A Look at Broken Versant

| About: Versant Corporation (VSNT)

By Kris Tuttle

Versant (NASDAQ:VSNT), a very microcap name, has collapsed but has one interesting thing going for it: over $6/share in cash, fairly high levels of profit and a tiny number of shares outstanding.

Against all odds these guys exist and have actually put two or three good years together as a company, although I thought the days of anyone needing an object database (their core product) were long over.

Insiders may have thought the same and were all very good sellers at prices at $20-30/share. (The stock now sits at $11.) The company also has a buy-back program in place and did buy some stock at higher prices in the past. This program is still active.

Nobody cares about this public company and there is no coverage. Listening to the management call on the lowering of guidance doesn't shed any light on the business. Management claims that there is a pause in rolling out new applications due to the economy as budgets are tight.

However, the company had to fire their head of sales and there appears to have been a major severance package there. They also bought their way into open source at the end of 2008. So there are some scary moving parts inside this strange little company.

Besides the fact that there may be a real question as to whether this product category is needed at all, there are even competitors for this small area. A private company, Objectivity, seems to have a very robust and scalable product too.

Why bother? Like we said, these guys are very small and have been very profitable in the past few years. They have $27M in cash which is over $6/share. Adjusting for the cash, the stock is trading around 1x their projected revenues this year and if they can come close to their earnings guidance will be cheap on P/E as well.

The cash makes it unlikely that the shares will revisit the lows from two years ago ($7 or so) and more likely to stay in the $10-15 range for now. If thy company has the fundamentals to drive some better top-line results, the per share earnings leverage is high, which could drive the stock back to earlier highs of $25-30 in the long term.

It's not super exciting but it sure is off the beaten path.

Disclosure: Research 2.0 doesn't own shares of VSNT at this time but might decide to do so if this continuing analysis supports it.