Convera (NASD:CNVR) has the very rare distinction of having a days-to-cover short interest ratio of 50. Even though the stock trades at a healthy average of nearly 135,000 shares a day, the short interest in the company's common is 6,767,000 shares as of April 13. That's a lot of bets against the company's prospects.
Convera is a provider of search technologies to commercial enterprises and government agencies. Its two major products are Excalibur, a newly developed Web search solution and RetrievalWare, its enterprise search product. The company has a very impressive Fortune 1000 customer list and a number of overseas customers as well.
But, something is wrong with the picture. Convera has been leaking revenue and losing money for years. Revenue in fiscal 2004 (ending January 31) was $29.3 million. In 2005, it was $25.7 million, and for the year ending January 31, 2006 only $21 million. The company had an operating loss in each year and in the latest year it was $14.9 million.
The quarter that ended on January 31, 2006 was shockingly poor. Revenue was only $3.6 million, down 43% from a year earlier.
Convera recently did a private placement of almost $37 million. Given how poorly the company is doing, it should hope that these investors have not joined the groups shorting the stock to protect their positions.
The company claims its most recent troubles are due "to continuing transition from a pure enterprise search software concern to a more diverse search provider offering a professional grade Web-based search technology through its Excalibur solution". It would appear that this is one in a long line of excuses for poor performance.
Convera's stock trades at $7.90, on a 52-week high/low of $20.20/$3.92. The company's market cap is still almost 20 times sales.
How it ever got that high is a mystery.
CNVR 1-yr chart:
Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at email@example.com.