|New Threads Only:|
|New Threads & Replies:|
Forum List » Value Ideas and Strategies|
Share and discuss value investing ideas and investing strategies.
Edgewater Technology Update: Cash Continues to Build
Posted by: Frank Voisin (IP Logged)
Date: July 10, 2012 07:36AM
A quick update on Edgewater Technology (EDGW) from the author of the original analysis found here. Note that EDGW is up 26.11% since that was published (exactly six months ago today).
Leave your thoughts on EDGW below.
Frank’s Disclosure: No position.
Last week EDGW announced the sale of one of its “modules” to Microsoft. This module will now be built into to MSFT’s offering instead of EDGW having to sell it itself as an add-on offering. Unfortunately, the news was announced during a holiday week so many investors may not have appreciated the significance of the transaction. As part of the deal, EDGW receives (i) $3.25 million in cash (which will be largely untaxed due to the big NOL) and (ii) additional cash compensation to provide MSFT with services during the integration of the module in MSFT’s Dynamics AX (its ERP solution for enterprises).
The benefits of this transaction are significant:
1) EDGW receives cash of $3.25 million (mostly today and largely untaxed), which represents ~ 7% of its equity market cap.
2) Increased opportunities for high margin consulting business as EDGW’s technology will now be built into MSFT’s offering. This means there should be a higher installed user base for this product and thus more demand by end users for services…and who better to advise an end user than the company that designed the module in the first place.
3) Increased credibility for EDGW’s other products and services.
Pro forma for this transaction, cash will equate to over 25% of EDGW’s equity market cap.
Stocks Discussed: EDGW,
Disclaimers: GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on GuruFocus.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The gurus may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. In no event shall GuruFocus.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on GuruFocus.com, or relating to the use of, or inability to use, GuruFocus.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. The gurus listed in this website are not affiliated with GuruFocus.com, LLC. Stock quotes provided by InterActive Data. Fundamental company data provided by Morningstar, updated daily.