Prestige Telephone Essay

1920 Words8 Pages
In an effort to reduce the need to request rate increases and to establish additional sources of revenue, Prestige Telephone obtained regulatory permission from the State Public Service Commission to spin off their computer data processing unit into a subsidiary, Prestige Data Services, in 1999. The strategic business objective for Prestige Data Services was to sell unused computer processing time to other businesses while continuing to service Prestige Telephone’s computer processing needs. Although early reporting showed sufficient customer demand, the newly formed subsidiary experienced significant issues with finding new customers. As of the end of March, 2003, Prestige Data Services had still not become profitable. When Daniel Rowe, Prestige Telephone President, become obligated to report to shareholders that their return on investment was the lowest it had been in seven years, he felt it was time to assess whether or not to continue operating Prestige Data Services. The original idea of selling unused computing time was sound. At its core, the profit potential for Prestige Data Services appears to outweigh the opportunity cost. Missteps experienced during the subsidiary launch such as inaccurate customer research, faulty budgeting for salaries / lack of discipline in sticking to budget, and equipment delay issues all point to a lack of attention to critical detail. If equipment delays resulted in lost business, were other alternatives considered such as rental equipment or outside hosting for a limited period of time? With sales lower than expected, have incentives and pricing been reviewed, as well as incentive-based compensation considered for sales staff? Are intercompany accounting transactions being properly applied? If Prestige Data Services is to remain in business, careful examination of the issues at hand, leading to fact-based changes must occur.

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