DillonFan makes are great case on Yahoo chat....HYSL will test new lows.
In reading the various posts on HYSL, it is easy to find opinions of bullish investors who believe that the stock is oversold. However, taking fear and greed out of the equation is key to sound investing.
Based on the validity of the comments made by DillonFan on yahoo chat, this stock could very well test the new lows of last week before hitting new near-term highs. Back in late Sept. and early Oct., no single investor would ever imagine that HYSL could, should or would trade below $20/sh. Well, it hit $12/sh. before rebounding...so anything is possible.
Here are DillonFan's comments:
"As an investor who wants to find every reason to love this company and its security, there are some reasons for every investor to be concerned over the near term and the fact that we have not seen the lows on this stock. The are as follows:
Yes, Mr. Imbler told money managers at Invesco (based in Denver) that revenues were not on target to meet Wall Street's concensus for this quarter. He noted that while the Essbase sales remain strong,
Enterprise is performing rather poorly and Pillar is behind schedule. What does this mean? Sales reps are having an easier time selling Essbase into its existing customer base and is not presently focused on selling the Hyperion "buy" apps (vs. "build" apps like OLAP tools and technology). In turn, this is leading to a
slowing in license revenue growth.
In last quarter's results, Enterprise and Pillar only accounted for 45% of total software sales, while Essbase made up the other 55%. Given that Hyperion Software was almost 4 times the size of Arbor Software, the fact that the combined entity is not selling Enterprise and Pillar as well as Essbase, does not bode well for future license rev. growth (a key indicator to many analysts on Wall Street).
Second, although Mr. Imbler noted that revenues may fall short this quarter, management is comfortable with earnings concensus. How can that be? Well, the classical response is OPEX cost savings related to
the merger. However, if you remember, the company beat the street last quarter by $0.08 via a lower than expected head count. Management
reassured analysts on the conference call that the head count issue would be resolved in the present quarter. Unfortunately, this is not the case. The company held an Open House for prospective employees
on Dec. 9/10 to fill the void in headcounts. Of course, management is comfortable with Q2 earnings concensus, they are using the same tricks as the last quarter to manage earnings. That will not sit well with
analysts nor shareholders.
Third, it is apparent that the bi-coastal merger is not functioning as smoothly as many had hoped. Recently, Mr. Dillon had to send out an all company memo telling employees to stop watching the stock every 15
minutes for the volatility in HYSL is likely to continue over the forseeable future. He also noted that the company is looking to cut costs via cutting back on promotional material and that the Sales force should be the only ones to contact the customer. Apparently, different parts of the organization have been calling on
customers for various requests. This has not only upset some big customers, it has caused bickering among the sales force and created "walls" between departments....not the sign of a harmonious merger.
In sum, there still remain a number of issues that the company needs to work out. While this company has tremendous potential in the future, they are in jeopardy of screwing things up; not only internally, but with Wall Street and investors alike. This stock will be punished severly if it fails to provide a warning to investors before earnings are released.
This stock will see the teens again before it sees new highs! Watch for a retest of the lows over the near term."
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