Over the last decade or so, a host of software companies have tried
to build successful businesses with models different than those used by
industry giants including IBM (IBM), Oracle (ORCL), and Microsoft (MSFT). While Salesforce.com (CRM) and NetSuite (N) have gone the software-as-a-service (SaaS, or Cloud) route, others like Red Hat (RHT) have looked to maintenance and support instead of the software itself as the source of value.
That brings us to SolarWinds (SWI). There's nothing unusual per se about network management tools - companies like IBM and Hewlett-Packard (HPQ)
have been selling them for years. What's different about SolarWinds is
both the sales model (a low-touch model that relies on 3rd parties like
search engines) and the product positioning (lagging tech, but cheap and
easy to use). So far, the results have been impressive as SolarWinds
has posted exceptional revenue growth and operating margins. As is so
often the case, though, the question is whether the company can maintain
this momentum and whether the Street is already ahead of the story.
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Will A Different Model Lead To Sustainably Different Results For SolarWinds?
Showing posts with label BMC. Show all posts
Showing posts with label BMC. Show all posts
Thursday, April 4, 2013
Thursday, December 6, 2012
Investopedia: Is TIBCO's Stumble An Early Christmas Gift?
Back in March, I wrote that investors were only likely to see TIBCO Software (Nasdaq:TIBX)
trade at a discount to fair value "if the company significantly
disappoints the Street." Well, the company did just that on December 4,
announcing a nearly 10% revenue miss and a bigger miss in earnings per share
terms. While TIBCO just bought itself a spell in the penalty box,
risk-tolerant investors may want to take this opportunity to check out
one of the few quality independent middleware companies left on the
market.
To read more, follow this link:
http://www.investopedia.com/
To read more, follow this link:
http://www.investopedia.com/
Monday, June 25, 2012
Investopedia: To Unlock More Value, CA Needs More Growth
I've been a fan of mid-sized software company CA Technologies (Nasdaq:CA)
for a while now, but it has taken quite a bit of time for the Street to
appreciate it. A relatively recent willingness to share more capital
with shareholders (buybacks
and bigger dividends) has helped, but management really needs to
outline a clear plan to boost growth to close more of that gap between
today's price and the fair value suggested by the company's free cash flow.
Please read more here:
http://stocks.investopedia.
Please read more here:
http://stocks.investopedia.
Friday, March 9, 2012
Seeking Alpha: Approaching The End Of The Quest
When I bought Quest Software (QSFT) in mid-2010, it was with the idea that the company was a solid acquisition play but had enough going on in its business that it would be a worthwhile investment on a stand-alone basis. With Friday's announcement that the company has accepted a buyout offer from Insight Venture Partners, it looks like this story has found its closure.
The Deal
Quest announced that it reached an agreement with Insight Venture Partners whereby this private equity firm will take the company private in a $2 billion deal. That price translates into $23 per share for Quest shareholders, or about a 19% premium to Thursday's (March 8) close.
This deal includes a pretty generous go-shop window (60 days) for Quest, where management can pursue and entertain competing offerings. Should a better deal emerge, Quest would owe only a small $4 million break-up fee.
Read more here:
Approaching The End Of The Quest
The Deal
Quest announced that it reached an agreement with Insight Venture Partners whereby this private equity firm will take the company private in a $2 billion deal. That price translates into $23 per share for Quest shareholders, or about a 19% premium to Thursday's (March 8) close.
This deal includes a pretty generous go-shop window (60 days) for Quest, where management can pursue and entertain competing offerings. Should a better deal emerge, Quest would owe only a small $4 million break-up fee.
Read more here:
Approaching The End Of The Quest
Wednesday, February 15, 2012
Seeking Alpha: Quest Software - So Far, So-So
Investing in low-growth value-priced software stocks is a little like digging for gold with a Nerf shovel - you can get there eventually, but it's going to take a lot of patience. Clearly Wall Street did not care for the earnings report of Quest Software (QSFT), nor the new of an unexpected change in CEO, but underlying results were not so bad and patience could yet pay off for investors.
