Servervault Case
ServerVault Case
Servervault is a company in the hosting industry located in the United States which has been in operation since December 1999. A hosting company provides its customers with physical space for servers and supporting services. Servervault chooses only to operate in the managed hosting section which gives more value-added services to customers.
ServerVault attracts Internet-reliant and security-savvy customers. It also provides end-to-end solutions to customers. Servervault differentiates itself from competitors by offering high level of security protection. It also has enough bandwidth and power supply to ensure the Internet access is always available. Servervault has three sources of revenue: one-time setup fees for new customers, monthly hosting fees and fees for additional value-added services. Although the variable cost of serving an additional customer is relatively low, it requires large funds to build facilities upfront. Recently, the president/CEO and CFO want to raise some capital for its expansion. The potential investors want to learn more about ServerVault’s projected cash needs to make the investment decision.
Macroeconomic analysis
Economic background
As it can be seen from Appendix A(1), the NASDAQ composite peaked at 5048.62 in March 2000 before dropped dramatically to 3205.11 in April. The major contributor to the loss is the internet bubble. The increasing stock prices over the last few years made some investors too confident in IT companies. However, the collapse of the bubble took place in 2000, when a lot of IT companies failed. As a result, the NASDAQ composite witnesses a huge loss in the stock market. Hence, it is a good opportunity for ServerVault to get more market share.
On the other hand, Appendix A(2) illustrates that the US GDP has kept growing during the last six years, which suggests that the loss may only occur in the IT sector. The growth in GDP brings more business capital spending. (Please see
Servervault is a company in the hosting industry located in the United States which has been in operation since December 1999. A hosting company provides its customers with physical space for servers and supporting services. Servervault chooses only to operate in the managed hosting section which gives more value-added services to customers.
ServerVault attracts Internet-reliant and security-savvy customers. It also provides end-to-end solutions to customers. Servervault differentiates itself from competitors by offering high level of security protection. It also has enough bandwidth and power supply to ensure the Internet access is always available. Servervault has three sources of revenue: one-time setup fees for new customers, monthly hosting fees and fees for additional value-added services. Although the variable cost of serving an additional customer is relatively low, it requires large funds to build facilities upfront. Recently, the president/CEO and CFO want to raise some capital for its expansion. The potential investors want to learn more about ServerVault’s projected cash needs to make the investment decision.
Macroeconomic analysis
Economic background
As it can be seen from Appendix A(1), the NASDAQ composite peaked at 5048.62 in March 2000 before dropped dramatically to 3205.11 in April. The major contributor to the loss is the internet bubble. The increasing stock prices over the last few years made some investors too confident in IT companies. However, the collapse of the bubble took place in 2000, when a lot of IT companies failed. As a result, the NASDAQ composite witnesses a huge loss in the stock market. Hence, it is a good opportunity for ServerVault to get more market share.
On the other hand, Appendix A(2) illustrates that the US GDP has kept growing during the last six years, which suggests that the loss may only occur in the IT sector. The growth in GDP brings more business capital spending. (Please see