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Barry Randall

 
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  • Cerner: This Niche Tech Stock Is A Strong Buy [View article]
    Epic is a private Health Care IT company based in Madison, WI. They are very large and compete directly with CERN, ATHN, QSII and MDRX. Because they are private it's not clear how fast (or if at all) they are growing, but anecdotal evidence suggests they are a serious competitor.

    I also agree with another commenter about the EMC/VMW valuation issue: if you want exposure to VMW, you can get it much more cheaply by buying shares of EMC than by buying VMW directly. But VMW's problem is that by some measures, their revenue and license growth isn't quite worthy of their own stock valuation.
    Oct 28, 2012. 10:20 AM | Likes Like |Link to Comment
  • Red Hat: A Software Investment For The Next 30 Years [View article]
    Thanks for taking time to read the article.

    The subscription terms are negotiated between RHT and individual customers; customers are generally offered 1-, 2- or 3-year terms and the average just works out to two. If you're thinking that's a short period of time, consider these two factors:

    1) The average maintenance contract on a traditional enterprise software purchase is one year with the opportunity to renew at the same price or slightly more. So two years is a little more stable.
    2) The average installed life of a traditional enterprise software system (hardware, software, middleware, application layer, database) is seven years. It may take a year to install and a year to train everyone how to use it, so even if you, the firm's Chief Information Officer, discover by year three that it's not as good as you hoped or even that you hate it outright, there is so much invested at that point that you generally tough it out until Year 6 or 7. That's just the natural cycle of things.

    So a two-year average subscription is mis-leading; most everyone renews even if they aren't thrilled with what they've got. But in Red Hat's case, I'm not aware of any current major issues that will shorten customers' time with the company.

    As to your second point, this gets tried all the time. A customer starts to think that Red Hat is charging way too much money for (free!) software, so they go off-the-rez and hire a third-party to do maintenance and upgrades. This can work in theory, but history shows that it doesn't really. Not because Red Hat software is pure awesomeness, but simply because you end up doing all the awful gut-wrenching work of interoperability checking and bug-fixing and pretty soon it's like you've had to re-create a micro-version of Red Hat inside your firm, only you can amortize that cost across only yourself, and not other companies.

    Back in 2006, Oracle basically tried to go into the Red Hat maintenance/service business and (like a lot of what Larry Ellison does) failed miserably.

    In the long run, you're just better off paying Red Hat to service your Red Hat software because you (a bank, an insurance company, a manufacturer) are not in the software business.
    --------
    One final thing: although I stand by my larger message in my piece: that Red Hat has the right business model for the next 20 years, compared with traditional software companies, I sold Red Hat out of the fund I manage about eight weeks ago because I noticed their business was decelerating quickly (probably because of the global slowdown, not anything RHT-specific) and the fact that Red Hat's May quarter results weren't of the traditional beat-and-raise variety - a bit of a sin for a company trading at a premium valuation.
    I'd like to see the valuation compress a little more (I sold around $56/share) maybe to the low-$40s before I would buy again.
    Just wanted to give you full disclosure.
    Oct 24, 2012. 01:30 PM | Likes Like |Link to Comment
  • Recent Bull Run In Greenway Still Looks Strong [View article]
    Momentum is nice, but can you explain why future earnings estimates are coming down for Greenway?

    I noticed on Yahoo Finance the earnings estimate for GWAY's current fiscal year ending next June has declined in the last 90 days from $0.33 to $0.29. The stock is going up, but estimates are declining. That's usually not a good combination.

    Plus, they made a huge investment in the March quarter of this year. Was that an acquisition? What sort of risks come with that? Are they experienced acquirors?

    Thanks in advance for your answers.

