Tomorrow, November 30, is judgment day for Mercury Interactive Corporation (Nasdaq: MERQE). The company has already notified Nasdaq’s management that it will not meet this target date for submitting its revised Q10 quarterly report and K10 annual report. Mercury asked for an extension in order to finish the reports. Nasdaq, which will discuss the matter by tomorrow, is liable to delist the company from Nasdaq trading, which would have far-reaching consequences for it.
The worst blow would be relegation to the pink sheets, which would put the share beyond the pale for many investment institutions that currently hold the share, and which are liable to sell it immediately. The other automatic damage would be removal from the prestigious Nasdaq 100 index. Dozens of mutual funds invest according to this index. Israeli and partially-Israeli companies on this index include Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA), Marvell Technology Group (Nasdaq: MRVL), SanDisk Corp. (Nasdaq: SNDK), Check Point (Nasdaq: CHKP), and Comverse Technology (Nasdaq: CMVT). Amdocs (NYSE: DOX) isn’t on this index because it is traded on the New York Stock Exchange, not Nasdsaq.
Smith Barney is gambling that Mercury’s size, and the fact that the company’s board of directors acted with full severity by instantly deposing all managers involved in the options fiasco, will save it from being delisted. They are gambling that Mercury will be granted an extension until the end of the year or the beginning of 2006, deadlines which they say Mercury will meet easily. This period is needed to carry out thorough work in order to avoid the need to revise the reports repeatedly, as has happened with many other companies in difficulties. Under its new management, Mercury is now probably looking for help from a professional exterminator in rooting out other bugs that are probably lurking there.
Smith Barney retains its “Hold” recommendation for Mercury, with a $27 target price, lower than yesterday morning’s price of $28.50. They don’t recommend buying the share on the eve of Nasdaq’s decision, even though they are gambling on an extension, and claim that Mercury is clearly a target for acquisition by the major companies. Furthermore, Smith Barney assert that sources have told them that Mercury’s board, headed by chairman Dr. Giora Yaron, is quoting a $45-55 price to all those inquiring about a possible acquisition. At that price, which is 80% above the market price, Smith Barney says that no company will embark on negotiations now.
Increase investment in Attunity
When I added Attunity (Nasdaq: ATTU) to my portfolio in August 2004, I thought I had scored a bulls-eye by buying at a rock-bottom share price of $2.12. In the stock market, however, shares can always go lower than you think, and Attunity fell 14% below that price. They say that a fund that fell apart had to unload hundreds of thousands of shares, and shares may also have been sold in order to offset a tax liability, because the fund bought its shares at $2.75, and a large loss will be recognized for tax purposes.
I’m waiting patiently until the new team that has been managing Attunity for the past two years, headed by chairman Shimon Alon and CEO Itzhak (Aki) Ratner, duplicates its magical achievements at Precise Systems. I believe that with a good management team, good technology, and a market for the company’s products, results will materialize sooner or later. Even if they only achieve a quarter of their success with Precise, my return will be in the hundreds of percent.
Two things on Attunity’s current agenda lead me to increase by investment in the share, although I have no information that anything specific is about to occur, nor have I spoken recently with anyone at the company. A new agreement with Oracle (Nasdaq: ORCL) (Attunity’s partner dating to the dark days of former CEO Arie Gonen), to be signed soon, is the first positive development I’ve waiting a long time for. Now it’s here. Experts who attended Oracle week in the US several weeks ago said one word: integration, and that’s what little Attunity does, and that’s what it can contribute to Oracle’s software.
Published by Globes [online] - www.globes.co.il - on November 29, 2005