Science Technology Company

1397 Words6 Pages
The purpose of this memorandum is to describe the competitive and operating environment of the industry, analyze the financial condition of Science Technology Company, and contrast probable causes for the difference between the forecasted and actual financials. Competitive and operating environment Science Technology Company is a manufacturer of computer-controlled automated test equipment that is used to test products such as computers and cordless phones to ensure the circuitry works properly and there are no defects. This is a highly competitive industry, as ATE is very important in the manufacturing industry. The test market has become too expensive for electronic manufacturers to do their own testing. It is much less expensive for manufacturers of the products to pay to have the products tested than to have a defective product and incur a large loss. The growth of this market was enormous between 1978 and 1984, with sales increasing from $359 million in 1978 to $1.6 billion in 1984. As with most products in the technology field, obsolescence is a constant concern. Further, the products in this industry have a short life cycle due to the continued technological advances. Because of this research and development is very important and an absolute necessity to stay ahead of the competition. STC has one of the broadest lines in the industry which is a large competitive advantage. Teradyne is STC’s biggest competitor at this point, with sales approximately 70% higher than Science Technology in 1984. Plans are underway to introduce a new tester in 1986. Financial conditions STC has had increasing sales from 1980 to 1984 and the cost of goods sold and selling, general and administrative expenses have been consistent with growth. Liquidity does not appear to be a problem currently. However, the sales projections do not reflect an increase in cash flow

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