G'Day FolksAn interesting day for Commander yesterday and what...

G'Day Folks

An interesting day for Commander yesterday and what Amanda has done is a great start. With regard to some views which have been posted saying it is looking up for Commander from here, following are some additional points to think about.

(a) Many of Commander customers purchase both Voice and Data products and Services from them. Commander now have to go to those customers and say, it is time to buy your Data products and services elsewhere, but please continue buying your voice products and services from us. There is going to be significant voice customer erosion as a result of this move.

(b) Commander have announced that they are staying in the Managed Services business. 80% of the Commander Managed Services business is the G8 contract. Commander could not exit the Managed Services business as they contractually bound to the G8 contract. From memory the G8 contract is due for re-tendering in 2009. That business is all based around IT products and services. Ask yourself what chance Commander are of winning that tender when Commander have just existed the Data business. It is doubtful that Commander could win this contract again (and all the senior Managed Services staff know it), based on yesterdays change in business focus. Company share value is based on forward earnings and the Commander Managed Services business will need to be discounted in those forward earnings.

(c) Commander are currently carrying substantial amounts of Data product stock. Given their announcement yesterday, their ability to sell that stock at anywhere near book value is nil. This stock will need to be written off and/or down, this will be part of the abnormals that Amanda referred to. and it won't be an insignificant amount.

Regards

Tails