Fourth-Quarter Results Mostly Better Than They Seem
Quest reported that revenue rose about 13%, more or less meeting the average analyst guess. License revenue was a little soft, growing 8% on a reported basis, but growing not at all on an organic basis and missing the average estimate. Service revenue was a little better with 18% reported growth and 6% organic growth, but the beat versus expectations was modest.
Read the full piece here:
Quest Software - So Far, So-So
Fourth-Quarter Results Mostly Better Than They Seem
Quest reported that revenue rose about 13%, more or less meeting the average analyst guess. License revenue was a little soft, growing 8% on a reported basis, but growing not at all on an organic basis and missing the average estimate. Service revenue was a little better with 18% reported growth and 6% organic growth, but the beat versus expectations was modest.
Read the full piece here:
Quest Software - So Far, So-So
Wednesday, January 25, 2012
Investopedia: Is VMware's Road Starting To Turn Uphill?
There's that unpredictable moment in a growth tech stock's life where investors and analysts go from assuming that the trees will grow to the sky to assuming that the lumberjacks are already on site. That may not yet be the case for VMware (NYSE:VMW), but it definitely seems that sell-side analysts are no longer racing to top each others' growth estimates and that there's an increasing concern about the underlying growth of the market.
A Mostly Solid Close to the Year
VMware reported that total revenue grew 27% this quarter and almost 13% from the September quarter. License revenue rose 22%, but this basically just met the expectations. One of the good news/bad news situations is that VMware is seeing an increasing amount of service and maintenance revenue. This a lucrative stream of revenue for any company, but investors don't tend to prize that much at companies like CA (Nasdaq:CA) or Microsoft (Nasdaq:MSFT).
Read more here:
http://stocks.investopedia.
A Mostly Solid Close to the Year
VMware reported that total revenue grew 27% this quarter and almost 13% from the September quarter. License revenue rose 22%, but this basically just met the expectations. One of the good news/bad news situations is that VMware is seeing an increasing amount of service and maintenance revenue. This a lucrative stream of revenue for any company, but investors don't tend to prize that much at companies like CA (Nasdaq:CA) or Microsoft (Nasdaq:MSFT).
Read more here:
http://stocks.investopedia.
Tuesday, January 10, 2012
Investopedia: How The Street May Care About CA Again
Trying to sell a cheap low-growth tech stock is often like trying to sell used electronics; sure, it's cheap relative to the value you can get out of it, but nobody is going to want it anyway. This is not a new problem for CA Technologies (NYSE:CA). While these shares do indeed look too cheap on even a conservative modeling basis, it's going to take leveraging the new mainframe cycle and showing growth in cloud computing, to get anybody to care.
The Good
CA Technologies has built itself into what is, in many cases, an indispensable part of the IT environment. This vendor-neutral enterprise and mainframe software vendor sells so many different products that it is not easy to talk about what they do in succinct terms. Nevertheless, here's a shot: CA Technologies helps make sure that an IT system can run multiple systems and applications, while maintaining performance and security. CA products also help monitor how well the system is working, identify problem areas and evaluate the performance trade-offs of new projects. (For related reading, see The Dotcom Crash.)
Read the full piece here:
http://stocks.investopedia.
The Good
CA Technologies has built itself into what is, in many cases, an indispensable part of the IT environment. This vendor-neutral enterprise and mainframe software vendor sells so many different products that it is not easy to talk about what they do in succinct terms. Nevertheless, here's a shot: CA Technologies helps make sure that an IT system can run multiple systems and applications, while maintaining performance and security. CA products also help monitor how well the system is working, identify problem areas and evaluate the performance trade-offs of new projects. (For related reading, see The Dotcom Crash.)
Read the full piece here:
http://stocks.investopedia.
Tuesday, January 3, 2012
Seeking Alpha: Can Quest Find Success In Simplicity?
Right off the bat, it would seem that Quest Software (QSFT) has two red marks against it. First, the company looks to provide simpler solutions in a world where vendors boast increasingly complex alternatives. Second, Quest is mostly a value play, and lower-growth value plays don't often work so well in the tech stock world. Nevertheless, with such an undemanding valuation, Quest may be worth a look as an undervalued play in a software sector where valuations have been quite high in many cases.
