Hummingbird Communications Ltd.
Dow Jones Newswires -- January 20, 1999
Once Again, Hummingbird Commun Up Ahead Of Earns
Release
By Lori McLeod
TORONTO (Dow Jones)--In a pattern that's becoming familiar, Hummingbird Communications Ltd.'s
(HUMCF) share price is rising in anticipation of the release of its quarterly results, analysts told Dow
Jones.
Hummingbird is scheduled to report earnings for the first quarter ended Dec. 31 after the market closes
on Thursday. On Friday, Monday and Tuesday, the stock gained 5.90, or 19%, to 36.75. Volume
averaged more than 300,000 shares a day during the three days, more than triple the average daily
volume.
Hummingbird's share price got a similar boost in October before the release of results for the fourth
quarter ended Sept. 30. Both share-price increases resulted from the view that Hummingbird could report
better-than-expected results, combined with speculation about a possible acquisition, said Michel
DeLavergne, an analyst with Dlouhy Investments Inc.
Hummingbird's fourth-quarter results were "in line with or slightly above" analysts' expectations, said
Paul Bradley, an analyst with Canaccord Capital Corp. However, the company revised downward its fiscal
1999 projections at that time, causing its share price to drop.
Hummingbird announced its last major acquisition, of Andyne Computing Ltd., in October 1997, right
around the time it reported its fourth-quarter results. Since then, there has been speculation Hummingbird
will announce its next acquisition in conjunction with quarterly results, Bradley said.
However, Bradley said there's no reason to believe news of an acquisition will accompany Hummingbird's
first-quarter earnings announcement, although Hummingbird has been talking about making another
acquisition for months.
DeLavergne said he expects Hummingbird to make an acquisition in the "not-too-distant future," but
added it could happen "next year or next week."
An acquisition would add to the market's confidence about Hummingbird's growth, Bradley noted.
Larry Rudolf, Hummingbird's senior director of corporate communications, said making an acquisition
on the business-intelligence side of its business is still a "number one priority" for Hummingbird, but that
nothing is imminent. He said the company has about $140 million of cash on hand.
Companies that compete with Hummingbird Communications Ltd.'s (HUMCF)
business-intelligence-software business have been reporting very strong revenue growth lately, analyst
Paul Bradley of Canaccord Capital Corp. noted.
Cognos Inc. (COGNF), Brio Technology Inc. (BRYO), and Business Objects S.A. (BOBJY) have reported
year-over-year revenue growth ranging from almost 25% to more than 70% in their latest quarters,
Bradley said. Hummingbird's Rudolf said the company's intent is that revenues from this sector in fiscal
1999 will be roughly double the fiscal 1998 level. The year-earlier revenue from this group isn't available
because Hummingbird hasn't provided revenue figures by business group.
That side of Hummingbird's business is seen as the key to its growth as sales of its core connectivity
software flatten out, Bradley noted.
In fact, the market would probably be "forgiving" if Hummingbird's first-quarter earnings fell slightly
short of expectations as long as the company showed "excellent" revenue growth from
business-intelligence-software sales, Bradley said.
Both Bradley and analyst Michel DeLavergne of Dlouhy Investments Inc. said they expect Hummingbird's
first-quarter earnings to be in line with expectations. Both said they have maintained their fiscal 1999
earnings estimates since Hummingbird's downward earnings revision in October.
Bradley said he's expecting Hummingbird to report net of 42 cents a share in its first quarter, while
DeLavergne is expecting net of about 40 cents. The First Call mean earnings estimate is 38 cents. The
First Call number was lowered from 42 cents on Jan. 13, but neither analyst could explain the change.
A company spokesman also couldn't explain the revision. He added that Hummingbird's outlook for
revenues of $150 million and net of $1.70 a share in fiscal 1999 are still "absolutely our objectives."
Analyst Paul Bradley of Canaccord Capital Corp. said he's maintaining his "buy" recommendation on
Hummingbird Communications Ltd. (HUMCF). He said he raised his rating from 'hold" in December
because he thought Hummingbird was undervalued.
Bradley said he's expecting net of about $1.70 a share and revenues of about $150 million for
Hummingbird in fiscal 1999, in line with the company's projections.
Analyst Michel DeLavergne of Dlouhy Investments Inc. said his estimates for fiscal 1999 are net of about
$1.65 a share and revenues of about $140 million.
DeLavergne said he's been "more conservative" than Hummingbird about growth in its core
connectivity-software business. He said he expects no growth in this sector in fiscal 1999, in contrast to the
company's forecast of 5% growth.
A company spokesman said growth in this side of its business is slowing, but isn't expected to be flat in
fiscal 1999.
DeLavergne said he has an "accumulate" recommendation on Hummingbird, which he said he will raise
when he sees a "clear signal" that its business-intelligence-software revenue growth is on track.
-By Lori McLeod; 416-943-7800 |
