My recent article on SupportSoft (NASDAQ:SPRT) generated some concerned responses. First, company insiders worried about the timing: By chance it was published the day after SupportSoft had closed its books for the latest quarter. SupportSoft is in a quiet period. Between the end of the quarter and the earnings announcement, management cannot address issues I raised, and that troubles it. Second, some investors raised an important point about the cash position. Although my opinion about the software company's investment potential hasn't changed, the cash position deserves discussion.

In addition to the $17 million in cash and equivalents mentioned in my article, SupportSoft also carries $100 million in short-term investments. Compared with this $117 million, management's $10 million stock repurchase pledge announced in April is relatively small. On the one hand, this means the company is in no danger of a liquidity crisis, even if it fulfills 100% of its pledge. On the other hand, we should wonder why SupportSoft isn't allocating more capital to the repurchase, with that ample war chest of $117 million coming out to $2.73 per share -- or 54% of the current share price. After all, one of the best ways to show confidence in an undervalued stock is to aggressively buy back shares.

As it stands now, SupportSoft is probably correct to be conservative. The cash reserves make it a more attractive acquisition candidate. Also, management may need the cash to carry it through the near-term challenges. Still, I will look closely at the next quarterly report to see whether the company is fulfilling the repurchase commitment and whether management is confident enough to expand it.

SupportSoft's cash reserves put it in an enviable economic position. But my key question remains: Will management be able to return to strong licensing growth? Without new products, the company would lose market share to competitors like Hewlett-Packard (NYSE:HPQ), Computer Associates (NYSE:CA), Siemens (NYSE:SI), Alcatel (NYSE:ALA), and Motive (NASDAQ:MOTV) -- and its cash advantage would slowly evaporate.

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Fool contributor Jim Schoettler does not own shares of any company mentioned in this article. Please email him with your thoughts and questions.