    I'm neither long nor short GWAY, but I'm long in some other HeathCare IT names like CTRX and MEDW
    Oct 3, 2012. 01:17 PM | Likes Like |Link to Comment
  • Velti: Cheap Stock Hammered By Analysts [View article]
    Mark,

    Thanks for your note on Velti. I'm somewhat new to the story but I have two straightforward questions:

    1) What is the scalability of Velti's model? When they win a big contract like the one just announced, is that work they can perform with the people and resources the already have? Or will they need to ramp up hiring a bit and perhaps open an office close to the client to provide better service?
    2) What's the total market opportunity here? Or put another way, how many Verizon Wirelesses are there out there to win? There are only four major wireless providers here in the U.S.; how is Velti positioned for more business here as well as outside the U.S.?

    Thanks in advance for your answers. If you've addressed these issues in previous posts, feel free to just send me the links to them.

    Hope all is well.
    Sep 24, 2012. 12:01 PM | Likes Like |Link to Comment
  • MeetMe Inc. - A Q2 Follow-Up [View article]
    Yardbird,

    Some people on this extremely inside-baseball web site called Seeking Alpha are "talking" about MATT. But among the wider world, not so much. I read the past month or so of MEET's Yahoo Finance message board...no mention. I re-read MEET's Q2 2012 earnings release...no mention.

    The plural of "anecdote" is not "research." Don't make the rookie mistake of thinking that because something is known to you it is known to all. MEET is a micro-cap stock with no Street coverage and only a few people discussing it every couple of days or weeks on a web site. While not impossible, it seems highly unlikely that one could state conclusively that the absence of MATT's revenue in MEET's Q3 is discounted in MEET's stock price.

    Which of course is a good thing, for the few of us familiar with MEET's current business prospects and on the lookout for a high-growth company not already on most investors' radar screens.
    Sep 18, 2012. 11:58 AM | 1 Like Like |Link to Comment
  • MeetMe Inc. - A Q2 Follow-Up [View article]
    Kyle,

    Thanks for all the work on MeetMe, and for your willingness to answer questions and criticism in the comments. I appreciate the effort.

    Personally, as far as MATT revenue is concerned, I tend to side with you: a micro-cap company whose supporters could be counted on two hands could hardly be thought of as having a definitive conventional wisdom surrounding what is (and what is not) expected in their financial performance.

    If there were five Street analysts with published research on MEET, then we'd all know beforehand whether the analyst community was or was not excluding the impact of the end of MATT revenue.

    But out here in Uncovered-Micro-Cap-Co... land, there's no telling what investors are expecting. It should go without saying, however, that if year-over-year revenue growth is positive in Q3, and 2012Q3 revenue doesn't include MATT revenue, then that would be categorically and specifically impressive. I'm not predicting that will happen - I have no idea and no basis for a prediction.

    Barry Randall
    Crabtree Asset Management
    Sep 17, 2012. 02:36 PM | 1 Like Like |Link to Comment
  • Zillow: The Next Apple [View article]
    Your analysis of Zillow is interesting, but facile. It's been thought for many years that the 6-7% sales commission was ripe for contraction through both FSBO (for sale by owner) trends or simply better informational liquidity brought about by Zillow and others.

    And yet that hasn't happened. And doesn't appear likely to happen.

    I've written extensively about Zillow
    http://bit.ly/RjrrNJ
    and I think they have a powerful business model. But short-term factors are far more likely to cause its stock price to decline, rather than rise.

    For example, in its second quarter (ending June 30), Zillow met expectations of $0.04 per share in quarterly earnings. However, three things were troubled us about Zillow's Q2 performance.
    1. Zillow’s revenue growth continued to decelerate rapidly, from well over 100% in Q1 to 75% in Q2 and a company-guided estimated revenue growth of 60% in the current third quarter;
    2. EBITDA margins were guided down from the 19% achieved in Q2 to around 16% in the current quarter;
    3. The company announced the registration of shares in advance of a secondary offering, which has since occurred earlier in September. That offering turned out to be 575,000 shares being sold by insiders and 3.425 million shares offered by Zillow itself. This latter number is over 10% of the 29.3 million shares of Zillow already issued and outstanding and represents an immediate dilution of future earnings.

