Aladdin Knowledge Systems
In Aladdin's case, I might add the fact that employee turnover in both the trenches and upper management has caused some transition difficulties. The latest examples would be the chief financial officer and the CEO of Aladdin North America resigning Monday with the earnings announcement.
The third-quarter earnings report was a mixed bag for investors. While operating cash flow was $3.5 million, bringing the cash hoard to $85.1 million, or roughly a third of the company's current market cap, revenue and earnings growth was light. Revenues were only up 7% to $21 million year over year, while earnings per diluted share were down 10% to $0.22 over the same time frame, partly because of stock compensation charges. The highlight of the quarter was the 26% growth in Enterprise Security revenues, and this portends a strong growth area for the future.
That's good news, because Aladdin does have some challenges ahead of it. For one thing, EMC
Still, Aladdin is the leader in the authentication token market and has substantial opportunities going forward in terms of DRM security and enterprise security. Microsoft's
Aladdin has some hefty opportunities in front of it and, when subtracting out the cash on the books, trades for a P/E in the 10-12 range. This means that investors can acquire a company that's only priced for modest growth in the next few years. Granted, the firm's sales growth over the last few years hasn't set the world on fire, but any resurgence could quickly push the stock to higher levels. That's a bet that investors should be considering.
More security-related Foolishness:
- Checking Up on Check Point: Fool by Numbers
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- EMC Does an Expensive Deal
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