Teletech Corporation
By: Mike • Case Study • 1,866 Words • February 13, 2010 • 1,757 Views
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TELETECH CORPORATION, 1996
Raiders Dials Teletech
Wake-up Call Needed Says Investor
New York (AP)---The reclusive billionaire Victor Yossarian has
acquired a 10 percent stake in Teletech Corporation and has
demanded two seats on the firm’s board of directors. The purchase was
revealed yesterday in a filing with the Securities and Exchange
Commission, and separately in a letter to Teletech’s CEO, Maxwell
Harper. “The firm is misusing its resources and not earning an
adequate return,” the letter said, “The company should abandon its
misguided entry into comput-ers, and sell the Product and
Systems Segment. Management must focus on creating value for
shareholders.” Teletech issued a brief statement emphasizing the
virtues of a link between com-puter technology and
telecommunications.
TELETECH CORPORATION, 1996
Margaret Weston, Teletech’s chief financial officer, learned of
Yossarian’s letter late one eveing in early January 1996. Quickly
she organized a team of lawyers and finance staff to assess
the threat. Maxwell Haper, the firm’s CEO, scheduled a
teleconference meeting of the firm’s board of directors the next
afternoon. Harper and Weston agreed that before the meeting they
needed to fash-ion a response to Yossarian’s assertions about
the firms’s returns.
Ironically, returns had been the sub-ject of debate within
the firm’s circle of senior managers in recent months. A
num-ber of issues had been raised about the hur-dle rate used by
the company in evaluating performance, and in setting the
annual capital budget. Since the company was ex-pected to invest
nearly $2 billion in capital
Wall Street Daily News, January 9, 1996
projects in 1996, gaining closure and consensus on these issues had
become an important priority for Margaret Weston. Now, Yossarian’s
letter lent urgency to the discussion. In the short sun, she needed
to respond to Yossarian. In the long run, she needed to assess the
competing viewpoints, and recommend new policies as necessary. What
should be the hurdle rated for Teletech’s two business segments? Was
the Products and Systems segment really paying its way?
The Company
Teletech Corporation, headquartered in Dallas, Texas, defined itself
as a “provider of integrated information movement and management,”
The firm had two main business segments: Telecommunications Services
and Products and Systems, which manufactured computing and
telecommunications equipment. In 1995, Telecommunications Services
had earned a return on capital(ROC) of 9.8 percent; Products and
Systems had earned 12.0 percent. The firm’s current book value of net
assets was $16 billion, consisting of $11.4 billion allocated to
Telecommunications Services, and $4.6 billion allocated to Products
and Systems. An internal