    Moreover, since Zillow reported their Q2, their number one on-line competitor, Trulia, has filed to go public. Although less well known than Zillow, Trulia has recently turned cash-flow positive, and has 10.6 million monthly unique visitors, compared with Zillow's 12.5 million. Both figures are growing about 35% year-over-year. So Zillow isn't exactly dominating its space.

    The bottom line: Zillow is a strong, fast-growing company. But any company with a forward P:E ratio of 70, whose growth metrics are decelerating as quickly as Zillow's are, typically gets re-valued lower in the short-term.

    Good luck to all. Disclosure: we have no position, long or short, in any security mentioned in this comment.

    Barry Randall
    Crabtree Asset Management
    Sep 17, 2012. 12:14 PM | 2 Likes Like |Link to Comment
  • American Software: Great Improvement In Value Metrics Despite Nagging Problem [View article]
    Thanks for the research report on AMSWA. We own it in our technology model, the Crabtree Fund.

    I agree with you on the ERP issue, but I don't think the company views it like we do...I think they feel that they have to have an ERP product, to be able to sell to clients that want an end-to-end solution. They don't much care if it's under-performing compared with the SCM side of the house.

    Barry Randall
    Crabtree Asset Management
    Sep 11, 2012. 02:58 PM | Likes Like |Link to Comment
  • What's Up With MeetMe Inc.? Record Q1 Revenue Is Likely Just The Beginning Of A Big Breakout [View article]
    Kyle,

    Per my advice to you, please analyze the earnings announcement and post your answers to

    1) Why you were right about the revenue;
    2) Why you were wrong about the earnings;
    3) Where should investors go from here.

    It's all part of being an analyst - being clear-eyed about what has happened, not just what you wished had happened.
    Aug 9, 2012. 10:37 AM | 1 Like Like |Link to Comment
  • What's Up With MeetMe Inc.? Record Q1 Revenue Is Likely Just The Beginning Of A Big Breakout [View article]
    Thanks for the clarification.
    Aug 3, 2012. 12:51 PM | Likes Like |Link to Comment
  • What's Up With MeetMe Inc.? Record Q1 Revenue Is Likely Just The Beginning Of A Big Breakout [View article]
    Thanks for the article. Very interesting. Always on the lookout for companies turning the corner.

    I have to question, however, your assertion that Meetme was the "18th most-trafficked site in the U. S. in June by page views."

    According to Site Analytics, a pretty well-established web-traffic auditor, http://www.meetme.com was the 839th-ranked site in the U.S. in June 2012, ranked by Unique Visitors.

    http://bit.ly/QKO4gR
    (free registration required, but it doesn't ask for any personal info)

    Now, unique visitors are not page views, but they are certainly related to each other, and for most sites, proportional to one another. (Exceptions include Google, where visitors tend to only view one or two pages per visit, compared with Facebook, where visitor linger and view more pages per visit.)

    Is the difference between UVs and PVs due to the huge mobile usage of Meetme? According to your news release, 60% of traffic is from mobile.

    And does Meetme make the same amount of money (virtual goods, advertising, ?) from mobile visitors?

    I hope you can dig further on this issue.

    Thanks
    Aug 3, 2012. 11:12 AM | Likes Like |Link to Comment
  • Red Hat Is Overvalued [View article]
    You just arrived from Mars, right?

    Red Hat has been "over-valued" virtually its entire existence as a public company. That hasn't prevented it from rising 12-fold since the market bottom in 2002 (the Nasdaq is up 2 1/2-fold since then) or 10-fold since the market bottom in 2008/2009 (the Nasdaq has doubled).

    Great companies addressing huge opportunities ought to trade at premium multiples: quality always costs more. It would only be unusual if it didn't cost more.

    Red Hat has about 4% market share of the multi-billion dollar server operating system, application server and virtualization markets. They have a structural pricing advantage, enterprise-class credibility and a solid management.

    No tree grows to the sky, but Red Hat is really just getting started.

