高德納諮詢公司 (IT) 2004 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the META Group third quarter conference call. At this time all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question-and-answer session. If anyone needs assistance at any time during the conference please press the star followed by the zero. As a reminder this conference in is being recorded today, Monday, November 8, of 2004. I would now like to turn the conference it over to Allison Ziegler from Financial Relations Board. Please go ahead.

hank you, I'd like to welcome you to META Group's third quarter 2004 earnings conference call. Before we get started, I'd like to remind you this call contains forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 including forward-looking statements regarding future operating results, future strategic directions, and industry and customer demand trends. These statements are neither product nor guarantees, but involve risks and uncertainties that could cause actual results to differ materially from those set forth in the forward looking statements including without limitation, risks relating to integration of our acquired operations; success in international markets; success of our marketing efforts; efficiencies associated with our cost reduction efforts; and other risks detailed in the company's filings with the SEC including those discussed in the company's annual report filed with the SEC on Form 10-K for the year ended December 31, 2003 as amended. These forecasts are dynamic and subject to change, therefore these forecasts speak only as of the date of this forecast, November 8, 2004.

Leading the call today for META Group's management team are C.D. Hobbs, president and chief operating officer, and John Riley, chief financial officer. I'll now turn the call over to C.D. Go ahead, C.D.

Thank you, Allison, and welcome to all of you for who have joined us today for META Group's third quarter 2004 earnings call.

I'd like to start since I'm new to most of you by briefly sharing some of my background with you and then provide a brief overview of our results for the quarter. John Riley will then review the financial results in more depth, and after the financial review, I'll speak to the company's current initiatives and priorities, and then open the call up to your questions.

I'd first like to say that I'm very pleased that the board of directors has entrusted me with the position of president and chief operating officer for META Group. I've worked closely with the company for nearly a decade and have seen META Group from both sides. I've seen it as a company executive, and I've been a business customer of META Group in both the capacity of CIO and as CEO of a software company.

I've spent over 20 years in senior management, most recently as CEO, president, and chairman of a global San Francisco-based technology software and services company. During my tenure there, revenues doubled, and we were profitable every quarter.

My prior experience includes serving as chief financial officer and chief information officer of a Fortune 500 energy company,as well as chief operating officer and CEO of many of its operating subsidiaries.

In 1996, I joined META Group to launch a vertical industry service, the Energy Information Strategy service, and two years later began running all global industry and executive services for META Group. I was an officer of the firm at that time. I left the company in 2000 and after completing a three year tour as CEO of a software company, I made a welcome return to META last fall to work in our executive services group supporting the IT-enabled business transformation needs of our CIO client base.

really think it's important to highlight that while I've had extensive experience inside the research business, I've spent as many years as a business leader consuming research and advisory services. I've occupied a large percentage of the roles that make up the population of our own client base, and I'm confident that my experience on the consuming side, along with my strong background in managing profitable company operations, will enable me to take swift action at META that will strengthen our financial performance and transform our business in support of the emerging needs of the customer base.

Over the last four or five years I've seen significant change in the technology research market. Business and technology research consumers are transforming the market by placing new demands on firms like META Group. Our customers are looking beyond our research driven advice and council and are making and asking us to help them execute on our recommendations.

This type of request translates into new products and services that not only transform research agendas, but force a significant change in how research firms deliver content and services that support the anytime, anywhere, everything-we-want-to-know access. I'm confident that META Group together with our customers will be a pioneer in shaping this new market.

As our third quarter performance shows META Group is well on its way to driving costs down and improving profitability. We'll do increasingly more in months to come. I plan to drive an aggressive cost-management initiative across every layer of our organization.

To highlight this point, we announced in our earnings release earlier today that not only were we profitable, but with unanimous support of our board, I took action to streamline operations world wide. This has enabled us to reduce management layers significantly across multiple geographies. These actions are new to META Group but necessary as we move to a flatter, more agile customer-centric organization that's responsive to changing market demands. Staffing our leadership ranks with individuals who can supply fresh thinking to our business, and who are motivated to put our customers first, will in fact improve our ability to serve our customers well.

