"News for nerds. Stuff that matters."
That famous tagline from VA Software
What analysts say:
-
Buy, sell, or waffle? Five analysts follow VA Software today. Three of them want to buy, one wants to sell, and the last one is holding. In our Motley Fool CAPS database, it's a sometimes-one-star, currently-two-star stock, based on over 50 user ratings.
-
Revenues. The analysts agree that $12.6 million looks reasonable, give or take $200,000. That's 16% better than last year's $10.8 million.
-
Earnings. Net income is expected to come in flat from the year-ago $0.02 per share.
What management says:
During the quarter, VA sold its Enterprise SourceForge software division to privately held CollabNet, in exchange for minority ownership in the acquirer and a promise of $2 million in service orders. VA hinted at the deal in its last earnings call, when CEO Ali Jenab said that the company was "focusing its management attention and capital on the opportunities in our core media assets."
The sale aimed to return some value to the company while giving the software operation a better growth environment. As a result, VA Software is now less software-ish than ever.
What management does:
VA turned in its first-ever quarterly profit just more than a year ago, and it's been going strong ever since. Stable gross margins, positive net income, and a fine revenue growth trend all look good, but the operating efficiency line is really a thing of beauty.
|
10/2005 |
1/2006 |
4/2006 |
7/2006 |
10/2006 |
1/2007 |
|
|---|---|---|---|---|---|---|
|
Gross |
47.5% |
49.3% |
51.5% |
52.7% |
53.2% |
50.4% |
|
Operating |
(20.1%) |
(10.4%) |
(3.0%) |
0.9% |
3.2% |
4.3% |
|
Net |
(13.8%) |
18.6% |
22.6% |
25.1% |
26.0% |
6.6% |
|
YOY Growth |
10/2005 |
1/2006 |
4/2006 |
7/2006 |
10/2006 |
1/2007 |
|---|---|---|---|---|---|---|
|
Revenue |
2.4% |
21.8% |
35.8% |
42.6% |
48.6% |
36.0% |
One Fool says:
The VA of today is a far cry from the builder of Linux-equipped systems it was ten years ago, or the software development expert it had become five years later. Given the company's habit of changing its name as the business model transforms, I'd expect it to become something like VA Communications or VA Media sometime soon.
That divestiture does look smart by the numbers. Over the past six months, the software segment contributed $4.9 million to net sales, or 13% of revenue. But it also represented 40% of VA's operating expenses, and made a $1.9 million operating loss over that time period. So with that cost center gone and lower revenues, you should expect that operating margin line to take a solid leap skyward.
So now it's tech news outlets Slashdot and NewsForge to the left, nerdy novelty retailer ThinkGeek to the right, and only the free version of SourceForge in between. It's a leaner, more focused structure, though you could argue that its enterprise software business lent some street cred to the other divisions.
Some of our CAPS players are concerned with the hefty price-to-earnings ratio, which is hovering north of 70. That's calculated from trailing earnings, though; based on analyst forecasts, the stock is trading at just 17 times forward earnings, and the company is expected to grow income by 40% a year for the next five years. Hmm.
Stuff that matters, indeed.
Looking for more geeky investment opportunities? The Motley Fool Rule Breakers team has a few suggestions for you. Sign up for a free 30-day trial subscription today.
Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure looks good in a pocket protector and horn-rimmed glasses, taped at the bridge.
