Investopedia: Progress Software Showing Signs Of Life In A Tough Market

More than a year into large-scale efforts to reshape the organization, Progress Software (Nasdaq:PRGS) is hinting that its transition toward faster-growing markets could pay off. The company still has much to prove, and I would not ignore the risk of competition from large, entrenched rivals like IBM (NYSE:IBM), Oracle (Nasdaq:ORCL), and Microsoft (Nasdaq:MSFT), nor smaller rivals like TIBCO (Nasdaq: TIBX) and Software AG (Nasdaq:STWRY). At the same time, the company's significant cash balance, cash generating capabilities, and large maintenance revenue base all provide more than the normal margin of breathing room to execute this transformation.

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Investopedia: Relief At Red Hat, But The Long-Term Growth Debate Will Rage On

I realize that Rule 36 of the internet says that you cannot challenge or question a stock in any fashion without being “secretly short”, but I think it's worth asking some questions about Red Hat (NYSE:RHT). On one hand, I do like the cash flow that this business produces, and I do believe that there are real opportunities for the company in middleware, data center, and cloud. On the other hand, the trend in billings and margins makes me wonder if this company is already transitioning out of its growth phase. Accordingly, while I wouldn't bet against this stock with my own money, it's hard for me to scoot this name up my watch list to a point where I'd seriously consider buying it with my own money.

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Investopedia: IBM Makes It Official - Tech Has Some Troubles

Although I doubt there were many investors still holding serious hope that the first quarter of 2013 was going to end up being a good one for tech companies, IBM (NYSE:IBM) likely snuffed out those hopes with an uncommonly weak quarter. With Big Blue missing for the first time in eight years, and missing across the board, it's pretty clear that business conditions have slowed markedly. Management remains optimistic that business will recover with a strong second half, but even with the big post-earnings decline these shares are not exactly cheap.

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Investopedia: Red Hat's Valuation Looks More Reasonable, But Expectations Could Be Problematic

There's room for more than one successful model in the software world, and not every company has to be IBM (NYSE:IBM) or Oracle (Nasdaq:ORCL). To that end, cloud-based models like Salesforce.com (NYSE:CRM) and service/support-oriented models like Red Hat (NYSE:RHT) can work in terms of generating attractive revenue and free cash flow growth rates. What's key, though, is understanding what's different about these models and adjusting expectations accordingly, and that may still be a significant source of risk to Red Hat investors.

Fiscal Q4 Numbers Came In Weaker Than Expected
Like Oracle and TIBCO (Nasdaq:TIBX) before it, Red Hat delivered a relatively disappointing quarterly result, though the magnitude of the disappoint was different. Even so, investors may do well to take a more cautious view of underlying growth here.

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Investopedia: VMware Stumbles And The Street Spares No Mercy

This earnings cycle has been relatively better than feared for most tech stocks so far, but VMware Inc. (NYSE:VMW) is going to go down as a glaring exception. While fourth quarter results were generally solid relative to expectations, the Street absolutely hated what management had to say about lower overall growth in 2013 and sales growth more heavily weighted to the second half. The stock's nearly 20% drop as of this writing seems overdone, but VMware is going to have to rebuild its credibility before valuation matters again.

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Investopedia: Do Weak Bookings Prove Anything About VMware?

For investors bearish on VMware (NYSE:VMW), this was an interesting quarter. Plenty of other software companies (such as IBM (NYSE:IBM), Microsoft (Nasdaq:MSFT) and Oracle (Nasdaq:ORCL)) have talked about weak macro conditions, but VMware's stock was weak going into this report and the bookings number did look pretty soft. Although I happen to be more positive about the long-term fundamentals for VMware, the valuation still leaves plenty of risk for this once (and future?) growth darling.

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Investopedia: Red Hat Keeps Booking The Dealds, But Is It Growing Enough?

I'll give credit where it's due - Red Hat (NYSE:RHT) did a great job with its Linux business, and management has shown prudent aggression when it comes to building next acts in middleware, storage, virtualization and cloud. The question, though, is whether the company can deliver the sort of growth and margin leverage that the valuation assumes. So far, it's not looking like a sure thing.