META was founded on the principle of providing market responsive in context technology and business research council to customers worldwide. With a sustained focus on this principle, META is poised to take a market leadership position. I look forward to leading META through this period of market transformation.

With that I'd like to transition into a review of quarterly performance numbers, and we'll then have our CFO John Riley provide more detail on Q3.

META Group continued to demonstrate strong growth in the third quarter of 2004. Our third quarter revenue increased 17% over the same period in 2003. Recent acquisitions of our global affiliates were a major factor in achieving this growth, along with organic growth in international markets, including research and advisory services, and strategic consulting.

We also believe our market share increased relative to our top competitors 12% in the quarter over the prior year.

Our cost control efforts as John will report also made progress in third quarter. The decline was mainly in our U.S. business where we reduced expenses across most expense categories.

Our net income for the quarter was $1 million compared to a net loss of $1.9 million a year ago. This is an important indicator of the progress we are making toward our goal of consistent profitable growth. Earnings in the quarter were 7 cents a share compared to a loss of 14 cents a share a year ago in the same quarter.

What's the bottom line? Organic growth above plan, expenses below plan, and much improved gross margins.

I'll now turn the call over to John Riley to discuss our third quarter financial results in more detail.

Thanks, C.D. As C.D. said, the company announced a third quarter net profit of $1 million or 7 cents per fully diluted share. This compares with the third quarter 2003 net loss of $1.9 million or 14 cents per fully diluted share. Total revenues for the third quarter were $34.4 million up 17% from the year-ago period. Ongoing operations grew 4% or $1.2 million while acquisitions and currency added $3.2 million and $600,000 respectively.

Revenues from international operations now represent 39% of total revenues in the third quarter compared to 26% a year ago. This is expected as a result of our distributor acquisitions. We evaluate changes in revenue and expenses on our ongoing operations, separate from the effect of foreign currency exchange rates on our international subsidiaries.

Research and advisory services revenue was $21.5 million, up 15% from the year-ago period $18.7 million.

Ongoing operations grew $800,000 before currency benefit of $200,000 while $1.7 million of growth came from the 2003 acquisition of subsidiaries in the United Kingdom and northern Europe, and the 2004 acquisition of our Middle East subsidiary.

Strategic consulting revenue of $10.8 million was 22% higher than the $8.8 million in the third quarter last year.

Acquisitions accounted for $1.5 million and ongoing operations grew $200,000 before currency benefit of $300,000.

Published research products revenue was $1.4 million versus $1.3 million in the prior year.

Total operating expenses of $33.5 million increased 7% compared to the $31.3 million in the third quarter of 2003. Ongoing operations reduced expenses by 6% or $1.9 million before considering foreign currency which added $700,000 of expenses. The 2003 and 2004 acquisitions increased expenses by $3.4 million.

2004 operating expenses included a $416,000 loss on the sale of our majority-owned subsidiary in Hungary, and $946,000 from termination of employment contracts.

U.S. bonus expense declined $1.4 million compared to the year-ago period.

Cost of services in fulfillment including reimbursable expenses was $16.7 million versus $16.8 million a year ago.

Ongoing operations decreased 12% or $2.1 million, before considering foreign currency which added $300,000 to expense.

Acquisitions added $1.7 million of expenses.

2004 U.S. bonus expense was $1 million lower in ongoing operations with the remaining decrease in expenses spread across other cost of services and fulfillment items. Gross margin as a percentage of total revenues was 51% as compared to 43% a year ago.

Selling and marketing expenses were $9.9 million, an increase of $1.7 million or 21% from the year ago level of $8.2 million. This increase was due to $1.1 million incremental costs associated with the acquisitions, while ongoing operations increased $400,000 before considering foreign exchange rates which added another $200,000.

