Evaluating managers, ROI, DuPont method, value-chain analysis of cost structure. Peach Computer Corporation is the largest personal computer company in the world. The CEO of Peach is retiring, and the board of directors is considering external candidates to fill the position. The board’s top two choices are CEOs Peter Diamond (current CEO of NetPro) and Norma Provan (current CEO of On Point). As a board member on the search committee, you collect the following information (in millions):

In early 2009, a leading computer magazine gave On Point’s main product five stars, its highest rating. NetPro’s main product received three stars, down from five stars a year earlier. In the same article, On Point’s new products received praise; NetPro’s new products were judged as “mediocre.”

1. Use the DuPont method to calculate NetPro’s and On Point’s ROIs in 2007 and 2008. Comment on the results. What can you tell from the DuPont analysis that you might have missed from calculating ROI itself?

2. Compute the percentage of costs in each of the four business-function cost categories for NetPro and On Point in 2007 and 2008. Comment on the results.

3. Relate the results of requirements 1 and 2 to the comments made by the computer magazine. Of Diamond and Provan, whom would you suggest to be the new CEO of Peach?

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On Point NetPro 2008 2007 2007 2008 S 600.0 S 480.0 S 300.0 S 525.0 Revenues Costs Costs 35.9 R&D 71.2 40.2 76.1 Production 132.6 145.6 107.6 128.2 96.4 Marketing and distribution 173.2 193.7 1513.8 30.4 67.6 Customer service 65.5 40.0 Total costs 442.5 419.5 270.3 425.7 S 60.5 S 99.3 S 157.5 S 29.7 Operating income S 240.0 S 540.00 $ 510.0 Total assets S360.0