"Banc of America analyst Kirk Materne, who met with Compuware management in February, said he believes Compuware would share the wealth with a one-time dividend or share buyback. Such an award likely would face years of appeals.
This week Karmanos is scheduled to testify. Because of the ongoing trial, he did not want to comment for this story.
Despite spending $90 million on the lawsuit to date, the fight has contributed to operational improvements and the way Compuware treats customers, said Zaineb Bokhari, an analyst with New York City-based Standard & Poor's.
With its mainframe products under attack from IBM and the tech economy in the doldrums, Compuware cut staff, acquired companies with complementary products and rolled out more business application software for personal computers.
"Three years ago I perceived (Compuware) as a sleepy company and now they are evolving," Bokhari said. "You can't argue with the fact that management seems focused and is passionate on defending their market share."
"We still believe IBM is Compuware's main competitor on the mainframe side of the business and is still aggressively pricing its products," said David Rudow, senior research analyst at Minneapolis-based Piper Jaffray & Co. "However, we heard that Compuware is doing a better job of competing against IBM and retaining its customers. In turn, we believe its win rates versus IBM improved during the quarter."
Rudow also said Compuware is managing customers more effectively and that the company is rumored to have closed many deals in the $2 million to $3 million range during the fourth quarter.
Materne estimates that the end of the trial will save Compuware $20 million to $40 million in fiscal 2006, which begins April 1.
"An end to the IBM lawsuit is a positive for shareholders, no matter the verdict," Materne said. "The original lawsuit was filed almost three years ago ... a resolution to this case is a positive for investors no matter what the financial outcome.""
1. CPWR does NOT get reimbursed for legal fees--$90-100 million spent so far. 2. IBM still markets their competing products in any way they want. Supposedly, this had caused $400 million in damages--I don't accept that so far, but what about the future? 3. The guaranteed money to be received for licensing basically covers that legal costs and interest OVER A PERIOD OF FOUR YEARS IN THE FUTURE.
All this being said, CPWR still benefits in some ways:
1. No more legal fees except for the investors' class action lawsuit that was caused by the posturing for the IBM case. 2 CPWR still receives technical mainframe info from IBM instead of being cut off. 3. CPWR has a chance of making money on future services to IBM.
All in all, this is better than a loss in the courtroom, but not enough to drive this stock upward into double digits. Considering the feeble case that CPWR made in their part of the trial, this is about as good as it can get. As someone else said, this was a nuisance payout by IBM. Once again, we see that Pete is still living in dreamland:
"50,000 consultants" (even though we are supposed to be "programmers rather than consultants".
"A settlement will be worth $500 million to $2 billion."
Now maybe Tommi and Pete can "focus"--they sure couldn't after Y2K because of that awful IBM causing trouble and distracting them!
I will probably sell my remaining holdings in the next week or two after all gains can be wrung out of this POS.
Wait until you see the fine print before you spend your money, guys.
Do your home work. There's a good reason the smart money is cashing in right now.
A FEW UNPLEASANT FACTS:
CPWR float is 369M shares. IF you realize a full $400M to bottom line (which you won't) that would be 25 cents a share over each of the four years. Only $140M seems to actually be guaranteed - read the fine print (nuisance offering by IBM to get rid of the CPWR unpleasantness, even though CPWR never made a coherent case on any of their charges). That's a piddling 8 cents a share - if all that tracks to bottom line. Let's be generous - give 6 cents. Bottom line, CPWR gets a little, IBM gets rid of a nuisance - and avoids the vicissitudes of a jury verdict. Cheap. And do you really think the IBM-CPWR relationship will ever be the same again. Remember, IBM can now come at CPWR in the market place where this will ultimately with A VENGEANCE.