2004 expenses include a $490,000 charge from termination of an employment contract. General and administrative expenses for the third quarter were $5.2 million level with a year ago. General and administrative expenses and ongoing operations were $500,000 less before considering foreign exchange rates which added $100,000 over the previous year.

Acquisitions added $400,000 in expenses. 2004 expenses include a $456,000 charge for termination of an employment contract. Costs associated with expatriot staff declined $300,000 from the prior year, while bonus expense was $300,000 lower than 2003.

The company also recorded a $416,000 loss on the third quarter sale of its majority owned subsidiary in Hungary. Proceeds were $37,000, and the company transferred certain contingent liabilities to the buyer.

I'll now turn my attention to the -- or my comments to the nine-month period. The company's results for the nine months the ended September 2004 were a net loss of $48,000 or no cents per fully diluted share. This compares with a 2003 net loss of $3.3 million or 25 cents per fully diluted share.

Total revenues for the nine months were $104.2 million, up 19% from the year-ago period. Ongoing operations grew 4% or $3.4 million while acquisitions and currency added $10.3 million and $2.8 million respectively.

Revenues from international operations now represent approximately 39% of total revenues in the first nine months this year compared with 26% a year ago, again an expected shift as a result of our distributor acquisitions.

Research and advisory services revenue was $67.3 million, up 19% from the year-ago period $56.4 million. Ongoing operations grew 7% or $4.2 million before currency benefit of $1.2 million. The 2003 and 2004 acquisitions added another $5.5 million in revenue.

Strategic consulting revenue of $30.7 million was 23% higher than the 25 million last year, while acquisitions added $4.6 million, ongoing operations declined $200,000 before currency benefit of $1.4 million.

Published research products revenue of $4.3 million declined from $4.5 million in the year-ago period due to lower revenue from ongoing operations. Total operating expenses of $104.3 million increased 14% compared to the $91.5 million in 2003. Expenses in ongoing operations declined 2% or $1.5 million before foreign currency which added $2.7 million. The acquisitions added $11.7 million in expenses.

Cost of services in fulfillment including reimbursable expenses was $53.6 million, a 10% increase from $48.6 million a year ago. Expenses decreased 4% or $2 million in ongoing operations before foreign currency added $1.3 million in expenses, acquisitions added another $5.7 million in expenses.

Our gross margin as percentage of total revenue, was 49% as compared to 45% a year ago for the nine months. Selling and marketing expenses were $31.5 million, an increase of $7 million or 29% from the year-ago level of $24.5 million. This increase was due to $4.1 million in incremental costs from the acquisitions, $1.9 million of higher selling and marketing costs in our ongoing operations, and a $1 million impact of foreign exchange.

General and administrative expenses were $15.3 million, an increase of $600,000 or 4% compared to a year ago. This increase was due to $1.2 million in incremental costs associated with acquisitions, and $400,000 from the impact of foreign exchange partially offset by $1 million of lower general administrative costs in ongoing operations.

Other income for the nine months was $128,000 compared to $723,000 last year which included non-recurring gains of $665,000 on the liquidation of investments.

I'll now provide comments on the balance sheet and cash flows. Turning to our net cash position, which is defined as cash including restricted balances less bank debt and notes payable, that decreased $1.5 million to $11.8 million as of September 30, 2004, compared to $13.3 million as of June 30, 2004. This reflects seasonal billing cycles in our business.

During the nine months ended September 30, 2004, the company used approximately $1.5 million in cash from operations compared to generating cash from operations of $7.6 million in the year-ago period. This $9.1 million decline in operating cash flow was due to a net decrease in bonuses of $3.3 million consisting of lowered accruals and increased bonus payments over prior years; a $1.4 million decline in other and consulting revenue; a $1.4 million decrease in other accrued compensation; a $2.7 million decrease in other accrued liabilities; a decrease in deferred revenue of $2.3 million due to the way we invoice multi-year contracts in the prior year. All of these offset by an increase of $2 million in cash collections from accounts receivable on a year-over-year basis.