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Investopedia: Rumors Roil VMware

Virtualization leader VMware (NYSE:VMW) has been an exceptional stock for the past three years and the business has grown nicely on the back of server virtualization, system virtualization and management tools. Sometimes, though, I wonder if investors overlook a key part of the VMware story - namely, that EMC (NYSE:EMC) owns 80% or so of the business and can largely do as it pleases with it.

That is coming home to roost with a vengeance on Tuesday, as rumors have spread widely that EMC is replacing VMware's CEO. While these reports have not been confirmed as of this writing, such a change would be a considerable shake-up for investors and would certainly introduce new risk into the business.

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Investopedia: Red hat Seems Ill-Fitting

Complaining about valuation with tech stocks is a little like complaining about diving in European soccer - none of the true fans really seem to care. That said, one of the ever-present lessons of the stock market is that valuation always matters eventually, and flagging growth tends to accelerate that day of reckoning. While Red Hat (NYSE:RHT) has had a volatile growth trajectory in its past and that means investors need to be careful about overreacting to any particular quarter, the results from Thursday night do nothing to ease worries about the company's growth.

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Investopedia: VMware Priced For Near-Perfection, But Results Not Perfect

Premium pricing has never been an obstacle to success in growth stock investing, but uncertainty about growth rates often is. To that end, while VMware (NYSE:VMW) is an operationally excellent software company, and the concerns about growth momentum do have a real bearing on its qualities as a growth stock. More to the point, this is a company that needs to see reported growth rates rebound if premium valuation is going to stay in place.

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Investopedia: TIBCO Building Its Big Data Niche

Investors don't get especially big windows to buy undervalued tech growth. While TIBCO Software (Nasdaq:TIBX) actually did look undervalued about three months ago, the stock has shot up by about one-third since then. The question, though, is whether investors should still stick with a story that looks to be improving. If TIBCO can continue to build its reputation in applications like complex event processing, visualization, and real-time business intelligence, scarcity value could continue to push this stock.

A Strong Start to the Year
TIBCO didn't beat by a lot this quarter, but it was still a strong quarter. Reported revenue rose 23% and license revenue rose 19% on a constant currency basis, and that's good. What I think is more impressive is the 18% growth in deferred revenue.

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Investopedia: Red Hat Back To More Familiar Growth

There's nothing like a great quarter to make investors forget about an allegedly bad quarter. While Red Hat (NYSE:RHT) shares were weak after the fiscal third quarter results, the fourth quarter results showed much of the strength that investors have become accustomed to in this name. Valuation is problematic, but that's hardly unusual with tech stories and it likely won't matter much until the market goes into another "risk-off" phase.

Companies like IBM (NYSE:IBM) and Oracle (Nasdaq:ORCL) set a fairly positive tone for the software market and Red Hat followed in that wake. Revenue rose 25% year over year. The company's self-reported billings proxy number rose 31% - more than 10% ahead of sell-side expectations and showing considerable acceleration from the third quarter.

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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.)

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http://stocks.investopedia.com/stock-analysis/2012/Heres-How-The-Street-May-Care-About-CA-Again-CA-BMC-IBM-CPWR0110.aspx

Investopedia: Progress Software - A GARP Story With No "Guh"

On more than one occasion, I have joked that so-called growth at a reasonable price (GARP) investors eventually have to choose sides and go with the "guh" (that is, growth) or the "arp" (value discipline). That's especially true in technology, where investors are not all that often interested in rewarding value-priced stories that lack growth. With that in mind, Progress Software (Nasdaq:PRGS) can indeed claim that these shares are undervalued, but without a better growth trajectory it may just not matter.

No Growth This Quarter  
Progress Software is in the middle of a business transition, but the new growth opportunities are not materializing fast enough to offset the erosion in older platforms. Revenue fell 6% this quarter, with a 14% drop in license revenue (essentially new business). Worryingly, the company's sizable maintenance revenue saw a 1% decline.

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Investopedia: TIBCO And The GARP Paradox

Value investors, and their quasi-traitor cousins GARP investors, often find little to buy in the software space. All too often, any software company priced like a bargain is likely to struggle to grow much (and will likely underperform the estimates that make it look cheap) or get much love from the typical tech investor crowd. That makes TIBCO (Nasdaq:TIBX) an intriguing but risky idea. While this company's valuation and their position as the last small independent integration vendor are appealing, any value investor is wise to be cautious about why this software stock seems appealing. (For related reading, see Stock-Picking Strategies: Value Investing.)  