    Disclosure: I'm long RHT in the separately managed account product for which I am portfolio manager.
    Jul 27, 2012. 11:03 AM | 2 Likes Like |Link to Comment
  • Ride The Coming Tsunami In Mobile Advertising With Velti [View article]
    Mark,

    Thanks for the information. Hope all is well.

    Barry
    Jul 15, 2012. 01:36 PM | Likes Like |Link to Comment
  • Ride The Coming Tsunami In Mobile Advertising With Velti [View article]
    Thanks for the article. I have several questions for you.

    1) Is there seasonality in the business? How is it that the company made about $0.60 in the Dec 11 quarter (a little ahead of expectations) and then lost $0.02 in the March 12 quarter (in line with consensus, apparently. If your argument is that Velti is in front of huge secular wave, how could seasonality be so pronounced?

    2) Revenues grew 75% y/y in the March 12 quarter (and about 40% of that growth was organic, as you note). Did Velti have positive Cash Flow from Operations in the March quarter? It didn't have positive CF from Ops in 2011, but with 60% gross margins and 75% revenue growth, they sure had better be turning that leverage into positive cash flow; circumstances for doing so could hardly be better.

    3) A company trading at a forward P:E of 6, yet growing 40% organically has some 'splaining to do. That is, you need to explain why the market is discounting this stock so heavily. And why the stock price has dropped by 75% within the last year.

    As of two weeks ago, 24% of the float was sold short. Why are the shorts so confident? The risk factors you list (lawsuit brought by a nearly bankrupt competitor? receivables 'problems' when your customers are blue chip?) aren't substantive enough to account for the valuation or the price action. Was there a huge write-down? Did the CFO leave? Big insider selling? The market is saying something and you have to listen harder.

    Thanks in advance for your answers to these questions. I have no position (long or short) in this stock. I like monopolies, however, and would like to add more to our fund but there are too many unanswered questions, at least for now, with Velti.
    Jul 14, 2012. 11:02 AM | 1 Like Like |Link to Comment
  • Facebook Poses No Immediate Threat To LinkedIn [View article]
    I think the author's analysis shows a lack of understanding about the relative market positions of FB and LNKD. Facebook skews toward younger and more blue collar users (I said "skews" not "is mostly."). LinkedIn skews toward older, white collar workers.

    http://bit.ly/PMlInr

    With that as background, let's parse the following sentence from your piece:

    "[U]sers will be reluctant to switch to Facebook's new job services, as most users want to keep social and professional profiles separate."

    That is imprecise. What is more accurate is that most LinkedIn users want to keep social and professional profiles separate. Facebook users, in general, care less about mixing it up because, in general, they don't need to maintain a professional presence there.

    Do some research and you'll find that more people find jobs on Facebook, simply through the normal social interactions taking place there, than they do on LinkedIn.

    http://bit.ly/NgTnB2

    This is confirmed even by parties who acknowledge that LinkedIn is far and away the premier professional networking site.

    The upshot is that Facebook's recently announced efforts involving BranchOut, JobVite, etc. is mostly directed toward the much-larger, non-professional, non-recruited, workforce. So initially there's no threat to LinkedIn.

    But consider that Facebook is much larger (in terms of total members) than LinkedIn, and Facebook is already successfully serving the much-larger non-professional workforce, and it's easy to envision LinkedIn's growth being somewhat capped. Add to that the recent revelation:

    http://cnet.co/Nhi2IC

    that 93% of recruiters are already using LinkedIn, and it's clear that super- normal growth for LinkedIn is over. Future growth will have to come either from recruiters applying LinkedIn over more candidates, or from some other business entirely.

    The bottom line from a stock market perspective: LinkedIn is the clear leader in the professional networking space, but growth in that space is now limited (ironically, because LinkedIn has already captured the dominant market share so quickly). LinkedIn probably deserves a premium valuation multiple, but most investors would say that its forward P:E of 104 is more likely to contract than to expand, no matter how well they execute.

    Disclosure: I have no position in either FB or LNKD and no plans to initiate one in the next 72 hours.
    Jul 11, 2012. 11:42 AM | 1 Like Like |Link to Comment
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