BLP’s WiR of September 23rd

BLP’s Week of September 23rd in Review

Earnings

The beginnings of Fall in Maine's Acadia National Park
The beginnings of Fall in Maine’s Acadia National Park

Technology

Red Hat (RHT:  NYSE) While Red Hat beat consensus earnings, at $0.24, by a few cents, the stock dropped.  In its conference call, management indicated a slowing in bookings due to a sluggish economic environment.  Revenues increased 17 percent to $374m for the second quarter.  Buy on hope, sell on news.

Progress Software (PRGS:  Nasdaq)  Progress Software, which provides for the rapid creation and deployment of business solutions, beat estimates by 10 percent, or $0.03, coming in at $0.27 per share.  Sales grew four percent to $78m.  Going forward the Company changed their guidance for Q4 to revenue growth of 4 to 6 percent, rather than a decline.  The Company’s focus of realignment and restructuring is beginning to pay off.  The Company’s marketing contains all the buzzwords de jour:  data driven, cloud, device independent, platform . . .

Aehr Test Systems (AEHR:  Nasdaq,), which designs test and burn-in equipment for the semiconductor industry, exceeded revenue and net income estimates at $3.8m and (.17)m respectively.  The long drought may be ending, which has seen the stock cycle from the double digits to below one, now trading at $2.26 per share.

Consumer

Nike’s (NKE:  NYSE) quarterly earnings beat Wall Street estimates, coming in at $6.97b in revenue and $780m or $0.86 per share in net income.  Strong demand in North America and Europe drove sales, whereas revenues from China fell three percent.

My original mail order running shoe company, Finish Line Sports (FINL:  Nasdaq), reported sales and earnings above estimates.  Sales were $436m, an increase of 13 percent  and earnings were $0.54 per share, up 10 percent.  Since my early marathoning days, the Company has expanded onto the internet, to retail stores, and most recently to managed in-department-store-departments, specifically at Macy’s.

IPO’s[1]

It was a great week for IPO’s with all but one closing above the offering price, and some company’s stocks doubling their IPO price.

Enzymotec (ENZY:  Nasdaq) raised $62m, pricing below the range at $14 per share and a $322m valuation.  In much better news, the stock closed the week at $18 per share.  The Company develops bio-functional lipid-based health products designed to address dietary needs, health disorders and common diseases.

RingCentral (RNG:  NYSE) raised $98m, pricing at $13 per share, the top of its range.  The stock closed the week at $18.20, up forty percent.  The valuation was $887m RingCentral provides a virtual PBX/phone service to businesses.  The Company is a big supporter/advertiser on Leo Laporte’s ThisWeekInTechnology (TWiT) network, where the RingCentral system was deployed in the little brick house in Petaluma..

Violin Memory (VMEM:  Nasdaq) priced in the middle of the range at $9 per share, raising $162m.  The stock fell 22 percent to below the range, at $7 per share.  We had been told, confidentially, that the Company executives were pushing the valuation envelope, not an uncommon occurrence in IPO Land.  The Company is reported to have had a goal of a $2b valuation, but realized a valuation of $898m and falling.  Violin Memory designs, manufactures and sells Flash-based memory arrays, appliances and cards.

Applied Optoelectronics (AAOI:  Nasdaq) priced at $10 per share, below the range of $13 to $15 per share, raising $36 million at a $126m valuation.  Applied Optoelectronics engineers and manufactures fiber-optic networking products.

Montage Technology (MONT:  Nasdaq), a China-based fabless provider of chips for set top boxes, priced at $10 per share, raising $71m at a $265m valuation.

Foundation Medicine (FMI:  NYSE) offers patient specific (“personalized medicine”) diagnostics for cancer analyses.  Individualized cancer treatment options are recommended based on the analyses performed. The Company raised $106m at $18 per share, a $473m valuation and closed the week at $35.65.

Ophthlotech (OPHT:  Nasdaq), which develops therapeutics for eye diseases, raised $167m at $22 per share, a $662m valuation

Mergers & Acquisitions

The big M&A news was the merger of Tokyo Electron (TOELF:  Nasdaq ) with Applied Materials (AMAT: Nasdaq).  This was a shocker of an announcement, as both are premier companies in their space.  TEL has always owned Japan, giving up very little turf.  Of the combined company, Tokyo Electron shareholders will hold 32 percent, and the Applied Materials will hold 68 percent.

Blackberry is to be acquired by Fairfax Holdings for $4.7b.  Kudos to those who secured the financing.  We’re holding our breath until the transaction closes.  A lot can happen between the announcement and the scheduled close. Nothing is guaranteed.

MAKO Surgical, a robotic-surgery platform, was acquired by Stryker to use with their replacement knees and hips, for $1.6b.

Payments are a hot and growing space, and we haven’t even gotten to Dwolla:

  • Official Payments, an electronic bill payments service provider (EBPP, for those who were wondering) was acquired by payment systems provider ACI Worldwide for $109m.
  • Chicago-based payments gateway Braintree Payment Solutions was acquired by PayPal for $800m.  Braintree helps process payments for start-ups such as Airbnb, TaskRabbit and Uber.

St. Louis-based Zoltek acquired by Toray Industries, the maker of carbon fiber used in Boeing Co.’s 787 Dreamliner, for $584m.

PPLive, a leading online TV company in China founded in 1994 was acquired by Suning, a B2C platform which is a leading consumer electronics and home appliance retailer in China, for $400m.

File-sharing service, CloudUp, was acquired by Automattic, the WordPress Company.  No price was disclosed.

Private Placements

JustFab, which is based in Los Angeles and creates new and updated fashion, designed by fashion celebrities and stylists, where each item costs $39.95, raised $40m, bringing the total raised $149m.

Deem, an ecommerce syndicated commerce network/platform formerly known as Rearden Commerce, raised $70m.

AngelList raises $24m at a valuation of approximately $150 from Google Ventures and the Kauffman Foundation.

Practice Fusion, maker of free web-based EHR (e-health records) and Patient Fusion, an appointment booking and physician review website, raised $70m.

3D Robotics, which recently announced the introduction of the 3DR IRIS, a $730 ready-to-fly autonomous “multicopter,” raised $30m.

BlueData Software, startup building the next-generation fast and secure big data private cloud services for enterprises, raised $15m.

Enjoy the crisp Fall days ahead, and the brilliant Fall colors.

All the best,

Margaret S.C. Johns

Founder

 


[1] Certain information from Renaissance Capital the SEC, and numerous business publications