Competitive Analysis.
Veritas DGC Inc. (NYSE: VTS) is a provider of seismic data two or three dimensional views of the earth’s subsurface and related geophysical services to the natural gas and crude oil (petroleum) industry. Oil and gas drillers purchase such information to increase drilling success rates and so lower overall exploration costs.
According to Standard & Poor’s Corporation, VTS’s peer group is “Oil & Gas Geophysical Data Technologies” in Oil & Gas Equipment and Services. Competitors include WestemGeco, a joint venture of Schlurnberger Ltd. (NYSE: SLB) and Baker Hughes Inc. (NYSE: BHI); Petroleum Geo Services (NYSE: PGO) which in late 2001 announced plans to merge with VTS; Dawson Geophysical (Nasdaq NMS: DWSN); Compagnie Gknkrale de Gkophysique (NYSE: GGY); and Seitel, Inc. (NYSE: SEI).
1. Discuss the economic factors that may affect demand for the services provided by VTS and its competitors, and explain a logical framework for analyzing and forecasting revenue for these companies.
2. Explain how comparing the level and trend in profit margin (net income1 sales) and revenue per employee for the above companies may help in evaluating whether one of these companies is the cost leader in the peer group.