Amcott Loses $3.5 Million; Manager Fired

On Tuesday, software giant Amcott posted a year end operating loss of 3.5 million. Reportedly, $1.7million of the loss stemmed from its foreign language division.

At a time when Amcott was paying First National a hefty 7 percent rate to borrow short-term funds, Amcott decided to use a $20million of its retained earnings to purchase three -year rights to Magicword, a software package that converts generic word processor files saved as French text into English.

First year sales revenue from the software was $7million, but thereafter sales were halted pending a copyright infringement suit filed by Foreign Incorporation. Amcott lost the suit and paid damages of $1.7 million.

Industry insiders say that the copyright violation pertained to a very small component of Magicword.

Ralph, the Amcott manager who was fired over the incident was quoted as saying, "I'm a scapegoat for the attorneys who didn't do their homework before buying the rights to the Magicword. I projected annual sales of $7 million per year for three years. My sales forecasts were right on target.

Do you know why Ralph was fired? Explain your answer.