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July 27, 2005


I have followed Borland for quite some time, though I have never owned its shares. The company has gone through quite a transformation since its days as the leader in spreadsheet software with Quattro Pro. Borland’s most recent offerings involve a suite of enterprise management software and developer tools that have been well-accepted. I have been following company financials and technical performance for signs that a turnaround may be at hand.

From the financial perspective, top-line performance has been flat. License fees are slightly down year-over-year while service fees have picked up the slack. However, net income has turned positive… 4c per share for the first six month versus a year-ago loss of 28c… due to cost controls and the absence of a restructuring charge. Glancing at the balance sheet, net cash has decreased from $1.75 per share to $1.67. Based on today’s closing price, one would be purchasing the shares at $4.81 (net of cash), or 2.6X sales. This ratio is a little high for a company in a turnaround situation, but keep in mind that companies in turnaround situation usually have negative net cash.

From a technical standpoint, Borland shares have been weak all year. I use a combination of moving averages with a proprietary statistical model for guidance on entry and exit points for many of my trades. Currently Borland is strengthening and may look favorable within a few days. Should the technical view turn positive, I will likely initiate a small position and will mention it in the blog.

Disclosure: None.


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