Trying To Patch Big Vendor Gaps
Quest has the unenviable task of trying to make its bones (and not get squashed) amidst the likes of Oracle (ORCL), IBM (IBM), VMware (VMW), BMC (BMC), and CA (CA). The idea here is that these companies often offer complex solutions that are actually difficult for IT personnel to implement and maintain – particularly at smaller concerns that can't throw an army of employees at every IT problem.
Quest steps in with simple-to-use solutions and products that help run heterogeneous and cobbled-together IT environments. The company's development tools, for instance, allow IT workers to manage heterogeneous database environments and improve the overall quality and performance. Elsewhere, the company's administration tools can make infrastructures more efficient and can create private clouds.
Please read more here:
Can Quest Find Success In Simplicity?
Trying To Patch Big Vendor Gaps
Quest has the unenviable task of trying to make its bones (and not get squashed) amidst the likes of Oracle (ORCL), IBM (IBM), VMware (VMW), BMC (BMC), and CA (CA). The idea here is that these companies often offer complex solutions that are actually difficult for IT personnel to implement and maintain – particularly at smaller concerns that can't throw an army of employees at every IT problem.
Quest steps in with simple-to-use solutions and products that help run heterogeneous and cobbled-together IT environments. The company's development tools, for instance, allow IT workers to manage heterogeneous database environments and improve the overall quality and performance. Elsewhere, the company's administration tools can make infrastructures more efficient and can create private clouds.
Please read more here:
Can Quest Find Success In Simplicity?
Friday, October 21, 2011
Investopedia: Lukewarm Performance At IBM
IBM (NYSE:IBM) can be a frustrating stock to evaluate. On one hand, it really is a tech bellweather with its hands in many different cookie jars. On the other hand, in a tech word that craves growth over almost everything else, IBM's sheer size works against it. And then, of course, there is the quality question. It has been quite a while since analysts have had the same sort of existential worries about IBM that currently plague former tech darlings like Hewlett-Packard (NYSE:HPQ), Dell (Nasdaq:DELL) and Cisco (Nasdaq:CSCO).
A Somewhat Disappointing Third Quarter
IBM missed the average analyst sales estimate and that's all some tech traders will care about when it comes to evaluating this quarter. It's true, year-on-year growth of 8% (3% in constant currency) is not great, and the 2% sequential decline is also concerning.
Read more via the link below:
http://stocks.investopedia.
A Somewhat Disappointing Third Quarter
IBM missed the average analyst sales estimate and that's all some tech traders will care about when it comes to evaluating this quarter. It's true, year-on-year growth of 8% (3% in constant currency) is not great, and the 2% sequential decline is also concerning.
Read more via the link below:
http://stocks.investopedia.
Tuesday, October 18, 2011
Seeking Alpha: VMware Reports Earnings, So Cue The Next Fight
There are certain companies where the valuations and institutional investor love-fests seem to just drive some people to distraction. Salesforce.com (NYSE: CRM) is certainly one, and VMware (NYSE: VMW) is another. Whenever these companies report, bears bring out the long knives and do their level best to flense the company and the stock. While VMware's valuation is indeed rich by almost any measurement you name, the fact remains that VMware delivers oodles of growth and institutional tech investors lust for growth above all else.
Third Quarter Results – Is Good Good Enough?
VMware reported 32% year-on-year growth and 2% sequential growth – excellent results when compared with software giants like IBM (NYSE: IBM) and Oracle (Nasdaq: ORCL) and quite strong relative to smaller growth stories like Red Hat (NYSE: RHT). Of course, this being VMware there has to be a “but” to it.
To read more, click the link:
VMware Reports Earnings, So Cue The Next Fight
Third Quarter Results – Is Good Good Enough?
VMware reported 32% year-on-year growth and 2% sequential growth – excellent results when compared with software giants like IBM (NYSE: IBM) and Oracle (Nasdaq: ORCL) and quite strong relative to smaller growth stories like Red Hat (NYSE: RHT). Of course, this being VMware there has to be a “but” to it.
To read more, click the link:
VMware Reports Earnings, So Cue The Next Fight
Thursday, July 21, 2011
Investopedia: Big Blue Still Making The Green
For better or worse, IBM (NYSE:IBM) basically tracks the market for tech spending. That makes it a fine one-decision option for investors wanting general tech exposure, but it also means that investors should not expect leading-edge growth. IBM's results suggest that the tech market is still fairly healthy, and the valuation suggests investors still do not fully appreciate the company's virtues.