Total accounts receivable at the end of September were $30.1 million up 13.7% from last year. Day sales outstanding were 79 days compared with 81 days in the year-ago period.

Year-over-year, deferred revenues have declined to $42.9 million on September 30, or have declined rather from $42.9 million at September 2003, to $41.2 million on September 30, 2004. This reflects a 2003 change in how we invoice multi-year contracts offset by current year billing and revenue recognized from those billings.

Capital expenditures for the nine months in 2004 amounted to $560,000 compared with $673,000 a year ago, with the decrease due to leasing of hardware this year as compared to direct purchases last year as we continue to invest in our infrastructure on a global basis.

I'll now turn the call back over to C.D.

Thanks, John. This was a very significant quarter for META Group. We reported positive operating results for the second consecutive quarter. As these results demonstrate our agenda to streamline worldwide operations and reduce overhead is driving positive results.

With the board's full confidence and support, I would like to outline the major elements of my tactical initiatives over the next several quarters. My priorities over the coming quarters are clear: To cut costs through practiced disciplined fiscal management; to streamline processes to improve forecasting and boost earnings; to tie executive compensation directly to profits; and to flatten the organization to make it more accountable. These initiatives support our board's direction to achieve profitability from current operations in line with our markets and industry.

To assist in executing these initiatives, we disbanded the operating committee previously formed, and I've organized an executive committee that will serve as a point of comprehensive review of tactical strategy and major management decisions. Represented on complete will be myself, legal, human resources and finance executives, and Dr. Howard Ruben, a long-time executive and former board member and currently a META fellow in our consulting organization.

Now let me report on our progress toward achieving target margins. We've mentioned in previous calls that we're driving our business model toward a 10% target earnings before interest and taxes. The EBIT target is based on a cost of services and fulfillment of 48% to produce a gross margin of 52%. For our third quarter, we achieved a gross margin of 51%, an improvement of 4% from our second quarter performance, and an improvement of 8% compared to the year-ago period.

Our target for selling and marketing expense is 27%. For third quarter, we achieved 29% selling and marketing expense, an improvement from 30% in the prior quarter.

Our general and administrative expense target is 12%. For third quarter, we achieved 15% general and administrative spending compared to 13% in the previous quarter. This increase was caused by the expense items which John referred to earlier in the call.

We will continue to measure ourselves against these expense levels in future quarters, and so I expect to report on them in the future as well.

So in closing I would like to thank you for joining us, and I look forward to engaging further with all of in you quarters to come. We're confident that we will take META to the next level with firm action to cut costs, control expenses, and measure management and employee performance. And with that, I would like to open up the call to your questions.

Thank you, sir. Ladies and gentlemen, we'll begin the question-and-answer session. If you have a question, please press the star, followed by the one, on your push button phone. If you'd like to decline from the polling process, please press the star, followed by the two. You'll hear a three-tone prompt acknowledging your selection. If you're using speaker phone equipment, you will need to lift the handset before pressing the numbers. Once moment please for the first question.

Our first question is from David Cohen with Midwood Capital. Please go ahead.

Hey, gentlemen. Nice quarter.

Thank you.

One -- This is not a question, but almost a request or suggestion. You guys do -- have done periodically when you have a 10-Q a great job of breaking out all data you reg on in the press release. If that's possible to include in the press releases going forward even before they come out in the 10-Q, so that it's just -- I'm not fast enough to absorb all those numbers that you read as regards to acquisitions ongoing opts and currencies, so, if it's possible to beef up the press release with that stuff, that would be great. Secondly, is, um, given the sort of numerous changes that have been made organizationally, and I don't know C.D., I know you've been assigned -- you have the title of president and COO, I don't know if you're carrying the CEO title as of yet, but I'm wondering if you don't, if there is a CEO search going on.

There is no CEO search currently in progress. I don't carry the title currently. The board is satisfied I think with the governance they have in place for company leadership, but there is no CEO search in progress.

Okay, and I don't know if John has dropped the interim in front of the CFO title, but if that is still there, is there a CFO search going on?

