some thoughts and observations:
From what I can tell, the biggest problem with ROSS' stock price is its sector. A year or two ago, the typical valuation to annual sales multiple in this ector was something like 3X - 5X. At that rate, ROSS would be 10 - 15. Unfortunately, this sector has had a pile of problems ranging from the likes of PSFT, BAAN and SAP, to all of the smaller ERP guys.
ROSS' growth and profits are actually a very bright note, but the company is just associated with a bunch of sector problems not directly of their own making, ranging from Y2K, poor execution, margin cutting, increased competition, etc.
I think ROSS is well positioned in an excellent niche. There are thousands of mid-tier companies who need to implement a highly-capable ERP system - either because they don't have one now, or because their business has grown sufficiently to the point where they need a new/better one.
It will be extraordinarily difficult for SAP, Baan and/or PSFT to move to the mid-tier - their products are too complex, and their cost of implementation too great. Their model can not support $250K deals - the big guys must do deals in the $1MM - 10MM range. Those sized deals are just too big and too pricey for most ROSS customers - and they just don't need it.
ROSS has also been through a tough couple of years - they've gotten their sales, marketing, technical and finance house in order. ROSS has built one of the best, if not the best, ERP systems for mid-tier companies and they appear to be ahead of their mid-tier competition.
I wonder if SAP or PSFT or Baan will see the light and acquire ROSS in order to have a terrific offering targeting the mid-tier companies? The company is in great shape, and is a steal. Perhaps if one of the large cap ERP companies acquires someone else, another ERP company will feel the pressure to acquire, as well.
If I were Dennis Vohs, and I know he sees these postings, I'd engage an investment banker and see if I could sell this company for $10/share. The other thing I'd do is develop some sort of all-out Internet initiative, perhaps targeting e-commerce vendors, and play that up, to get an Internet-infrastructure type of valuation and break out of the stagnated ERP sector.
The other good news, BTW, is that if the valuations in the sector wake up, ROSS is well-positioned to move. |
