BroadVision Handing Out Free Money

In my last article I spoke of why we are so excited about one of our holdings, Linktone (LTON). They announced a great quarter, highlighted by a return to profitability (not bad for a company that at the time was trading at ½ of cash value). The stock is breaking out (thanks in part to a shout out by James Altucher on a TheStreet.com video). My reason for writing this follow-up is not to toot my own horn, but really to recommend that anyone that liked the Linktone story take a look at another one of our holdings, BroadVision (BVSN.OB).

BroadVision is another company that is profitable and is trading at less than just the cash that they have in the bank. They have no debt and cash of $61.9mm or $14.11/share and as I am writing this the last trade on the stock was $13.00. Here comes the part that will blow you away; are you sitting down for this? In Q4-08 they legitimately earned 64c/share!

BroadVision continues to generate free cash flow quarter after quarter. We think that revenues bottomed out during 2008 and we expect continued profitability even in the worst case scenario. The company’s product offerings are better than ever and they have a Software-as-a-Service (SaaS) HR company named CHRM that is growing like gangbusters in China. The company said on the Q4 conference call that they expect it to turn profitable as a stand alone entity (read: spin-off some day) by the end of the year.

We’re all about risk adjusted return, and BVSN has virtually no risk and 300%+ potential. They’re handing out free money across the street; will you venture over to claim yours or will you just assume that it is too good to be true before you go over to check it out for yourself?

Disclosure: Author holds long positions in LTON, BVSN.OB

Comments

[techocracy.net:]

WADR Joesph, if a company bought BVSN's during the bubble years, it was later considered a huge mistake. The product is slow and very expensive to maintain. Programming talent familiar with the product was very expensive. I would assume their only revenue source would be maintenance revenue and perhaps services for a shrinking customer base. Your article has caught my attention though, and I am going to look into this.

Mar 26 01:33 PM

[techocracy.net:]

sorry, above I meant "if a company bought BVSN's software".

I looked at their 10k on the edgar site. Revenue was double 2008's number in 2004, and the trend down is clear with each year dropping. Most of the revenue is now services, which is a bad sign for an ISV. $23M in 2008 was services, $12M was software. That's incredible really. During the bubble years they probably sold a single license(mabye) for as much as $12M.

Mar 26 02:44 PM

[carey_jim:]

BroadVision has an exceptional CEO (Pehong Chen) and great upper level technical management.

techocracy.net is basically correct, however, in observing that BroadVision websites are (were?) expensive and need(ed) to be maintained by technicians who are experts in BroadVision's proprietary software. (If this has changed, a representative from BroadVision should tell us.)

In the past, BroadVision sites were not difficult for trained computer engineers to maintain but untrained webmasters couldn't maintain them without help from the company.

In the past, BroadVision's business strategy was to attract very large clients with deep enough pockets to afford very costly, up front fees (as high as ten million dollars) and high maintenance costs for the kind of powerful and flexible websites that (BroadVision claimed) no other company could build.

At the end of 2000, BroadVision suffered a precipitous and nearly fatal fall in the price of its stock, along with many other dot com startups, which was only partially due to bad business decisions (It hired too many new employees, acquired too much new real estate and made an unwise acquisition of an XML based company.)

It isn't surprising that its stock has risen, in eight years, from under a dollar to $13 because it has solid management and a brainy CEO (he has a PhD in computer science from U.C. Berkeley) who listens to his employees.

But I think the principle reasons for BroadVision's business problems might still be there:

The rise of Linux, along with free SQL and php as popular and easy to use and maintain database and web programming languages, and the decline of Sun and HP (and even Microsoft) as back end database servers.

This, along with BroadVision's proprietary server side Java (used for calls to the database) and server side Javascript, made it difficult for anyone other than BroadVision trained engineers to maintain and expand BroadVision sites.

It isn't completely certain, of course, that this model can't still work (if indeed it is still being used) into the future.

In the past, BroadVision demonstrated its capacity to provide robust, very large, database driven personalized websites for large corporations, that are easily expandable and easy (for BroadVision engineers!) to maintain.

I don't own the stock but if I decided to buy it, I would have to be convinced that 1) the old business model can still work, 2) AND/OR that a new, more accessible model is in place.

Mar 26 04:53 PM

[Zeronomo:]

is there any chance BNSN may have a forward split 2 for 1?

Apr 24 04:05 PM

[Zeronomo:]

is there any chance BVSN may have a forward split 2 for 1?

Apr 24 04:10 PM