Advent Software (ADVS.DL) is in the middle of a major marketing effort to migrate customers to its new product. But, it may be difficult for Advent stock to reverse the downward trend, as the company will face debt overhang amid the task of attracting new customers as well as repositioning current ones. Its primary clients are financial services firms that generate a huge volume of customer activity data and proprietary information every day.

Uncertain 2014
While answering questions from analysts in a conference call after its recent earning release, Advent management indicated that migration of existing customers to a new product (to be launched later this year) will involve a lot of trial and error, even though beta testing has given favorable results. The company's entire future may depend on its ability to successfully launch this new product.

This uncertainty is not viewed favorably on the Street, and the chances of Advent falling out of favor with investors are high. The stock had a bad day after the release of its results, falling 3.9% to close at $29.40.

Questionable corporate governance
Advent had paid a special dividend totaling $470 million in July 2013, and it was financed through debt. The debt amassed was even more than the annual revenue of the company, which was $349 million in FY 2013.

The interest outgo will eat away a major chunk of the profit from its business operations in coming quarters as the debt was at $285 million as against $85 million last year. This pushed the book value of the company to negative territory and is now $-2.63 per share, according to Yahoo Finance.

Instead of reinvesting in business operations when the whole sector might face margin squeeze and hence would require more branding efforts to retain Advent's market share, the management had decided to beef up the kitty of major shareholders. This puts a question mark over the company management and begs the question: whether this stock requires the attention of your hard earned money?

Can Advent sustain its marketing effort?
Another negative might be the emergence of cloud computing technology, which could help new entrants or more nimble competitors gain market share. This was recognized by the company in its 2012 10k filing.

During the conference calls' Q&A session, management indicated an intention to reduce the company's debt level in coming quarters. If the company tries to cut its debt, such actions will affect net profit for at least the next few quarters, negatively impacting both earnings per share and dividends. 

What to watch out for
In its latest filing, Advent declared profit and revenue that were slightly above expectations, but had a forecast weaker than analysts' original predictions for this year. If the company can impress investors with better results, possibly through the success of a new product launch, Advent may begin to resemble a viable investment option. 

The company's significant debt and uncertain marketing environment must be addressed before this stock should be considered as a potentially viable purchase. As the company stated in its earnings conference call, the new product won't have a revenue impact before 2015. Use this period to observe the company's success or failure.