Teletech Case

Topics: Weighted average cost of capital, Cost of capital, Investment Pages: 4 (1353 words) Published: April 9, 2013
I.Summary: The Teletech Corporation is a U.S company that provides integrated information movement and management. It has two main business divisions, which are The Telecommunication Services, and The Products and Systems. In Telecommunication Services division, it primarily provided many kinds of phone service to business and residential customers. In fact, it performed a network for 7 million customer lines throughout Southwest and Midwest. The division archived an increasing average rate of 3% on revenue from 2000 to 2004. On the other hand, the Products and Systems division was in charge of manufacturing equipment for computing and telecommunication purpose. In 2000, Teletech’s managers developed a plan to apply computing technology to the design of telecommunication equipment, which gave the company a better position in the telecommunication-equipment industry. Indeed, it increased net sales by almost 40% in 2004. However, it required a decent amount of investments in research and fixed assets in order to keep up with the mainstream development. On October 25th, Margaret Weston, the chief financial officer of Teletech Corporation, had received a letter from investor, Victor Yossarian. He wanted to address some issues and solutions that the firm currently had. First, the company had an error in using the firm’s resource. In fact, he pointed out that the Products and Systems division’s performance was not so good compared to TS division. The company should have invested money and labors in Telecommunications Services instead of the one did not make any profit to Teletech. As a result, it could not acquire an adequate return and its stock could not maintain the same pace with the industry indexes for telecommunication. Besides, he suggested Teletech Corporation to stop using its misguided entry into computers, and Teletech should sell its Products and Systems division in order to increasing value for shareholders. After going through his letter, Margaret had...
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