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gnulaw (51.11)

PVSW - Q2 2012 Ending 31 Dec 2011

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January 28, 2012 – Comments (8) | RELATED TICKERS: PVSW.DL , INFA , ORCL

Earnings Release here and Seeking Alpha's Conference Call Transcript here

 

"...We executed well in the December quarter, which represents our 44th consecutive quarter of profitability," said John Farr, president and CEO, Pervasive Software. "I'm particularly pleased that our core integration products team once again grew year over year quarterly revenue, as it has now done for nine consecutive quarters, and in doing so has achieved a new record for quarterly revenue from our integration products and services in the December quarter.  Integration revenue represented approximately 43% of our total revenue in the December quarter.  Our balance sheet continues to be incredibly strong with over $41 million in cash and marketable securities, a new record deferred revenue balance of $8.1 million and no debt..." - John Farr, Pervasive Earnings Release

"...At a product level, our database products represented approximately 53% of our business and our integration products represented approximately 43% in Q2. While our Business Xchange, DataSolutions and DataRush products accounted for the remainder..." - Randy Jonkers, Conference Call

A couple of comments...First, John Farr's comment "Our balance sheet continues to be incredibly strong" bothers me. $41 million is not incredibly strong esp. when PVSW is not exhibiting earnings growth and their division which accounts for 53% of their revenues is a mature business with negligible market share competing against Microsoft and Oracle. This statement is a smoking gun in my opinion and says more about John Farr's insecurities and lack of confidence than it does about PVSW's financial stability.

Table I below shows PVSW product lines as a percentage of revenues from Q1 to Q2.  Revenues from PVSW's products coming out of their Innovation Labs decreased from Q2 to Q1. PVSW has still failed to deliver any revenues with Big Data.

Integration looks good and the conference call also came off significantly better than Q1's.  Farr sounded much more confident and passionate but, again, as cited above there are substantive inconsistencies. I am also very concerned regarding PVSW's alleged share buyback ruse, alleged epic fail with corporate governance viz-a-viz insider option issuances not based on performance, [NO] insider open-market share purchases...all noted here and here. Said actions simpy suggest PVSW insiders do not beleive the shares are undervalued enough to purchase on the open-market but they are undervalued enough when they can be acquired at no cost and not based on performance and at the expense of non-insider shareholders in the form of dilution. This is not corporate governance it is an alleged shakedown of non-insider shareholders(.)

 

Table I. Product line (as % of revenues)


                          Q1 2012          Q2 2012 


Database                 60%               53%

Integration                35%               43% 

BD, BE, DS*               5%               4%


*Big Data (DataRush), Business Xchange, DataSolutions 

 

8 Comments – Post Your Own

#1) On February 03, 2012 at 10:19 AM, gnulaw (51.11) wrote:

Pervasive Software - (NASDAQ:PVSW)

Two key metrics used by the legendary Manager of the Fidelity Magellan Fund, Peter Lynch, were PEG, which he is credited for popularizing, and Insider Buying on the open market.

PEG

Example, if a stock is trading at a P/E of 20 and its earnings are growing at 20% annually, it is fairly priced as its PEG ratio is P/E/G = 20/20 = 1.00 . PVSW's PEG per Thomson Reuters via Yahoo! Finance is 3.78. Peter Lynch only considered stocks with a PEG ratio of < 1.00 which means that he wanted to see projected annual earnings growth rates > the Company's current P/E where E is trailing twelve months earnings/share. PVSW's projected PEG of 3.78 suggests its current PE is 3.78 X its projected annual earnings growth so is [overvalued] based on these assumptions. 

Insider Buying.  

"Lynch believes there’s no better tip-off to the probable success of a stock than that people in a company are putting their own money into it. Even though insider buying excites him, he considers insider selling usually meaningless because there are many reasons why insiders sell (to buy a house, pay for a child’s college tuition, buy a sailboat), but there is only one reason why insiders buy: They think the stock is undervalued and will eventually go up."  - Forbes Deconstructing Peter Lynch's GARP Investing Strategy. [emphasis added]

PVSW has no insider buying. Never has.

Per the above main blog >>

>>A couple of comments...First, John Farr's comment "Our balance sheet continues to be incredibly strong" bothers me. $41 million is not incredibly strong esp. when PVSW is not exhibiting earnings growth and their division which accounts for 53% of their revenues is a mature business with negligible market share competing against Microsoft and Oracle. This statement is a smoking gun in my opinion and says more about John Farr's insecurities and >>lack of confidence than it does about PVSW's financial >>stability. 

