Sometimes just knowing that a company has a path forward can be good for its stock. That's the case with Synchronoss Technologies, Inc. (NASDAQ:SNCR), a company that provides mobile solutions for service providers and enterprise through scalable software solutions.
As October began, Synchronoss was in the midst of pursuing "strategic alternatives." That's a fancy way to say that it was examining its business while facing some harsh financial realities.
In mid-October, the company emerged from that process with a new plan. It decided to "double down" on its communication and media business while selling its Intralinks subsidiary to Siris Capital. Synchronoss had entered an exclusive negotiating period with Siris earlier in the month, after concluding talks with other suitors.
Siris paid approximately $1 billion for Intralinks. It also made an investment of $185 for convertible preferred equity in Synchronoss; that would convert into roughly 20% of the company's stock. The sale is expected to close by the middle of November, while the equity arrangement will close in the first quarter of 2018.
Synchronoss answered questions about its future, and the market liked what it heard. After closing September at $9.33 per share, Synchronoss shares finished October at $11.33, a 21.4% gain, according to data provided by S&P Global Market Intelligence.
In a press release, CEO Stephen Waldis explained what the company did and why it did it: "These transactions would provide Synchronoss with a strong balance sheet and the capital flexibility to pursue a more focused business strategy that builds on our existing footprint in cloud, messaging, and digital transformation while executing on key growth vectors in each of these areas," he said.
Shareholders were clearly happy with the deal, but initial enthusiasm faded quickly. Shares climbed to an intraday high of $15.69 on the day the deal was announced, but quickly came back to Earth, closing that day at $13.19.
Synchronoss shares got a bump because the company found the cash it needed to go forward. That's a big step, but it's only part of the journey. Now, the company needs to show that it can execute its new plan, and grow the business in the ways it says it will.