$20/share? I would be far less sanguine about the short-term and long-term prospects. What information do you have on the sales performance of the Centura product line? Their last 2 Q's have been (marginally) profitable. However, they had Net Revenues of $15.393M in the March Q and of $15.646M in the June Q. During their same period, their Deferred Revenue balance declined from $28.144M to $25M. In other words, excluding the $3.144M that was released from this decline in the Deferred Revenue balance, their Q to Q Net Revenues actually declined by $2.891M. As I understand it, the Centura products only began shipping in May of this year. The September Q would be the first real indication of how this product line is faring.
Their Balance Sheet is not exactly healthy. The following is from their latest 10-Q:
"NEED FOR ADDITIONAL FINANCING. Additional financing may be necessary to meet NASDAQ minimum net worth requirements. Furthermore, the Company is dependent upon achieving a reasonable operating performance to satisfy its current and future financing needs. During 1995, the Company completed a private debt placement with Computer Associates International of approximately $10 million dollars. If the Company needs further financing, there can be no assurance that it will be available on reasonable terms or at
all. Any additional equity financing will result in dilution to the Company's stockholders. "
Also, under the terms of the settlement agreement of its shareholders class action law suit, the company is obligated to issue a minimum of 1.875M and a maximum of 2.5M additional shares- an additional overhang of upto 19% of the currently outstanding shares- a further dilution.
I too wish Umang Gupta had been more receptive to the idea of a take-over. But as of June 30, 1996, he still held almost 2.2M shares for a 17% stake in the company. So, it was his loss as well. He must have really believed the company could do better on its own. Maybe it still can. But I think this Q's results will be a crucial indicator, one way or another. Over 170,000 shares traded today and the stock moved down significantly. This could suggest bad news leaking out. |