This comment from John Farr is actually precisely why (NASDAQ:PVSW) has not and arguably will never be huge with this mindset. John Farr already thinks the company is incredible, as if Pervasive were a mature dividend paying Fortune 500 company. With all due respect John Farr's cut and paste press releases since 2006 are simply symptomatic of a small-minded bean counter and not the CEO of a disruptive Company.

John Farr and many of the incumbent Board of Directors need to be replaced immediately. The mindset (and performance) is all wrong at PVSW. The non-insider shareholders must simply lobby the largest institutional shareholders and pursue said changes with all legal recourse.

 

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#2) On February 19, 2012 at 9:30 AM, gnulaw (51.11) wrote:

"...Being a key enabler and catalyst in Social Age, Big Data Management, Mining and Analytics companies are going to command a premium valuation and hence Big Data Mining and Analytics has triggered a new ‘Gold Rush‘, not to mine gold this time but something even more valuable – knowledge and insights..." Source:  Feb 15, 2011, Why Big Data Mining / Analytics is the New Gold Rush.

So what is PVSW's issue? This management team has not announced any substantive Big Data ccntracts nor obviously has PVSW benefiited from any said 'Big Data' premium valuation. 

 

References:

(January 12, 2012)  (NASDAQ:PVSW) Non-insiders Sustain Shareholder Value Destruction As Insiders Award Themselves $1.6M

(October 28, 2011 OPS OCCUPY PERVASIVE SOFTWARE - (NASDAQ:PVSW) Q1 Fiscal 2006 v Q1 Fiscal 2012

(September 02, 2011)  (NASDAQ:PVSW) 2011 Sees No Insider Buying But Much Insider Selling, Share Buybacks a Sham?

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#3) On February 23, 2012 at 6:33 PM, gnulaw (51.11) wrote:

PVSW near/at a tipping point of significant earnings/revenue growth/valuation ?

Their new Big Data website is very impressive:..

Technical Solutions

Big Data Analytics 

Industry Solutions

Telecommunications

Business Solutions

Cybersecurity

much more...very comprehensive...clear competitive advantages with PVSW. All coming down to marketing and sales.

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#4) On February 25, 2012 at 8:02 AM, gnulaw (51.11) wrote:

Comment #3 above being said one must be very aware of comment #2 above including each reference.  There still is something very very wrong. They traded only 2,104 shares yesterday. There is no buy-in with the street, no credibility with this entrenched Management and Board of Directors...PVSW reported $13M in revenues for its Q ending March 31, 2009

Something stinks with this Management and Board. It is entrenched and they are highly sales chellenged...as if their mindset is stuck in the 80's, BTRIEVE, and they are simply protecting their livlihoods at the expense of maximizing  organic  non-insider and insider shareholder value.

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#5) On February 25, 2012 at 10:01 AM, gnulaw (51.11) wrote:

>>...PVSW reported $13M in revenues for its Q ending March 31, 2009

(Jan 24, 2012) Business Outlook
"...As previously stated in guidance provided on January 16, 2012, Pervasive expects revenue for the third fiscal quarter ending March 31, 2012, to be in the range of $11.5 million to $12.5 million..."

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#6) On March 04, 2012 at 2:29 PM, gnulaw (51.11) wrote:

I have problems with the current CEO and there are issues with PVSWs CTO but the CTO may be the best candidate to replace John Farr as CEO. This company needs a very badly needed shakeup...just as BIGDATA represents a disrupting paradigm-shift PVSWs BoD and Sr Mgt needs to be disrupted if it is going to ever become a growth Company and not an insider ATM nor guaranteed employment for an entrenched and allegedly negligent (and sales challenged) management and Board of Directors.

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#7) On March 11, 2012 at 9:11 AM, gnulaw (51.11) wrote:

(3/05/2012) CeBIT 2012: App Stores and Cloud Marketplaces Meet Business Applications

Is (NASDAQ:PVSW) at a tipping point of important, explosive growth across all divisions (except PSQL)

* (Integration (Universal CONNECT) (watch video)

* BigData

* DataSolutions

* Business Xchange (B2B Integration)

...?

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#8) On March 17, 2012 at 7:50 PM, gnulaw (51.11) wrote:

(March 12, 2012) Nasdaq stocks posting largest volume decreases

zzzzzzzzzzzzzzz.......................

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