There is not a CFO search going on either. This is of course news to John, but I'm sure he's happy to hear it.

Secondly there were a lot of data given, John, in your rundown of the business. And I know that in the past, there was confusion on some of these call about the presentation of the international pieces of the business, but is that business profitable today? In the aggregate? Is it profitable at an EBIT level?

The discussions that we've gotten into the past, David, around the international business largely depend on how we measure the business in terms of certain inter-company transactions. Our international businesses are where we're driving to growth and we, frankly, as you may have noticed in looking at some of the queue comments in the past, we show those international businesses again before including certain transactions. So I'd rather not try to specify whether or not they're profitable, because that can turn into a discussion about what do we include and what don't we include, for certain things that are part of essentially inter-company transactions to get eliminated out in the consolidation.

Are you going to present in the backup to the financials in the queue the same schedules you've had before about the changes from year-over-year whether they are acquisition-driven, currency-driven or ongoing opts. Are you going --

Certainly, the format, and you make a good suggestion that we ought to put that in the press release, that is the way that we believe it most appropriate for people to understand what's driving changes in the business year-over-year.

Okay.

But we will continue to break those changes down between acquisitions, ongoing, and foreign exchange.

Okay. One more question, and I'll get back in the queue, is -- have you made any comments and are you willing any comments on this call about the process for evaluating strategical turns. I know you can't specifically say what the board is contemplating, but maybe tell us when the next milestone is for possibly for the shareholders to get an update on what that process looks like?

You know, it clearly it's in process, and it's supported by, you know, Wachovia. And I think the board expects to be looking at options in the near future. You know the board has made it very clear that they're under no obligation to accept any offers that might be made and there are no offers currently that I'm aware of that are on the table so --

Okay. Thanks.

Thank you. Our next question is from Brian Goenick with Corsair, please go ahead.

Hi. I'm wondering if you could quantify some of these recent reductions in personnel, in terms of annual savings they might represent?

Something around a million three.

And do you expect that as part of your efforts to streamline and reduce expenses further that there will be continued reductions in personnel or other over head, in addition to this?

Yes, I do. I mean, I think we're going to look systematically at streamlining overhead, and in particular, on a segment-by-segment basis against what we believe reasonable market-driven performance measures. And put a program in place to get there. You know, we're just beginning to see the benefit of the consolidation of the acquisitions, and so we're at a point now where we can begin to think about the G&A on a global basis from the perspective of achieving efficiencies in operating integrated company. And I think I think we'll see the benefits of that captured as quickly and as expeditiously as it can be done.

So with an EBIT margin this quarter of almost 4%, do you expect that you know, going forward we should be at least in level and hopefully getting towards our 10% target?

Well, I haven't -- I am not yet fully accountable for a forecast, and so I can plead innocence for the moment. But, I mean, the bottom line is I think you're seeing an improving trends that's going to continue, and whether it'll continue linearly or uninterrupted, I can't say at the moment but I expect it to continue to improve consistently.

Any sense for a time frame for when you might hit that 10% level.

Not at this time. If you ask me that next quarter I'll have an answer for you.

Okay. Great, thanks a lot.

Thank you. Our next question is from Mike Neri from Neri Asset Management. Please go ahead.

Hey guys. I -- just -- as a shareholder, I would like to thank all the employees for the hard work over the last several years, and, you know, a lot of people have done quite a bit to get us to where we are today. And I definitely appreciate that.

Thank you on their behalf.

In terms of where we are today, I was actually really surprised that we were profitable in the third quarter given that Europe basically shuts down, and that international is now 40% of the business. Do you have any type of outlook for the fourth quarter in terms -- do you expect to be profitable; do you have any type of revenue targets?

Mike, as you know, one of the things that we made, we started doing at the beginning of this year, and we're continuing on in this quarter is refraining from giving guidance, both with respect to estimates of revenue and/or net income targets.

Okay.

So we're still continuing on, on that path.

