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Corporation
JACK REILLY, JAKE DIESU
Overview of the Company
"Provider of integrated information movement and management"
Teletech is headquartered in Dallas, Texas
CEO is Maxwell Harper
CFO is Margaret Weston
Consists of two business segments:
Telecommunication Services: provides long distance, local, and cellular
telephone service to business and residential customers
Products and Systems: engages in the manufacturing of computing and
telecommunications equipment
Division Performance (2004)
Telecommunications Services
75% of Teletech's market value
Return on capital: 9.1%
Net assets: $11.4 billion
Revenue: $11 billion
NOPAT: $1.18 billion
3% YOY revenue growth from 2000-2004
Products and Systems
25% of Teletech's market value
Return on capital: 11%
Net assets: $4.6 billion
NOPAT: $480 million
Sales grew 40% in 2004
Market Performance
Teletech's shares have been lagging
behind the overall stock market as well as
indexes for telephone, equipment, and
computer stocks
Analysts contributed this to the firms
lackluster earnings growth, citing increased
competition in telecommunications, as well
as disappointing performance in the P&S
division
Situation at Hand
Victor Yosarian has acquired a 10% stake in Teletech
Demanded two seats on the firms board of directors
Believes the firm is misusing its resources and not earning adequate
returns
A single hurdle rate is starving Telecommunication Services of capital
Says Teletech should sell the P&S division because it is causing the firm to
lose value
If Teletech consisted of only Telecom it would be worth $16.58 billion, the
value with P&S only is $15.23 billion
If the segment hurdle rate is lower than the corporate hurdle rate,
shareholder value is being lost
A single hurdle rate will deprive under profitable divisions of funding in
order to move funds into a more profitable one
Allows the company to earn the highest absolute rate of return
A single rate allows NPV and economic profit calculations to be
compared across divisions
Q:7