Case Scenario 2: Raptec Raptec was incorporated in 1991 and went public on the N
ID: 1138453 • Letter: C
Question
Case Scenario 2: Raptec
Raptec was incorporated in 1991 and went public on the Nasdaq Stock Market in 1996. Raptec's strategy is to become the global leader in innovative storage solutions. Raptec is an S&P 500 and a Nasdaq Stock Market 100 member. The company's hardware and software solutions for eBusiness and Internet applications move, manage, and protect critical data and digital content. Raptec operates in three principal business segments: Direct Attached Storage ("DAS"), Storage Networking Solutions ("SNS") and Software. These hardware and software products are found in high-performance networks, servers, workstations, and desktops from the world's leading OEMs, and are sold through distribution channels to Internet service providers, enterprises, medium and small businesses, and consumers. Since the time it went public, Raptec has experienced rapid growth and consistently profitable operations. In early 2007, the company announced its plan to spin-off the software segment, subsequently incorporated as Axio, Inc., in the form of a fully independent and separate company. Software was Raptec's most profitable and fastest growing segment. By mid-2007 Raptec had completed the initial public offering of approximately 15 percent of Axio's stock, and then distributed the remaining Axio stock to Raptec's stockholders in a tax-free distribution.
(Refer to Case Scenario 2). What risks does Raptec run in spinning off Axio?
Explanation / Answer
o With more of investors coming on board after series D financing, it would imply the company would have to become more aggressive on acquiring new customers, as investors would like the company to have more customers- even if by spending money, so that it becomes a sizeable player in the digital map market
o It would also have to hire more employees to create and manage a aggressive growth streak- be it of product development side or sales/marketing side of the business
o It would also lead to increase in cash burn for the company and company would have to reduce its conservative approach
· How would product have to change?
o Product would have to become more innovative to fend-off the challenges from both Apple Maps and Google Maps.
o Product would
· What would the company need to strive to become?
o Company would have to strive to become more aggressive in customer acquisition and marketing promotions
o Company would have to become a sizeable market player in android OS market also
o Company would have to find new revenue streams – targeting other segments of the navigation industry to rapidly expand
o Eventually, company would have to find newer ways to monetize its data and start on the journey for attaining profitability