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Anacomp

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1. Anacomp’s new product development strategy involved developing software system via limited partnerships (significant interests held by affiliated officers and directors), and Anacomp having the option to acquire all rights upon completion. An example will be the CIS.
Anacomp initiated the development of a major new computer software system called Continuous Integrated System (CIS) to be marketed to major financial institutions, via a limited partnership with RTS Associates. The agreement was: RTS had to pay a development fee of $6 million; Anacomp to market CIS for 5 years on a commission basis, with the option to acquire all rights to the CIS system at the greater of its appraised fair value. RTS had the right to extend or cancel …show more content…

This increased the liabilities of the firm significantly. Should the firm be unable to generate enough revenue and cash flow in the coming year, it will be difficult to service the debt and Anacomp’s ability to sustain and exist as an entity will be threatened.
4. Our group feels that the future performance of Anacomp will hinge on the outcome of CIS
We feel that there is immense potential in the computer service industry. This is partly caused by the fact that financial institutions were installing a large number of computers as it will value add to their operations. CIS will give Anacomp a first mover advantage in this industry as it is the first allow for on-line real time retail banking transactions processing system. If successful, it will make Anacomp a market leader in the booming industry. Being the market leader will give Anacomp the economies of scale in operations. This will be imperative in enabling Anacomp to invest in R&D, which will be important for the firm to differentiate itself from its competitors, given the competitive nature of the IT industry.
However, should CIS fail to takeoff, Anacomp’s future will be bleak as it is saddled by a huge amount of debt. Interest expense was about 10% of the revenue in 1982. Such a level of debt will be difficult to sustain.
Our group feels that given Anacomp’s track record and experience in producing software, the success rate of CIS is high. Also the fact that

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