Teletech Case Study Summary

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Frank Ngoubene BMGT440 Prof. Kass 2/26/13 Teletech Case Summary Early January 1996, Teletech Corporation’s CEO Maxwell Harper was sent a letter by billionaire Victor Yossarian following the latter’s purchase of a 10 percent stake in Teletech. In this letter, Yossarian proclaimed that Teletech was not properly using its fund nor earning an adequate return, and that to remedy this problem, some changes had to be made. According to him, Teletech should sell its Products and Systems department and focus on creating value for its shareholders through achieving stronger returns. Ironically, company executives had been debating about the hurdle rate used by the company to evaluate performance, and thus, returns. Teletech, headquartered in Dallas, is a company which defines itself as a “provider of integrated information movement and management.” It has to main business segments: Telecommunications Service and the manufacture of computing and telecommunications equipment, dubbed Products and Systems. Though Telecommunications held a stronger percent of Teletech’s market share (75%), as well as a stronger piece of the company’s of total assets ($11.4 billion of $16 billion), the ROC and IRR of Products and Systems were of superior value (12.0% and 12%, over 9.8% and 9.8%, respectively). A 10.41% hurdle rate was applied to all capital projects , and in evaluating the performance of the business. However, as a collective unit, the company’s 10.35% rate of return had been underperforming and had not been keeping pace with the overall stock market indices. Teletech’ telecommunications services segment provided basically every kind of telephone service to more than 7 million customers in the United States. By the end of 1995, revenues for this market segment reached $11.4 billion, and while expansion into further ventures occurred, so did the capital budget, which varied

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