Case 1CoralSysCaseSolEFimEd3 (2)

Case 1CoralSysCaseSolEFimEd3 (2) - CAPSTONE CASE 1 CORAL...

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Unformatted text preview: CAPSTONE CASE 1: CORAL SYSTEMS, INC. Suggested Case Discussions and Analyses A. Describe Coral Systems’ “business model” in terms of revenues, profits, and cash flows. Coral Systems’ business model was to develop and license software products for the telecommunications industry. More specifically, Coral Systems focused on fraud prevention or reduction products and customer retention products. Revenues, profits, and cash flows would be generated primarily through software licensing arrangements. There are three current products. 1. The venture’s main product, FraudBuster, is a fraud profiling system that was first offered in June 1993. FraudBuster also is the only product currently on the market that can support both digital and analog standards. 2. Coral also introduced a Home Location Register (HLR) in June 1993. An HLR is a permanent database used to identify a subscriber and contains subscriber data related to features and services. However, the HLR has produced only limited software license revenue for Coral. 3. Coral’s second major project, ChurnAlert, was introduced in September 1995. ChurnAlert works using the same software interface into the call detail records as the FraudBuster product. However, ChurnAlert had achieved only limited success (two major customers) through the end of 1996. Revenues are generated from software licenses (the most important source), services (and related activities), and hardware sales. The first revenues were from services provided in 1992. Software licenses began at $215,200 in 1993 and increased to $5,828,700 for the first 9 months of 1996. Revenues to date were as follows: (Net L/Rev) Year Revenues Net Loss Loss Margin 1991 $0-$125,000 Undefined 1992 $699,000-$502,000-71.8% 1993 $504,100-$1,049,800-208.3% 1994 $1,416,900-$1,227,800-86.7% 1995 $3,889,800-$3,390,900-87.2% 1996 (9mths) $6,852,400-$741,700 -10.8% Revenues generally followed the rapid growth “hockey stick” pattern. Net losses also grew rapidly with possibly a peak in 1995 as Coral Systems moved 1 Capstone Case 1: Coral Systems, Inc. closer to profitability in 1996. Positive cash flows, if any, would be in the future. B. What intellectual property, if any, does Coral Systems possess? FraudBuster, the venture’s main product, is a registered trademark of Coral Systems. A fraud profiler tracks the customers calling patterns through nearly real time call detail records by interfacing with the cellular switch. FraudBuster looks at many possible characteristics such as: a) Changes in call patterns inside or outside the subscribers calling area b) Call patterns that typically indicate some form of fraudulent activity c) Simultaneous calls on one account....
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This note was uploaded on 12/05/2009 for the course FIN 595 taught by Professor Shabbir during the Spring '09 term at CSU Dominguez Hills.

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Case 1CoralSysCaseSolEFimEd3 (2) - CAPSTONE CASE 1 CORAL...

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