Internet-based business models with pristine balance sheets nicely describes webMethods (Nasdaq: WEBM), eSpeed (Nasdaq: ESPD), and Mamma.com (Nasdaq: MAMA). So does three of the five most down stocks on the Nasdaq.
Losing one-third of its value, and leading the losers, is Web services infrastructure company webMethods. Only last April 27, the company's guidance for its June quarter revenue was an increase from $43.2 million to between $51 million and $56 million. Now the expectation is between $40 million and $41 million.
With at least $145 million in net cash, the company's near-term future is not threatened. Continuing losses, though, are sending the stock into penny-stock (sub-$5) territory. Having competitors like IBM (NYSE: IBM) and well-funded TIBCO Software (Nasdaq: TIBX) does not build investor confidence, either.
Debt-free, with $233 million in cash, David Gardner's Motley Fool Hidden Gems guest analyst pick eSpeed was gushing free cash flow when it was recommended. Well, it still is.
The developer of electronic trading technology lost one-quarter of its value when it revised its operating earnings guidance from $0.19 to $0.20 a share in the second quarter to $0.15 to $0.16 a share. Unlike the belly flop at webMethods, eSpeed is profitable and expects revenue to rise from $39.1 million to between $42 million and $43 million.
The company cited an "erosion of our market position from competitive pricing pressure and lower-than-expected market volumes in Europe" for the revision. Losing market share after the CFO resigned to pursue "other opportunities" is bad news. Add in a new COO and a patent dispute, and you get investor jitters. Trading at 20 times trailing earnings, the rapidly growing company offers interesting long-term growth prospects at an attractive price.
Seth Jayson was ahead of the pack when he questioned investor enthusiasm for Mark Cuban's investment in Mamma.com. Yes, Mr. Cuban did get billions for unloading Broadcast.com on Yahoo! (Nasdaq: YHOO) at the height of the Internet boom. Surprise! Mr. Cuban has unloaded all his Mamma.com.
It seems that Mr. Cuban didn't like Mamma.com's new acquisition strategy. That strategy, if that is the right word, led to a private placement of 1.5 million shares at a 10% discount to the five-day average closing bid price. Talk about diluting and discounting your shareholders!
With Mr. Cuban's departure, it is interesting that the stock (at 156 times earnings and with a less-than-interesting 9% return on equity) is only down 12%. The stock soared from $7.86 to $10.48 when Mr. Cuban purchased shares. The stock is currently trading for $10.40 -- substantially above the pre-Cuban days.
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Fool contributor
W.D. Crotty
does not owns stock in any of the companies mentioned.
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