A Fine End to the Year  
Despite the disappointing Oracle (Nasdaq:ORCL) reports that spooked investors, TIBCO reported a pretty good quarter. Revenue rose 20% for the quarter and slightly beat the average estimate. Growth was a little stronger in the slightly larger service/maintenance segment (up about 22%), while the licensing line showed around 17% growth and the company boasted of 28 deals over $1M for the quarter.

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Investopedia: A Minor Slip Sends Red Hat Skidding

Sometimes it seems that Wall Street drives the news more than the news drives Wall Street. In other words, investors interpret events and information in ways that are consistent with how they already want to view the world. Maybe that explains why stocks often sell off on good news or rise on bad news. In the case of Red Hat (NYSE:RHT), for instance, this software and service provider showed a fair bit of financial progress in the fiscal third quarter, but Wall Street seems hung up on a minor guidance revision and appears to be looking for an excuse to sell.

Solid Third Quarter Performance  
Red Hat announced that revenue rose 23% for the Q3, with subscription revenue up about 24%. Billings growth (which is revenue plus the change in deferred revenue) was up 23% for the period. For the quarter, Red Hat did well with large deals - signing 27 deals worth more than $1 million and 5 deals in excess of $5 million.

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Investopedia: SAP Pays Up And Accelerates Its SaaS Development

One way or another, growth costs money. Large software companies, like Microsoft (Nasdaq: MSFT), Oracle (Nasdaq: ORCL) and International Business Machine (NYSE: IBM), spend piles of money on internal software development, but the reality is that the big boys still often have to bring out their wallets to compliment or compensate their own efforts. To that end, SAP AG (NYSE: SAP) is paying quite a lot for human resource software-as-a-service (SaaS) leader, SuccessFactors (NYSE: SFSF), but it would seem the alternative was even less appealing. (To know more about technology industry, read: A Primer On Investing In The Tech Industry. )


The Deal 
SAP announced over the weekend that it was acquiring SuccessFactors in an all-cash deal worth about $3.4 billion. SAP will pay SuccessFactors shareholders $40 a share, a 52% premium to the Dec. 2, 2011, close and near to the all-time high for the stock. SAP will initially pay for this deal with cash on hand and a loan.


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Investopedia: Profitless Prosperity For Salesforce.com?

I'm not too proud to admit that Salesforce.com (NYSE:CRM) confuses me on many levels. The organic sales growth is clearly there, but these are still early days, and it's uncertain whether Salesforce.com can withstand Microsoft (Nasdaq:MSFT), Oracle (Nasdaq:ORCL) and SAP (NYSE:SAP) taking serious aim at the cloud business. But, even more important is the question of Salesforce.com's profitability - the company's profitability under the generally accepted accounting principles (GAAP) looks rather lousy (as do the returns on capital), but the sell-side is not bothered by this, and the cash flow picture is more encouraging. All in all, though, this looks like an expensive stock that has to continue to execute flawlessly to justify its price.

Mixed Fiscal Third Quarter Results  
While some will focus on what looks like encouraging guidance from management, the reported results for the fiscal third quarter have some hair on them. Reported revenue rose 36% from last year and 7% from the last quarter, with constant currency growth of 34%. Subscription revenue rose 36%, deferred revenue rose 32% and billings rose 29% - dipping below the psychologically important 30% growth rate.

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Investopedia: Microsoft - Little Expected, Little Delivered

Software giant Microsoft (Nasdaq:MSFT) has hit another one of those pockets where there is just not much going on to excite investors. The next iteration of Windows 8 won't come out for months, the company is annualizing the Office 2010 launch, the PC market is soft, and a lot of the company's enterprise products are still building up some momentum. So while this stock looks quite cheap on its cash flow generation potential, value-oriented investors interested in this name have to bring ample patience with them as well. 

A Ho-Hum First QuarterMicrosoft reported overall revenue growth of 7%, which is not so bad in the broader context of mega-cap tech names like IBM (NYSE:IBM) or Oracle (Nasdaq:ORCL). Revenue from Windows was up just 2% as sluggish domestic PC growth hurt sales and rampant software piracy in regions with high PC growth sapped sales. The server and tools segment showed a nice 10% increase in sales, while the business unit was up almost 8% and entertainment was up more than 9%.

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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.

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VMware Reports Earnings, So Cue The Next Fight