dog and cat Essay

1928 Words Sep 28th, 2014 8 Pages
LINK TECHNOLOGIES1

Link Technologies, a small firm located in San Jose, California, is currently engaged in the development, manufacture, and sale of high-speed fax modems for use in personal computers. The company was created in 1980 by Mr. James Lee, a researcher who was employed at IBM’s T.J. Watson research center, and two former graduate school classmates from Cornell University. At the time, the personal computer business was in its infancy, and the company sought to fill a niche by providing communication networks to link mainframe computers. Although the company grew rapidly, Mr. Lee felt that the real opportunities for growth lay in personal computers. In the mid-1980s, he decided to make a major switch to the production
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They enthusiastically approved the plan submitted by Mr. Pross, subject to supervision by Mr. Brown. Mr. Lee, however, cautioned both men that he would be monitoring the results of the so-called derivatives plan very closely. The derivatives plan was implemented in February 1991. In the first week of May 191, Mr. Lee called both Mr. Brown and Mr. Pross to his office. He had been looking over the figures for the derivatives plan, which was managed by Mr. Brown’s treasury group. He noted with concern that in the first three months since its inception, the total losses from derivatives trading amounted to almost half a million dollars. At this rate, he observed, the operation was going to have a significant negative impact on the foreign operations results. Mr. Lee emphasized that he expected the treasury group to “pull its own weight,” reminding both men that their bonuses would reflect their success in this regard. He felt that the problem lay in the use of futures contracts rather than options contracts. With call options, the downside risk was known; you could not lose more than what you paid for the call. This was not the case with futures contracts. He suggested that they use options rather than futures contracts in the future. Mr. Lee felt that his “heart-to-heart” talk had had an immediate impact on the derivatives operation, staunching the large losses associated with its inception. Indeed, the

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