And, John, the $900,000 in severance costs. Where did that flow through on the cost?

It's split in between two lines, Mike. About half of it is in selling and marketing, and the remaining is in G&A.

Okay. And John, I always ask you this. What was CapEx in the quarter?

Give me one second, Mike. I've got the year-to-date number. Let me look for the quarter's number. Is there anything else you want to touch on while I'm getting that?

C.D., I'd just like to welcome you and, you know, the numbers I always look at, Gartner today is trading at 1.6 times enterprise value to revenue, Forrester is trading at 1.8 times,and Meta is trading at 0.4 times. So if you're successful in driving the margins that that you're talking about, there's a lot of potential there for us shareholders.

I certainly believe that's the case, and I think -- I think we're poised to do a very good job for you.

Okay.

Thank you. Ladies and gentlemen, if there are any additional questions, please press the star, followed by the one, at this time. As a reminder, if you're using speaker phone equipment, you will need to lift the handset before pressing the numbers. One moment please for the next question.

Excuse me, we do have a response to the prior question first that John's just looked up.

Mike, you had a question as to what was the CapEx for the quarter, and actually, we did not have any CapEx in the quarter. We had $100,000 of proceeds from some disposals. So no CapEx spending in Q3.

Thank you. Our next question is a follow-up from David Cohen. Please go ahead.

Based on your comments when you were asked about overhead reductions, C. D., you said you're starting to see the benefit of the acquisitions when actually rationalizing G&A across the entire company. Is that -- the implication there that the cost base of the acquired operations has been largely untouched so far. Has there been cost taken out of those international operations so far?

There has been some cost taken out of it, but the fact of the matter is just rationalizing them and getting them into a position where you can begin think dealing with the whole has taken some time. So I think the best -- the best of that experience is immediately in front of us.

Are you willing to give a sense of sorts of what degree costs could be taken out from those infrastructures?

Not on a unit by unit basis, but our stated target is to take about -- G&A overall from 15% down to 12, and I think the lion's share of that is achievable quickly, and we'll goat that target.

And is the source of that likely to be, I mean, less the U.S. operations than overseas operations?

No, I can't say that that's necessarily the case. I mean, I think we, we need to systematically look across the board at where G&A is delivering real value, and where we've allowed G&A to creep and it's not delivering real value. And you've already seen us take a part of that have in the two weeks since I've been on board, but we're looking at it, I would say with intensity.

And, John, the change that you referred to in 2003 in terms of treatment of multi-year contracts, can you give just a brief description of what that means?

Sure. Back until March of 2003, when we signed customers up for multi-year deals, we also invoiced them for the multi-year legs of those deals. So, and you would notice, you would see that in a couple of places in our financial statements. You would see that we had long-term accounts receivable.

Yeah.

And we also had long-term deferred revenues. What we realized late in the first quarter of 2003 was that, that it was adding some level of complexity just to an accounting exercise or a bookkeeping exercise for ourselves as well as for our clients. So while we actively continued to pursue signing clients up for multi-year deals, we no longer invoice them for anything other than the first year of the deal.

Okay.

Consequently what's happened over time is those long-term items I mentioned on our balance sheet have declined.

Okay. Great. Thanks a lot

You're welcome.

Thank you. Our next question is with Rich Boone with Fairlawn Capital. Please go ahead.

Hi, guys. I have a couple of questions. First, John, could you give us the contract value number for Q3 as well as Q2. And secondly, could you guys comments on what you're seeing in terms of the competitive environment especially with the price of pricing?

It's clearly, there's clearly a massive attempt on part of consumers to drive pricing and what they perceive to be a soft market, and I think we all see pressure on prices from that perspective. Interestingly, that pressure is generally impacting published research for what I would describe as the part of the business that's being driven ultimately into commodity space. One of the nice things about this market is that it has really moved in Meta's direction. Meta's has always excelled in stepping beyond the research into both actionable advice and council and, in fact, our clients are asking us to step beyond that, and into a consideration of taking a firmer hand in execution of some of the recommendations. And that segment of the business is not getting the same kind of price pressure. So, you know, this is -- we continue believe that the market is transforming rapidly but is showing slow growth. One of the reasons we have a real focus on getting the margins in place, and understanding that when the margins in place, then we'll turn our attention to a greater, at least get a greater focus on strategy and less of a focus, I think, on fiscal near term performance.

