Re: significance of the buyback
Funny, I see the importance exactly the other way 'round; the price cap means little, the number of shares (i.e. the total $ amount) a lot:
A) PRICE
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I don't think the "up to $10/share" cap signals perceived value: I see it just as an appropriate limit on the commitment, given the current stock price and the cash balance at hand (see below).
B) NUMBER OF SHARES
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Eventhough 1m shares is just 1.7% of outstanding diluted shares, earmarking up to $10m for a buyback is a significant gesture of confidence in near term revenue and cash flow growth, given the current cash balance of "only" $82m (per analyst call).
Remember that Del wanted "6 month's operating expenses as cash in the bank to alleviate [corporate customers'] concerns of viability". (analyst call July 22, 97). With continuing quarterly operating expenses now at $38m, which will presumably grow a little due to necessary new hires & marketing cost for new products, as well as some ongoing cash burn for new systems infrastructure (conference call today), the $82m cash level is pretty much where INPR might want/need to keep it, considering Del's stated goal. -- Consequently, spending $7-10 million on a stock buyback only makes sense if (a) cash flow shows signs of improvement in the near term, and/or (b) Fortune 1000 customers show less concern about INPR's viability and don't watch cash balances so closely as part of their buying considerations [which would again fortify (a)].
Regards
PS:
BTW one analyst (Merrill Lynch [?!])cought your point of INPR's minority stake in Starfish (your msg 497). KF confirmed it to be "around" 10%, but since no one has seen the proxy yet, no one knows how the MOT/Starfish deal is really priced.(Not mentioned, but they certainly don't know either, over what time frame these "several hundred million $" will be paid out...) Thus INPR cannot comment or count on any benefits which will eventually come from this deal. ==> in other words: while INPR might get some sizeable additional cash from this in the long term, they certainly did not take this into account for any short term use or benefit. |
