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Technology Stocks : Hummingbird Comm. (HUMC) -- Ignore unavailable to you. Want to Upgrade?

To: micromike who wrote (1577)	4/29/1998 1:00:00 PM
From: Paul Loucks	Read Replies (4) \| Respond to of 2018

HUM Bull turns Bear I sold my entire HUM position. Outlined below are the reasons: 1) I believe that if you look carefully, you will find that HUM has buried a $1.6M loss by Andyne in Q1. Watch the earnings excluding merger/restructuring/intangibles. Look at announced profit for HUM in Q1 ($8.6M) and the announced combined HUM/Andyne profit for Q2 ($8.6M) yet the combined 6 month "exclusion" profit is stated at $15.6M. We have $1.6M missing and the only way this can be possible is if Andyne lost it in Q1. 2) Fred's comments that "the highly profitable and cash flow positive connectivity business is being used to position HUM for continued growth in a much larger market" and "HUM's movement into DW is a more appropriate market for Hummingbird" bother me. Let me show you why. I am going to use $US. The market cap of HUM is $35 * 15M = $525 M. Let's see whether the company is worth $525M. First deduct the Owner's equity of about $170M. Now, the remainder of the company must be worth $355M. Now, the connectivity business is a cash cow, so let's look at the bottom line cash it will generate over the next 5 years. I will use $30M, $40M, $30M, $30M, and $20M (a bit generous from my point of view). Therefore, this part of the business is worth $150M. Therefore, the remaining business must be worth $205M. Well, the remaining business is Andyne. HUM paid about $60M for Andyne. They have improved the business but is it now worth $205M? I don't feel it is. Last year, Andyne's revenue was about $16M US. Let's look at other Canadian high tech companies Price / Sales ratios. Cognos 5; Geac 5.5; HUM 4.5; Jetform 4.5; PC Docs 1.4; Fulcrum 0.6. Therefore, this leg of the business may be worth P/S of 7 (again generous) and therefore $112M. Finally, even if you think it is worth $205M, there is still a problem. I don't want to own a company with a market cap of $525M when only $205M of it represents the growth leg. I believe this has been the shorts thinking for a long period of time. In particular, the connectivity business was never going to net Hummingbird $500M+ (their market cap). 3) Some might debate the long term potential of the consulting business recently purchased. Overall, I believe they paid a fair price and that the business will be a nice complement to the data warehouse offering. The consulting business will not generate the traditional HUM profitability. If well run, it will provide consistent revenue growth and a consistent contribution to the bottom line. I feel that I am qualified to comment on the professional services business potential since in October of last year I sold my client/server consulting company to Compaq. 4) Final - Not a big one but annoying. I am still annoyed at the Employee Stock Option Plan. I feel it is too generous. They handed out another 400K+ options in 1997. This represents an average of 1000 options per employee. Even, after you deduct the 150K to the three senior employees, the average would be 700 shares per employee. For a stock priced at $35 US, this is a huge benefit for the employees. I feel the dilution of the stock is not necessary and excessive. I will conclude by stating that I am neither short on HUM nor purchasing puts. I wish good luck to all the long HUM shareholders and I have enjoyed participation in this thread. Paul

To: micromike who wrote (1577)	5/6/1998 1:59:00 PM
From: J L Segal	Respond to of 2018

Mike, Has anyone speculated that HUMCF may be looking at REDB? "Hummingbird in talks for major acquisition To aim at data warehousing market" "Toronto-based Hummingbird said yesterday that it is examining a publicly traded company for a possible major acquisition, which the company defines as a deal worth between $100-million and $300-million (U.S.)." REDB certainly fits the description. Appx. 12.5mm shares outstanding, and 3.89 rev./share (per Market Guide). A deal @ 3X sales = $145MM. (Although I don't think that longer term REDB shareholders would be too happy with 6-5/8 per share) REDB, currently trading around $6, is a pure play in the data warehousing industry. They need someone like HUMCF who has a lot of cash. REDB recently ran up to the $10 level, after announcing that they closed a deal with Amazon.com. Everyone credited this run up to the internet craze, but it may have had more to do with rumors after HUMCF's announcement. (There have been no comments about HUMCF on the REDB thread.) I can't think of any other data warehousing co. that would be worth only $100 - $300MM, can you? SYBS needs help too, but they would be much too expensive with appx. 81MM shares outstanding. Any comments, anyone? JL