, does expect to offer compelling hard evidence that ThrustMaster is on the right course. That will come in this year's third and fourth quarters as ThrustMaster begins to tear open its "cocoon" and give investors a peak at the company that was evolving within, he said...Another important point is that, despite the waning interest in hardware, it's still generating the most revenue, by a vast majority...Regardless of how quickly the shift occurs, it's clear to Hausmann that hardware no longer offers ThrustMaster a "defensible franchise," to use another of Hausmann's favorite phrases. The market for joysticks and the like is consolidating and the products themselves are becoming commodity items bought simply on the basis of price, Hausmann says. It was a good market from 1990 through 1997, but not anymore.*
Success with the internet products also will attract competition, but Hausmann and Yuzon agree that ThrustMaster has a formidable early lead.
That lead, they say, is attracting attention not only from retailers but from companies such as Chumbo Holdings Co. Chumbo is selling ThrustMaster's WeCanTalk products through its web site.
More important, one of Chumbo's operations, Point Group Corp., is the leading aggregator of software bundles for the major personal computer makers. That means the WeCanTalk products could be bundled with Dell, Compaq and Gateway computers..."
SOURCE: Yahoo! Message Boards TMSR Thread © 1999 May 31 Portland Business Journal Dan McMillan Business Journal Staff Reporter [emphasis added]
messages.yahoo.com
* Tell or Tale that to DELL [and NASCAR®]. DELL['s Defensible [Commodity Hardware] Franchise] [8 splits later note: Map DELL with TMSRs post IPO 2/95-present]] quote.yahoo.com v. where TMSR simply failed [and significantly] with NASCAR® and Formula 1® world licenses [Defensible Franchises] yet simply failed due to poor management [as proximate cause viz a viz DELL?] of said "Defensible Franchise" quote.yahoo.com ...i.e. TMSR simply should have been and be the DELL of entertainment hardware(.)
© copyright 1999 SiliconNewswire.com. All Rights Reserved. |
