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2907_rea chess

This is intriguing on so many levels. Game theory is being played out live over at REA Group’s realestate.com.au, and we are glued to our screens. Can a business with possession of several competitive advantages, including monopoly power, network effect and the most valuable competitive advantage – the ability to raise prices without a detrimental impact on unit sales volumes – lose its competitive advantage? Continue reading

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Amcom Telecommunications (ASX: AMM) has secured a contract with The University of Melbourne to provide its Unified Communication solutions to around 13,000 users. While the number of users is impressive, we believe that the deal will contribute modestly to earnings.

Unified Communications has the potential to be a key growth driver for Amcom as it provides a number of revenue streams such as handset sales, licensing fees and rental of data networks.

However, we understand that the University of Melbourne already has the devices that are compatible with Amcom’s unified solutions platform. What’s more, the University of Melbourne does not require a data network, as it is a member of AARNet – a high-speed fibre network that connects 38 Australian universities and the Australian CSIRO.

This means that Amcom is only receiving a fraction of the revenue it would otherwise receive from a new client.

The contract is certainly a step in the right direction for Amcom, as the more that Amcom can change professional behaviour towards unified communication, the more demand will ultimately flow to vendors over time. Amcom’s addressable market with AARNet is 200,000 users, so securing the first contract with The University of Melbourne will go some way in encouraging the other members to follow suit.

But if management is seeking to extract maximum value from its Unified Communications division, then it will need to acquire infrastructure in the eastern states. They certainly have the means to do so after raising $40 million of equity in June.

Tim Southee

One thing we can say about the Reserve Bank of New Zealand is they certainly move quickly when they think it is appropriate to do so.

For example, in the nine-month period between July 2008 and April 2009, the New Zealand official cash rate (OCR) was cut on seven occasions, from 8.25 per cent to 2.5 per cent.

Now the opposite is occurring and in the past four months the OCR has been increased on four occasions – each by 0.25 per cent – from 2.5 per cent to 3.5 per cent. The New Zealand economy is expected to grow by 3.7 per cent in 2014, with the recovery in construction and net migration adding to housing and household demand.

The graph below compares the New Zealand 90-day bank bill rate with the New Zealand official cash rate, which commenced life in March 1999 at 4.5 per cent.

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We’ve had a lot of demand from advisers wanting to access The Montgomery Fund on the Colonial FirstWrap platform – so if you’re an adviser and would like to see it added, then let us know. Alternatively, if you aren’t a financial adviser but you know that your adviser uses FirstWrap, feel free to pass them my details.  Continue reading