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EGAIN COMM CP Message Board

  • cohsgrad cohsgrad Jul 16, 2007 2:04 PM Flag

    Useless Speculation

    Three million plus deals signed in quarter. One of them was a hosted deal that closed early in the quarter. The other two may be hosted but I�m guessing they are license deals.

    If deals are unprecedented why the additional 2 million from Ashu? Speculation:

    1) They are going to ramp marketing expenses significantly to develop partner program and they were concerned about running out of cash. Based on open positions listed on web site I don't buy this. Perhaps it is a shifting of resources? That makes a lot of sense.

    http://www.egain.com/about_us/careers.asp

    2) Cash had drawn down so they were concerned about going concern opinion from auditors and/or bad perception in the market. If large deals closed right at end of quarter (as they usually do). My guess is that they weren�t too concerned about the going concern opinion but it totally eliminates this risk plus they were going to need to adjust the terms of the note in any event as it is unlikely they would have the cash to pay off the $2 million due in December. It makes sense for Ashu because 12% isn�t bad at all.

    3) Large deals are to be spread out over next fiscal year and deals currently in pipeline are not significant enough (or at risk) so they are genuinely concerned about cash decreasing and causing concern in the market place while they build up the partner sales efforts.

    Will find out more two months from now when they report results.

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    • No, it is in addition to the 12% so the effective interest rate is higher than the 12. The 12% is just added to the balance due which helps eGain's cash flow situation.

      The high interest rate is an indication of the significant risk that exists. If Ash is getting higher than 12% imagine how much risk we have!

      Always important to remember the risk as one gangbuster quarter doesn't indicate they will do the same thing next quarter. Right Now is the only company in the sector to get to profitability that I know of. Maybe eGain will get there but Ashu is only giving the company a shot and unfortunately the odds of long-term failure remain high.

    • COHSGRAD:

      You seem to have it all figured out.

      Good fortune to you.

      • 1 Reply to s_e_t_56
      • Boy I wish I had it figured out!

        I spent some time thinking about the press releases and needed to write it up just so I can put it in the past. They obviously had a great fourth quarter but what will the future bring and when will all of the revenue from the deals booked in the fourth quarter be recorded? Imagine Ashu and Eric S. are not totally sure on the answers either.

        FWIW it is kind of interesting to look at the old P/Ls. In FY06 and 05 they were largely at breakeven and FY07 looks like it will be a loss or perhaps breakeven depending on the revenue for all of the deals. Really impressive when you look at the results from FY04 and prior. I think they worked hard to shift everything to India and it clearly allowed them to survive if not quite thrive. If they can leverage the partner relationships it could be a very nice business.

        I am �flummoxed� about why the share value hasn�t increased more so obviously I don�t know too much. There is a significant liquidity risk here but I do like the business prospects.

        Wish someone would comment or e-mail me at mjb032295@gmail.com with their thoughts if they don�t want to post them.

 
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