Services Rebound in Q2
IBM posted an all-around solid performance in the second quarter, as revenue exceeded even the high end of the analyst range. Reported revenue rose 12% for the quarter on an annual basis and 8% sequentially. Foreign currency was a powerful factor this quarter, as constant currency growth was 5% on an annual basis.
To continue, please follow the link below:
http://stocks.investopedia.
Services Rebound in Q2
IBM posted an all-around solid performance in the second quarter, as revenue exceeded even the high end of the analyst range. Reported revenue rose 12% for the quarter on an annual basis and 8% sequentially. Foreign currency was a powerful factor this quarter, as constant currency growth was 5% on an annual basis.
To continue, please follow the link below:
http://stocks.investopedia.
Monday, May 16, 2011
Investopedia: CA - Quality Is There, Growth Is Not
Looking only at cash flow, CA Technologies (NYSE:CA) should be a slam-dunk for value investors. The company produces a lot of cash flow, has a strong position in its core markets, and provides software that is critical enough to its customers' operations that switch-overs to competitors' products are not undertaken lightly.
To read the full piece, please click the link:
http://stocks.investopedia.
But then there is the growth problem. CA Technologies just is not growing that much, has not grown much in a long time, and serves a market (mainframes) that seems to be in inexorable decline. Given the relative scarcity of technology value investors, then, CA is a stock may well be much too cheap and yet could languish anyway.
A Fiscal Fourth Quarter that Was Not Strong
Sometimes companies report earnings that look bad at first and get better with further exploration. In other cases, the opposite is true. It looks like CA Technologies belongs in that second category.
To read the full piece, please click the link:
http://stocks.investopedia.
Monday, April 25, 2011
Investopedia: Signings A Small Thorn In IBM's Paw
Old-tech hasn't been getting much love lately, but this earnings cycle may help bring investors back to many of these old-school tech names. For although weak signings in the service business may send some investors to the sidelines, IBM (NYSE:IBM) reported an otherwise solid quarter and Big Blue remains a respectable less-risk play on technology.
A Mostly Solid First Quarter
IBM reported top-line growth of 8%, adjusted down to 5% on a constant currency basis. Growth was led by the Systems and Technology business (hardware, mostly), which posted 19% growth with strong mainframe and UNIX business. Software grew 6% this time around, while the services business rose by a like amount.
IBM also delivered solid operating leverage for the first quarter, though readers should realize that there are a lot of adjustments and moving parts here and the numbers will vary from investor to investor depending upon what charges they choose to add back. Nevertheless, gross margin ticked up almost a full point, while operating margin expanded nicely as adjusted operating profits grew more than 20%.
Continue on below:
http://stocks.investopedia.
A Mostly Solid First Quarter
IBM reported top-line growth of 8%, adjusted down to 5% on a constant currency basis. Growth was led by the Systems and Technology business (hardware, mostly), which posted 19% growth with strong mainframe and UNIX business. Software grew 6% this time around, while the services business rose by a like amount.
IBM also delivered solid operating leverage for the first quarter, though readers should realize that there are a lot of adjustments and moving parts here and the numbers will vary from investor to investor depending upon what charges they choose to add back. Nevertheless, gross margin ticked up almost a full point, while operating margin expanded nicely as adjusted operating profits grew more than 20%.
Continue on below:
http://stocks.investopedia.
Investopedia: VMware Singes The Shorts ... Again
Like it or not, "early" and "wrong" can mean the same thing in investing. It is hard to argue that VMware's (NYSE:VMW) valuation makes much sense or will be sustainable, but shorting this name has been a tricky proposition over the past couple of years. So even if the skeptics are right that VMware is apt to hit a wall in terms of growth and market penetration, this could still be a case where Wall Street's ability to remain irrational outlasts an individual investor's ability to stay short and remain solvent.
