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Athenahealth, Inc. (ATHN) Message Board

  • georgespelvin Feb 4, 2013 1:31 PM Flag

    Lets examine the case where Athena makes their numbers.

    Lets say they do. Then what? Is the P/E justified then? I don't think so. Even if you go with their non GAAP "earnings".

    How can they be immune to standard valuation metrics? What is different about them? The word "cloud"?

    If you just look at the metrics that relate stock price to company financial performance they are being given a pass on every single metric. And not by a little.

    If you then know something about their business, about the marketplace, it becomes alarming and absurd.

    If you then know something about how companies in this untenable situation react to it (acquisitions that attempt to confuse the issue of organic growth with purchased growth, in which what would have been expense had they attempted to grow the business (thereby reducing profit) becomes an asset on the balance sheet (not reducing profit)) you wind up looking at something you have seen over and over for 20 years.

    Significant acquisitions are usually the sign of desperation on the part of both parties...the acquired and the acquirer.

    Do you know how long the CEO of Epocrates worked at Epocrates before he arranged the sale???? He was brought in to sell it by the board. Why? Because they were at the end of the road. They were a one trick pony. It was a good trick. But a minor trick with little barrier to entry and very little insertion into the mind share of their clients who were deeply involved with the PMS/EHR vendors. Those PMS/EHR vendors had finally embraced smartphones and could easily eat Epocrates lunch. That is why Epocrates wanted to sell.

    But they refused Athena stock. Why? Because they knew something the institutions do not. They KNOW the field. They KNOW the clients.

    What does Athena get. They get a business that adds $10 per month per doctor they serve, reduced by the cost of running the business and the cost of buying the business which by all rights should be taken over the course of three years (which is an eon in this sector...but the tax code knows nothing about sectors).

    In other words they got almost nothing. Which does not even speak to the issue that when an enterprise vendor salesperson sits down with the client to negotiate or renegotiate a contract they almost never get the same fee for the cross selling tidbits they acquired that the tidbits commanded when they were offered by a third party. The salesmen throw it in. Why would the salesmen go to the mat on a $10 item? They give it away.

    I doubt Athena can grow their way into a reasonable stock price with the stock at this level or even half this level. And I know they cannot acquire their way into it. After the first quarter after acquisition, each acquisition makes matters worse, not better. Look at Misys, Allscripts, MedMan/WebMD/Emdeon/Sage/Vitera, IDX, STI...the list goes on and on. Look at HP, for Pete's sake.

    Acquisitions are like a New Orleans funeral procession, coronets and trombones blaring, everyone playing a solo at the same time, prancing and dancing, all masking the unhappy reality that the poor bloke is dead.

    Sentiment: Strong Sell

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