Evaluating managers, ROI, value-chain analysis of cost structure. User Friendly Computer is one of the largest personal computer companies in the world. The board of directors was recently (March 2007) informed that User Friendly’s president, Brian Karmo, was resigning to “pursue other interests.” An executive search firm recommends that the board consider appointing Peter Diamond (current president of Computer Power) or Norma Provan (current president of Peach Computer). You collect the following financial informa¬

tion on Computer Power and Peach Computer for 2005 and 2006 (in millions):

Computer Power Peach Computer 2005 2006 2005 2006 Total assets $432.0 Revenues $400.0 Costs:

R&D 36.0 Design 15.0 Production 102.0 Marketing 75.0 Distribution 27.0 Customer service 45.0 Total costs 300.0 Operating income $100.0

$408.0 $192.0 $288.0

$320.0 $200.0 $350.0 16.8 18.0 43.5 8.4 3.6 11.6 112.0 82.8 98.6 92.4 36.0 66.7 22.4 18.0 23.2 28.0 21.6 46.4 280.0 180.0 290.0

$ 40.0 $ 20.0 $ 60.0 In early 2007, a computer magazine gave Peach Computer’s main product five stars (its highest rating on a five-point scale). Computer Power’s main product was given three stars, down from five stars a year ago because of customer service problems. The computer magazine also ran an article on new product introductions in the personal computer „„rA„,inr mdustry. Peach Computer received high marks for new products in 2006. Computer Power’s performance was called “mediocre.” One unnamed insider of Computer Power commented: “Our new product cupboard is empty.”
Required 1. Use the DuPont method to analyze the ROI of Computer Power and Peach Computer m ^-2005 and 2006. Comment on the results.
2. Compute the percentage of costs in each of the six business-function cost categories for Computer Power and Peach Computer in 2005 and 2006. Comment on the results.
3. Rank Diamond and Provan as potential candidates for president ofUser Friendly Computer.