Another Strong Quarter
Beating estimates is nothing new here, and VMware once again outpaced even the high end of its revenue estimate range. Reported revenue jumped 33% this quarter, with license revenue growing 34% (to roughly half the total). Billings were also quite strong (up 44%), and the company has roughly $2 billion in deferred revenue on the books. Of the company's bookings, 22% were enterprise license agreements (ELAs) and that percentage continues to improve.
There was also strong momentum on the profitability side of the business. Operating income (on a non-GAAP basis) jumped 44% and operating margin rose more than two full points. What's important here is that VMware is not delivering this growth by stinting on its future - R&D spending rose 23% this quarter (again on an adjusted basis), while general and administrative expenses have stayed under control.
To continue, please click the link:
http://stocks.investopedia.
Another Strong Quarter
Beating estimates is nothing new here, and VMware once again outpaced even the high end of its revenue estimate range. Reported revenue jumped 33% this quarter, with license revenue growing 34% (to roughly half the total). Billings were also quite strong (up 44%), and the company has roughly $2 billion in deferred revenue on the books. Of the company's bookings, 22% were enterprise license agreements (ELAs) and that percentage continues to improve.
There was also strong momentum on the profitability side of the business. Operating income (on a non-GAAP basis) jumped 44% and operating margin rose more than two full points. What's important here is that VMware is not delivering this growth by stinting on its future - R&D spending rose 23% this quarter (again on an adjusted basis), while general and administrative expenses have stayed under control.
To continue, please click the link:
http://stocks.investopedia.
Thursday, January 20, 2011
Investopedia: Big, Blue, And Kinda Cheap
If investors are looking for a one-stop shop in technology, IBM (NYSE:IBM) is a good candidate. The company makes mainframes, servers, develops all kinds of software and is a leading provider of technology services and outsourcing. Of course, there are no free lunches, and investors pay for IBM's ubiquity in lower growth and widespread competition. All of that being said, investors may want to check out this name as a later-cycle undervalued tech play.
The Quarter That Was
By almost all accounts, IBM had a solid end to its fiscal year. Revenue climbed a little less than 7%, with systems (hardware) leading the way at 21% growth, software following at 7% (12% on an adjusted basis), and services lagging at 2% growth. Systems revenue was helped by strong refresh cycle in System Z (up 69%), while System X and storage were also reasonably strong. Although service revenue growth was sluggish this quarter, the company did report very strong bookings.
IBM did well in leveraging this additional growth into profits. Gross margin improved about 70 basis points (to 49%), though weakness in services was a dead weight. Operating income grew 9% in the period, and the company saw an approximate 80 basis point improvement in operating margin. Looking at the segment pretax margin data, it was no surprise to see strong software margins, but it might surprise some to see that IBM's hardware business is actually more profitable than its service business.
Looking Through and Ahead
As IBM's fourth-quarter numbers suggest, services have not rebounded to the same extent as systems and software. Then again, on an industry-wide basis they did not fall as much either during the worst of the recession.
Continue on by clicking the following link:
http://stocks.investopedia.
The Quarter That Was
By almost all accounts, IBM had a solid end to its fiscal year. Revenue climbed a little less than 7%, with systems (hardware) leading the way at 21% growth, software following at 7% (12% on an adjusted basis), and services lagging at 2% growth. Systems revenue was helped by strong refresh cycle in System Z (up 69%), while System X and storage were also reasonably strong. Although service revenue growth was sluggish this quarter, the company did report very strong bookings.
IBM did well in leveraging this additional growth into profits. Gross margin improved about 70 basis points (to 49%), though weakness in services was a dead weight. Operating income grew 9% in the period, and the company saw an approximate 80 basis point improvement in operating margin. Looking at the segment pretax margin data, it was no surprise to see strong software margins, but it might surprise some to see that IBM's hardware business is actually more profitable than its service business.
Looking Through and Ahead
As IBM's fourth-quarter numbers suggest, services have not rebounded to the same extent as systems and software. Then again, on an industry-wide basis they did not fall as much either during the worst of the recession.
Continue on by clicking the following link:
http://stocks.investopedia.
Friday, January 7, 2011
Investopedia: Will 2011 Be Another Wild Year In Software?
