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  • mikebert mikebert Sep 9, 1999 8:59 AM Flag

    Well stated by Monjobones

    This shift must have been what Sage was talking
    about by the "low hanging fruit". They now need to be
    directly involved with the consulting end of the business,
    either through partnerships or by developing their own
    consulting capability. As a result there has been a basic
    change in how they obtain their contracts and some
    difficulty in building backlog.

    There is a silver
    lining to declining backlog. The cost of this torrid
    sales growth is poor cash flow and a weak-appearing
    financial strength resulting in a lousy stock price (as has
    been extensively discussed). If growth slows from 40%+
    to ~15%, cash earnings will rise to more closely
    match accounting earnings. Debt will be paid off and
    financial health will appear to improve. As financial
    strength improves, the stock should retain its current
    multiple, despite lower sales growth.

    Then at some
    time a new acquisition program can commence, focusing
    on building their consulting capability. Hopefully
    THIS time they will time the secondary offering right
    (e.g. right after the momentum guys come on board) so
    they can keep growing.

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