ADP 2003 Annual Report Download - page 5

ADP 2003 Annual Report 3
We are seeing growth opportunities where positive
early market reaction to our new offerings clearly justifies
an increased level of investment. Our business model and
financial strength provide us the ability to pursue these
opportunities even in times of economic uncertainty.
We’ve been tightening our belts long enough. Our
markets are too good and our associates are too valuable
to hold off on further investment. So, while the timing of
the recovery remains unclear, now is the time to take
aggressive steps to position us for the future. We under-
stand that this bucks the trend of continuing cutbacks in
the face of weakness, but we believe ADP’s long-term
opportunities and the value of our franchise justifies the
short-term impact. We are taking actions along three crit-
ical paths: (i) increasing our investments in attractive
growth opportunities; (ii) continued cost focus in selected
areas; and (iii) reinvigorating our Employer of Choice
initiatives. We started these actions toward the end of
fiscal 2003.
1. Growth — We are increasing our investments in
our most promising growth areas, particularly in
Employer Services. These investments include
both product development and product launch
initiatives. Some of the Employer Services areas
we have targeted include improved and increased
use of Web front ends for payroll and benefits, a
new 100% Web-native payroll offering targeted at
companies with in-house systems, a new payroll
platform for large companies and broadly increas-
ing our sales coverage. In addition, we are
increasing our investment in growth opportunities
in each of our other core businesses.
our clients’ employees compensation (especially in bonus
dollars and stock option profits). These factors clearly
affect our ability to sell services to new clients and to grow
revenues from existing clients.
Brokerage Services has felt the repercussions of the
malaise in the stock market. There have been (i) reduced
retail investor trades, (ii) consolidation of brokerage indus-
try firms (with ADP’s more retail-oriented clients more fre-
quently the acquiree than the acquirer), (iii) no growth in
street name shareholders, (iv) fewer IPOs and related one-
time events, and (v) less discretionary spending, in gener-
al, by the industry. All of these items negatively affect our
primarily volume-based back-office processing and
investor communications activities.
Interest rates continued their decline to multi-decade
lows with a 50-basis point decline in November and a 25-
basis point decline in June on top of a 200-basis point
drop in fiscal 2002. Since ADP’s average daily balance of
investable funds exceeded $12 billion in fiscal 2003, the
interest rate reductions caused a significant reduction in
our interest income.
Why has ADP chosen to invest more now?
At the same time that we are facing these difficulties,
which are ongoing into fiscal 2004, we see exciting invest-
ment opportunities to enhance our leadership position in
a number of our most critical markets and to reinforce our
Employer of Choice relationship with our associates.
WE ARE INCREASING
our investments in our
most promising growth
areas, particularly in
Employer Services.