Perhaps more than any other sector in 2011, M&A played a major role in valuations and investor expectations in software in 2010. With companies increasingly comfortable with the economic recovery and their own balance sheets, and an insatiable demand from Wall Street for growth and so-called catalysts, 2011 could be yet another year of above-average M&A activities. Not only is this good news for the large investment banks that will likely win the advisory business for these deals, but software investors may benefit from the tailwind as well.
What are some of the names that investors might want to watch in 2011?
BMC: Customers First
In broad terms, BMC Software (NYSE:BMC) helps its customers manage their IT environment - an increasingly important task as virtualization and cloud computing make what was already a complex job even more difficult. What BMC offers is a lot of what might be considered "blocking and tackling"; monitoring systems for equipment failure and allocating more servers in response to demand surges may not seem exciting, but they are important to the overall operation of a company's IT. BMC's relatively lower growth rate probably will not prompt a huge buyout valuation, but this could be a useful "back filling" acquisition for a tech company that wants a well-regarded, very sticky software provider. (For more, see The Next Cloud-Computing Takeovers.)
Searching for Dividends
Check Point Software (Nasdaq:CHKP) is a rather rare bird in software these days - a company with good growth prospects (analysts expect double-digit revenue growth), respectable returns on capital and a valuation that actually does not look ridiculous. As a leader in security, particularly in the firewall and VPN space, Check Point is strongest in markets that used to be hot but still remain essential and quite profitable. Accordingly, a deal for Check Point could be one of those transactions that generates little buzz for the buyer at the time of the deal, but pays dividends over time.
Please click below for the full piece:
http://stocks.investopedia.
What are some of the names that investors might want to watch in 2011?
BMC: Customers First
In broad terms, BMC Software (NYSE:BMC) helps its customers manage their IT environment - an increasingly important task as virtualization and cloud computing make what was already a complex job even more difficult. What BMC offers is a lot of what might be considered "blocking and tackling"; monitoring systems for equipment failure and allocating more servers in response to demand surges may not seem exciting, but they are important to the overall operation of a company's IT. BMC's relatively lower growth rate probably will not prompt a huge buyout valuation, but this could be a useful "back filling" acquisition for a tech company that wants a well-regarded, very sticky software provider. (For more, see The Next Cloud-Computing Takeovers.)
Searching for Dividends
Check Point Software (Nasdaq:CHKP) is a rather rare bird in software these days - a company with good growth prospects (analysts expect double-digit revenue growth), respectable returns on capital and a valuation that actually does not look ridiculous. As a leader in security, particularly in the firewall and VPN space, Check Point is strongest in markets that used to be hot but still remain essential and quite profitable. Accordingly, a deal for Check Point could be one of those transactions that generates little buzz for the buyer at the time of the deal, but pays dividends over time.
Please click below for the full piece:
http://stocks.investopedia.
Friday, July 30, 2010
Quest Software (Insert Monty Python Joke Here)
When I decided to push a sizable chunk of my cash into the market a few months ago, I basically walked right into a buzzsaw (thank you, Monsanto (NYSE: MON)!). One of the stocks I picked up then that *has* worked is Quest Software (Nasdaq: QSFT) and last night's earnings report has me feeling a bit happier than usual going into the weekend.
Revenue in the second quarter rose about 13% to $186M. That is not an eye-popping result, but it was almost 10% better than the average guess on the Street. Quest also produced about 350 basis points of operating margin improvement (non-GAAP), and a four-cent beat on EPS.
Digging a bit into the details, license revenue jumped 25% from last year, and I am glad to see this. License revenue growth has been a bit sluggish of late, and it is hard for me to see how the stock goes higher without a revival in this line-item.
Service revenue rose 6% year over year, while maintenance revenue rose 4%. I would like to see a better performance here, but I am not going to worry about it just yet.
The company's Windows business, its largest segment, was also its best grower. Although the database business did show the same magnitude of growth, at least it is growing again. The company's virtualization business did pretty well this period, but at about 10% of the total revenue base it does not really move the needle yet.
Along with earnings, the company announced the acquisition of Surgient - a company that specializes in the deployment and management of secure cloud infrastructure platforms. Given that this is basically "tools for cloud", it makes sense that Quest would be interested. As the IT world moves more and more towards the cloud approach, Quest is going to need to have tools available if it wants to maintain its growth prospects.
