That Robby Stephens guy was all wet. Here are a few facts about the situation:
1. Perhaps most importantly, Robby just changed coverage of SE to a new analyst who has been working as a junior to the previous analyst. The previous guy was Gary Craft, who is a pretty knowledeable guy. The new analyst is Rick Juarez. As you will see below, I think he is not savvy in the ways of the market yet in terms of reading management comments as credible or not, the impact of a call he might make, and the magnitude of impact some factor may have on a company.
2. Harbinger claims that its value added network business is not growing anymore. Rick made the assumption that SE's business won't grow either. But HRBC is hurting because Harbinger's traditional client base is small companies and they are moving to the Internet for EDI. SE's clients are large for the most part, which means that as they target the smaller companies, it is an incremental revenue opportunity. The lack of growth for HRBC also likely indicates that SE is gaining market share within that customer base, probably because SE can leverage its relationships with its large clients to draw in the smaller trading partners as customers.
3. Rick also thinks that the ERP vendors like SAP, Peoplesoft and Oracle will get into EC and EDI soon. Again, HRBC tried to site this as a reason for their lower expectations. But these guys are
busy trying to move from the back office to the front office and supply chain and are fighting each other. They will not get into EC for at least 2 years. And while they have lots of experience dealing with improving the internal efficiency of organizations, they have little experience working with a company's partners to improve that relationship. That is all SE has done since it began.
4. Rick claims that SE lowered Street guidance. That is blatantly false. Rick was at $150.8 million in revs for the Sept. quarter. The rest of the Street was at $145-147 million. All they told Rick to do was come back to the range. They didn't say that range was not acceptable and every indication I have is that those numbers are fine.
5. Rick made another rookie mistake by not giving the company a heads up before making his call. That's standard practice when you make a big call and it also gives the company the opportunity to tell an analyst if he's way off base.
Bottom line, in this market, people are freaking out and in general, people do not know their companies as well as they should (including some sell side analysts). That just gives us the opportunity to capitalize on eveyone else's idiotic panic and make some easy money.
Turs |
