Name : NELSON Subject: Managerial Economic Instructor :DeyHeriansjah, Ph.

RIGHTNOW-TECHNOLOGY
1. Evaluate the progress of the company and its situation at year end 2003. SWOT ANALYSIS

STRENGHT WEAKNESS - Credibility founder in software - Small capital to expand the industry business - Leadership - Tendency to one dominant - The product based on customer figure. features specific needs The CEO & Founder has - Rapid growth experience to sell company.

OPPORTUNITY - Overseas market potential - Value for money product - Good bandwidth (IT connection infrastructure) to support cloud concept in US & Europe

THREAT - Competitor growing stronger by doing un organic growth (acquisition) - Low cost Competitor by outsource programming (for instance from China & India) - Low awareness of changing IT concept Cloud base model - Negative perception from investor to listed IT company due to bubble burst

S-O STRATEGY Develop and focus to cloud business concept to meet specific customer Need Promote cloud business concept 1. Bundling with network internet provider 2. Free trial 30 days 3. Good after sales service & support - Flexible pricing strategy to cover all size of customers

KEY SUCCESS FACTOR Control majority equity to secure business direction Growing trend in cloud awareness Recovery of investor confident to IT Company

KEY RISK FACTORS Traditional CRM model getting more cheap (local or import from emerging country) Government policy and data security Risk from hacker give a bad image to cloud computing

PRO & CONS OPTION Acquisition PRO - Immediate increase sales coverage and resource from a larger parents - Securing growth and covered risk CONS - Loss power and dictated direction - Loss of potential human capital - Possibility loss of corporate culture - High IPO preparation cost if failed - More reporting requirement to

IPO

- Maintain company direction, corporate culture - Fresh and cheap fund - Increase accountability and

good corporate government regulator - Increase feasibility in IT market - Exposure company strategy to competitor CONITUNUE - Maintain company - Lack of capital for EXISTING direction expansion - Maintain corporate culture - Slow growth due to BUSINESS - Maintain People lack of capital AND - Low exposure ORGANIC GROWTH

PORTERS FIVE FORCES INDUSTRY ANALYSIS

EXIT ENTRY- Low

y y y y y y y y Entry Costs; Low Speed of Adjustment; Low Sunk Costs; low Economies of Scale; low Network Effects; low Reputation; high Switching Costs; low Government Restraints; low

Suppliers; many supplier Positive

Buyers; low (Negative)

y Supplier Concentration; low y Price/Productivity of Alternative Inputs; y RelationshipSpecific Investments y Supplier Switching Costs y Government Restraints

Industry Rivalry Low Negative

y Buyer Concentration y Price/Value of Substitute Products or Services y RelationshipSpecific Investments y Customer Switching Costs y Government Restraints

Substitutes & Complements negative

2. Based upon the data in the case and given the macroeconomics information, what is a fair value for RightNow ?if the company hits its forecast, what could the company be worth in the future?
Free Cash Flow =EBIT(1-Tax Rate) + Depreciation & Amortization - Change in Net Working Capital - Capital Expenditure Terminal Value

In 000 EBIT Tax Rate Depreciation & Amortization Change in Working Capital Capital Expenditure Free Cash Flow Discount Rate Year NPV Free Cash Flow Average PER industry from Exhibit 3 Terminal Value

Projected 2004 2,220 34% 2,666 623 2,000 1,508 4.0% 1 1,450 37 53,657

Estimated Enterprise value around USD 53 mill.

5 If the Company does not

Advantages of Public Offerings Going public will result in increased capital for the issuer. A public offering places a value on your company's stock and insiders who retain stock may be able to sell their shares or use them as collateral. Going public also creates a type of currency in the form of its stock that the business can use to make acquisitions. In addition, the company will likely have access to capital markets for future financing needs. Generally, a company's debt-to-equity ratio improves after an initial public offering, which means that the company may be able to obtain more favorable loan terms from lenders.

By offering securities publicly, the company and its management may be able to retain a certain degree of control. If a privately held company decided to sell common stock to venture capitalists to raise money rather than doing an initial public offering, the purchasers would generally require some decision-making authority. For example, the venture capitalist may require that a person of its choosing be put on the board of directors. With a public offering, these sorts of obligations are avoided. For some individuals, the prestige associated with public companies or being a director or officer of a public company has a certain allure. In addition, going public will generally result in the ability to better promote the company. Publicly traded businesses are usually better known than non-publicly traded businesses. The company can gain publicity and an image of stability by trading publicly. Along with prestige and the ability to better promote the company, going public may allow the company to attract better personnel, including high-level executives and officers. Public companies are able to offer stock options, which have the potential to substantially increase in value. Disadvantages There are a number of reasons why a company may opt not to go public, especially if it has another way to raise capital. Going public is an expensive process (costs can range from $250,000 to $1 million), and if the offering does not go through, the company will lose that money. Typical expenses associated with a public offering include legal and accounting fees, filing fees, travel costs, printing costs and underwriter's expense allowance. Going public can also be an extremely difficult process, especially if the business and its management are not familiar with the registration process. The company will need to put all its business affairs in order and the day-to-day business operations will likely be disrupted. Another disadvantage of going public is that public companies operate under close scrutiny. The prospectus reveals substantial information about the company including transactions with management, executive compensation and prior violations of securities laws. This may be information the company would rather not reveal. In addition, the decision-making process must become more formal and less flexible when there are shareholders. This may be hardest for companies that previously were run by a small number of individuals who made decisions as they wished. Public companies must comply with reporting requirements under the Exchange Act of 1934 as soon as the registration statement becomes effective. Complying with these reporting requirements can be expensive. There is also an increased risk of exposure to civil liability for public companies, executives and directors for false or misleading statements in the registration statement. In addition, officers may face liability for misrepresentations in reports

filed with the SEC, for disclosing false information about the company or for insider trading. There is a new pressure on public companies to increase earnings. Even successful businesses will face this pressure as shareholders become extremely focused on the company's current earnings. Because shareholders are often only investing for the short term, they want to see quick, steep rises in the stock's price so they can sell their shares for a profit. Thus, there is tremendous pressure to increase current earnings. Public companies are also at risk of takeover attempts. It is generally advisable for the company to implement certain anti-takeover measures such as a staggered board of directors. Conclusion Any business that is considering going public must know the advantages and disadvantages of such a decision. Those listed above are only some of the relevant considerations. An attorney with experience in securities law can assist you with analyzing these considerations and making a decision that suits your company.