All in all, not much changes with this quarter, other than that I feel a little more comfortable with the "return to growth" scenario that motivated my initial purchase of the shares. The risks here are likewise still the same - that large vendors like Microsoft (Nasdaq: MSFT), IBM (NYSE: IBM), and Oracle (Nasdaq: ORCL) will squeeze Quest out of the market by incorporating more free tools into their products, and/or that others like BMC (NYSE: BMC) and CA (NYSE: CA) will basically just out-compete Quest.
Of course, counter-balancing that is the possibility of Quest getting a "if you can't beat them, buy them" bid.
I am still long Quest and I still think the shares are worth upwards of $26 a share. Please note, though, that my history in software stocks is gruesome - I bought Quest mostly as an experiment in a new way of approaching and analyzing the sector, so we will see how that works out.
Disclosure - I own shares of Monsanto and Quest Software
Revenue in the second quarter rose about 13% to $186M. That is not an eye-popping result, but it was almost 10% better than the average guess on the Street. Quest also produced about 350 basis points of operating margin improvement (non-GAAP), and a four-cent beat on EPS.
Digging a bit into the details, license revenue jumped 25% from last year, and I am glad to see this. License revenue growth has been a bit sluggish of late, and it is hard for me to see how the stock goes higher without a revival in this line-item.
Service revenue rose 6% year over year, while maintenance revenue rose 4%. I would like to see a better performance here, but I am not going to worry about it just yet.
The company's Windows business, its largest segment, was also its best grower. Although the database business did show the same magnitude of growth, at least it is growing again. The company's virtualization business did pretty well this period, but at about 10% of the total revenue base it does not really move the needle yet.
Along with earnings, the company announced the acquisition of Surgient - a company that specializes in the deployment and management of secure cloud infrastructure platforms. Given that this is basically "tools for cloud", it makes sense that Quest would be interested. As the IT world moves more and more towards the cloud approach, Quest is going to need to have tools available if it wants to maintain its growth prospects.
All in all, not much changes with this quarter, other than that I feel a little more comfortable with the "return to growth" scenario that motivated my initial purchase of the shares. The risks here are likewise still the same - that large vendors like Microsoft (Nasdaq: MSFT), IBM (NYSE: IBM), and Oracle (Nasdaq: ORCL) will squeeze Quest out of the market by incorporating more free tools into their products, and/or that others like BMC (NYSE: BMC) and CA (NYSE: CA) will basically just out-compete Quest.
Of course, counter-balancing that is the possibility of Quest getting a "if you can't beat them, buy them" bid.
I am still long Quest and I still think the shares are worth upwards of $26 a share. Please note, though, that my history in software stocks is gruesome - I bought Quest mostly as an experiment in a new way of approaching and analyzing the sector, so we will see how that works out.
Disclosure - I own shares of Monsanto and Quest Software
Monday, June 28, 2010
A Good Omen From Oracle
The bigger a business gets, the more complicated it becomes. The more complicated a business becomes, the larger its IT needs get. That is my five-second summary on Oracle's (Nasdaq: ORCL) basic raison d'etre and why I continue to be optimistic about the company's future.
The Quarter That Was
Oracle generally has a reputation for delivering the goods, and this quarter was no exception. Although revenue was in line with the average analyst guess, 39% growth to about $9.5 billion was a solid result. Even stripping out the non-organic boost from the acquisition of Sun, 12% growth was a solid result. Oracle also delivered very solid operating performance and beat the bottom-line estimate (adjusted for items) by more than 10%. (For related reading, take a look at The Wonderful World Of Mergers.)
For the full piece:
http://stocks.investopedia.
The Quarter That Was
Oracle generally has a reputation for delivering the goods, and this quarter was no exception. Although revenue was in line with the average analyst guess, 39% growth to about $9.5 billion was a solid result. Even stripping out the non-organic boost from the acquisition of Sun, 12% growth was a solid result. Oracle also delivered very solid operating performance and beat the bottom-line estimate (adjusted for items) by more than 10%. (For related reading, take a look at The Wonderful World Of Mergers.)
For the full piece:
http://stocks.investopedia.
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