20? Don't think so anytime soon. Maybe a small bump, could be good for day trading to 13 or 14 then a quick bail.
Here's a recent Soundview update on RMDY:
Update Remedy Dec. 9, 1998
(FYE December) F97 F98 F99 Curr. Last Yr. Ago
Ticker: RMDY
Revenue ($M) 129.2 150.5 179 43.2 40.1 38.8
Price: $11.25
EPS .90 .68 .86 .23 .21 .27 52-Wk.
Range: $7.75 - 47.75
Old Revenue
Shrs. Out. (M): 29,500
Old EPS Rating: Hold
We recently met with the CFO from Remedy who was hired permanently prior to
the last quarter. The update on the quarter indicates that the sales hiring
process has stabilized (approximately 20 new heads (177 total), and the new
products should be available in 4Q, but not see meaningful revenue
contribution in F99. Remedy has not changed the outlook for top line or
operating margin for F99 (20% in both areas). We believe the expectations
(reduced after 3Q) are reachable in 4Q, but until we see meaningful
improvement in the predictability of sales and pipeline, we will maintain
our hold rating.
3Q Details:
* Sales Headcount: Attrition in the organization made headcount flat
in 3Q. Management believes sales management and personnel have stabilized
and should be able to report better than 10% growth in sales headcount in
4Q. We need to see evidence of improved sales productivity before we can
increase our confidence in the sales model.
* Balance sheet: RMDY is authorized by the board to continue to
buyback approximately 2.0M more shares, but has not done so this quarter.
* Y2K: The company has seen some issues with Y2K and admitted to
having concerns about the global economic uncertainties and the Y2K impact
to IT budgets, but mostly anecdotal evidence, as opposed to actual budget
lock-downs. We think this will be evident in the second half of F99, and
have reflected this in our numbers.
* Big deals: Large deals like the Lucent contract (an enterprise
internal helpdesk deal) are the strategic direction of the company, however
telesales operation and continuing growth of web-based deals will keep the
ASPs in the 20K range.
* International: 28% of license revenues were from international
operations in 3Q, and we expect this region to be strong this quarter.
Remedy has upgraded international sales (new hires) and will look for Europe
to grow about 40% y/y in Q4.
* Partnerships: Systems Integrator business was strong with a revenue
contribution of about 11% in 3Q, and has not seen any meaningful degradation
in 4Q. Cap Gemini (Europe) and IBM global services (US) are still large
* New Products: AR Web 4.0 (generally available in 4Q) is on track for
release. Additionally, the new purchase requisition applications version
1.0 will be released by the end of 4Q (on plan), but will not sign up to any
revenue contribution in F99 (which would imply a very slow ramp of these
products). F99 will be another critical year for new product rollouts, with
more employees facing applications (T&E, Timecards, etc.)
* Acquisition: Baystone acquisition, a mid-market external CIS vendor
(competes with Onyx, Pivotal, and SalesLogix - all private) will be closed
this quarter. Remedy is entering the CIS space, but we do not expect them to
compete at the Enterprise level with Siebel, Vantive, or Clarify. The deal
will be for about 10M in cash in 4Q and will be taken as a one time charge
of approximately 2.5M in 4Q (with an additional 2.0M in operating charges).
* Competitive landscape: While the low end of the internal help desk
market has been relatively quiet (Network Associates is normally more
aggressive on the marketing side), the high end of the market has several
participants (Peregrine and the redesigned Software Artistry - IBM) which
Remedy intends to compete with more aggressively. We have seen a renewed
effort from these vendors and expect the competition to remain stiff in the
high end.
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