BLP’s WiR September 9th, 2013

Earnings Reports, IPO’s, M&A and Private Placements

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Greetings from North Bay, Ontario, as I sit at Twiggs Coffee Roasters, on McKeon, tapping away.  The Hilton’s Hampton Inn’s internet was slower than molasses in September in North Bay.  The Canadian Royal Military Academy’s women’s soccer team had brought the hotel’s internet to its knees, so my stepson guided us to the fastest internet in town.  Chris is in North Bay teaching the Canadian Air Force how to use the North American Defense System.

Yes, the internet has changed our lives.  It’s now a requirement not an add-on, and we demand performance.  Just checking off a box or lip service will no longer do.  The hospitality industry is slowly learning that not only must it provide the internet to its customers, it must test for maximum load to guarantee performance, too.

Earnings Reports

Ten percent of the DJIA names swapped out, with Goldman Sachs, Nike and Visa replacing Alcoa, Hewlett-Packard and Bank of America in that much vaunted group of thirty.

Palo Alto Networks (PANW: Nasdaq) announced fourth quarter sales at $112.4m, and a small non-GAAP profit or GAAP loss.  The difference between GAAP and non-GAAP being employee stock compensation.  The most important point is that sales grew strongly at 49 percent quarter-over-quarter and 55 percent year-over-year.  PANW focus is internet security over the network.  The current market cap is $3.4b.

Analogic’s (ALOG: Nasdaq) revenues grew to $160m from $143m year over year, but earnings slipped to $0.96 form $0.99.  The company does advanced medical imaging and aviation security systems and subsystems.  Their COBRA Checkpoint CT System will enable you and me to go through airport security with our liquids and laptops inside our carry-on luggage.  Hallelujah!  We’re hoping for sales to MHT (Manchester,NH), ABQ (Albuquerque International) and Logan.

ULTA Salon, Cosmetics & Fragrance (ULTA: Nasdaq) finally broke above $100 per share to $117 with its earnings release.  Sales came in at $600m vs. $481m quarter over quarter, and Net Income at $45m vs. $35m or $0.70 per share vs. $0.55 per share.  Who says you have to be in high tech to be a growth stock?  Specialty retail works, too.

My stepdaughter loves this store.  It’s sort of a lower end Sephora.  ULTA seems to be hitting its mark with the combination of their numerous brands, their mall locations, and heavy promotions through email, mail and social.  ULTA’s market cap is $7.5b 

IPO’s of the Week[1]

No IPO’s this week.  Though there was one filing of note:  Twitter.  The Company tweeted its confidential filing of the S-1, making it a most un-confidential filing.

As most of you know, I disapprove of delaying an IPO for years and years.  As a result, the general public has little opportunity to gain from the early-to-mid-stage growth of these companies.  A select few private equity and venture capital funds garner all the profit.  And President Obama wonders why the top one percent have garnered 95 percent of the new wealth in the last five years.

Neiman Marcus withdrew it’s S-1, when it announced it’s acquisition by Ares Management and a Canadian pension fund for $6 billion.  More financial engineering.

If the number of companies setting the terms for their IPO’S, is any indication, we should be seeing quite a few IPOs close, and more public companies, in the near future.

M&A of Interest

Dell Computer finally went over the MBO goal line, where its proposed $25b buyout was finally ratified by shareholders.

Virident Sytems, which manufactures enterprise flash and SSD solutions was acquired by Western Digital (WDS:  Nasdaq) for $685m.

Whiptail, a manufacturer of solid-state flash-based array solutions was acquired by Cisco (CSCO:  Nasdaq) for $415m.  Again, we see the merging of storage and networking.

Mopub, a hosted ad serving solution for mobile publishers was acquired by Twitter for $350m.

Recordati, a billion dollar pharmaceutical manufacturer out of Milan, Italy, acquired Spanish pharmaceutical manufacturer Casen Fleet for $122m.

Directi, out of Mumbai and a marketer of Web 2.0 products and services, was acquired by Endurance International, a web hosting company, for $110m.  Endurance International Group (“EIG”), headquartered in Burlington, Massachusetts, is owned by private equity firms Warburg Pincus and GS Holdings.  Endurance owns HostGator and BlueHost, prominent web hosting companies, and Domain.com.  EIG, this week, filed for a $400m IPO.

Glowork, a Saudi platform to connect women to jobs, was 51 percent acquired by SAS Holding, another Saudi company, for $16m.

Private Placements of Interest[2]

Clarabridge, out of Reston, Virgina, raised $80m.  Intelligent Customer Experience Management (ICEM)????

Virtustream, a Company delivering enterprise-class cloud computing infrastructure platform and services raised $40m.

Irvine-based Crowdstrike helps companies identify and preempt damage from targeted cyberattacks.  The Company raised $30m.

Maker Studios raised $25m.  The Company is a next generation on-line media company founded by YouTube veterans to assist other YouTube artists in monetizing their product.  Maker Studios is all about on-line and YouTube.

Benu Networks, out of the Boston Area, provides Fixed and Mobile Operators with innovative solutions for augmenting their networks with Wi-Fi and Small Cells.  The Company raised $27m.

Calastone, based in London, serves the fund industry with a “global transaction network”.  The Company raised $18m.

Paydiant, out of the Boston Area, provides cloud-based white label mobile payment solutions to banks and retailers.  The Company raised $15m.

Hooklogic, out of New York City, raised $14m.  The Company is a digital media advertising company.

Nextdocs raised $14m.  The Company provides a system for “regulated content management,” where regulatory or industry standards require that companies adhere to certain processes and standards.

PureDiscovery raised $10m.  The Company talks about Transparent Concept Search.  In other words, it will map how the search engine obtained its results, rather than deliver them in a black box.

Etc.

I returned to New Hampshire from Taos to take my pugs out of the Puppy Palace and reinstall them back a few days later.  We’re continuing on the tour to visit Toronto, and Ottawa. In Ottawa, we’ll launch a search for my family’s old house on Flora Street, providing the lot hasn’t become home to one of the city’s numerous skyscrapers.

Margaret S.C. Johns

Founder, BlueLake

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*This newsletter does not purport, in any sense, to be comprehensive.  Rather, it contains news that we, at BLP, find of interest.

 


[1] Certain information sourced from Renaissance Capital

[2] Note:  In the interest of brevity, some of the company descriptors sound weak, vacuous, and full of mumbo-jumbo.  They are.