Rich, this is John. In terms of the contract value, at the end of the third quarter, our contract value was $72.8 million, and that was down about $300,000 from 73.1 at June of last -- at June of this year. But compared to September of last year, our contract value is up 4.6%, that is it's up from 2 against 72.8 million compared to 69.6 million in the year-ago period.

Great. And the increase year-over-year is excluding acquisitions?

The contract value statistic that we've always shared on these calls has been contract value across the Meta family, if you will. So we've always included the distributors.

Okay great.

So to the extent we acquire them it has no effect on the stats.

Great, thank you.

You're welcome.

Thank you, our next question is from Chuck Goldblum with Emancipation Capital. Please go ahead.

Hi, thank you. With the board having contracted Wachovia to act as a banker, can you give us a sense of when you expect to receive formal bids on the company.

This is like asking me to predict the stock market. My view is, that process is imminent. And I mean, there's the Wachovia has these completed its work. You know, interested parties signing a NDA can get data, and we expect -- we expect interested parties to want to engage very quickly.

Is there a, I guess the question more particular. Is there a schedule they've sort of laid out as far as when they expect to be receiving numbers by, a deadline, something like that?

My belief is it'll be this week.

Okay. Great. And follow-up on Europe. You made some changes there as far as gentlemen running AMEA. Is that an indication that there might be further cost cuts there, as you guys just made the acquisition.

I think that is an indication that there may be additional cost cuts in the G&A layer there. I think, philosophically, having a duplicate centralized G&A in Europe is not in the cards, nor do we think it's fully justified, and having run global companies before, I've certainly run them differently than the G&A profile that I believe we have here at META Group. I think there's opportunities for some real savings.

Okay. So should we use, when you talk about some of the other competitors in the space, should we use a Forrester-type margins, you know, 12, 13%, or Forrester at its best margins, 18, 20%, or what do you guys look at when you talk about sort of margins you want to get to in that respect?

I thin we confessed what our target margin was at EBIT at the presentation, and I don't have a strong reason to wants to vary from that yet. Give me a while to get in the saddle and maybe we'll feel differently.

Okay, well thanks, great job so far.

Thank you.

Thank you. Our next question is from a follow-up from Brian Goenick. Please go ahead.

Yeah, hi. On the cost savings we talked about earlier, would those be primarily in G&A or in cost of services?

Primarily in G&A.

Both.

Both, I was getting to both. John's cautioning me here, but there's clearly an opportunity in G&A. There's clearly an opportunity in services. I think there's clearly an opportunity in sales and marketing.

And as far as -- but specifically on the $1.3 million you cited was that split any particular way, half --

Actually, it's about half G&A and about half services, roughly.

50/50, 60-40.

You know, it affected both sides of the house.

Right. And as far as the process for the transaction which you mentioned something expected by this week, do you mean that you have signed NDA's with a number of parties or that process to sign NDA's is happening this week.

The process to sign NDA's is ongoing. Some have been signed.

Some have been signed. Can you tell us how many?

I don't know.

Thank you.

Thank you. Gentlemen, we have no additional questions.

We certainly appreciate the attention and the opportunity to give a good report. Both John and I thank you for attending. Certainly, you know, we're not strangers. You know where we're at, and if you have any questions, I'm assuming that you'll touch us directly, and with that I look forward to next quarter and appreciate having this one over. Good night.

Ladies and gentlemen, this concludes the META Group third quarter conference call. If you would like to listen to a replay of today's conference, you may dial 303-590-300 or 1-800-405-2236 followed by access 11014243. Once again we thank you for your participation. Have a pleasant evening. You may now disconnect.