If the various components of the company, Markco Media, Monitise Create and the MCP and its relationship with partners and clients were to be sold off, how much is each one worth? It is an interesting speculation and may shed some light on the potential going forward. Interesting to hear your serious thoughts.
As of the spring of 2015, at the moment the company unveiled its cloud platform, here are some surprising numbers. Less than 50% of financial institutions in Europe and about a quarter of them in the US have adopted a cloud platform. It may very well be true that the company's offerings are ahead of the curve in terms of what the market is willing to commit to at this point. The good news is that there is market opportunity. The key here, as always, is execution. Will the partnership with IBM be able to deliver? Here is a summary of some interesting data:
One noteworthy item is that small companies (with less than 500 employees) and large enterprises (more than 5,000 employees) had the highest cloud strategy adoption rates at 40% and 35%, respectively. 18% of companies in the 501-4,999 employee range had an established cloud strategy.
It surprised me that participants in the Americas had a rather low rate of adopting cloud strategies (28%). The figures for Asia-Pacific (APAC) and Europe-Middle East-Africa (EMEA) were 41% and 35%, respectively.
Could it be that the market is not quite ready for the company's cloud based offerings? Is this the primary reason for the absence of new contracts, explaining why IBM's global sales force has not translated into a steady stream of new contracts that everyone hoped for? Well, it turns out that adoption of the cloud in financial services has been slow. According to one relatively recent survey, data security still represents a huge obstacle to negotiate. Here's an attempt to summarize some of the data:
Data security is the main barrier for not adopting the cloud. Of those survey participants who have opted not to use cloud services, 100% listed security concerns. The other main concerns were regulatory restrictions (71%) and public breach notifications (43%).
Regarding security concerns, the top five answers given by respondents clearly indicate governance and security of data are leading issues:
Data confidentiality (60%)
Loss of control of data (56%)
Data breach (55%)
Compliance and legal issues (51%)
Data loss (42%)
To some extent, this is beyond the company's control. But how does the company's offerings address these issues? Perhaps this is the most relevant question.
You might consider the following statement from EB in the RNS. The issue may not be the quality of the product, but the timing of when companies are ready to commit to advanced cloud solutions. This puts a somewhat different light on things. The issue becomes one of cutting costs until customers are ready and willing to make the necessary commitment to innovate. What do you think? Here is what she said in her review of the business:
It has become clear over the past year that the market is not evolving at the pace we had anticipated, and this impacted market readiness for some of our more advanced solutions.
So do you think EB and LC are lying when they say they are delighted by the response of customers to the platform? I think there may be some hesitance to commit to the company given the turmoil both in terms of leadership and in terms of SP. Potential customers may be questioning the long term viability of the company. Why commit to a product if the company may not be around? So the absence of contracts may not really be about the quality of the product.
I too was surprised. But there is too much we don't know. This is troubling. If you read the full RNS, there is some language about working on projects with all of the major partners. And there is talk of "refocusing" the relationship with IBM to sell the platform. That is amazing. But maybe the focus has been on building and deploying. But they have a global sales force. We should have seen some contracts by now. However, LC did say that we should see that in relatively "short order" during his response to one of the questions. I feel that there are too many questions left unanswered and I was frustrated by the lack of focused questions by the audience. Nobody pinned LC down on specifics.
For a takeover, the list would be quite long. For taking it private, Leon, Santander and IBM together could do it. And engineer an IPO in a few years time. And recoup all of their losses.
Well, I believe there is upside here. How much is anyone's guess. But I think it will be taken private by people who will figure out how to manage the four transitions the company is trying to negotiate.
Imagine that the company did last year what it did just now, namely, forecast flat revenue over the coming year, instead of having to eat its words not once, or twice, not three times, but four times. Just imagine that. Do you think we'd be in the predicament we are in now? If the company clearly predicted that it would sacrifice short and medium term revenue growth for the sake of long term profitability at the time they announced their partnership with IBM last August, all the pressure to announce new contracts, all of the expectation about revenue growth and an increase in subs would have been taken off the table, and we would be looking at a share price that is much higher than it is today. It is a classic case of mismanaging the expectations of the market. In addition, they are managing four separate transitions, one in business model, two in technology, three in the behavior of financial institutions and four, in the behavior of consumers. This was never going to be easy and it was always going to take some time, quite a bit of time. This is not 20-20 hindsight. This should have been part of the planning process. As it is, I still believe there is great unrealized value in what the company has to offer. Will it be unlocked here? I still think it will be taken private where its true value will be realized without all the public oversight. And there will be a valuable IPO in a couple year's time.
For a cost of $200-300 million, the company will be taken private, perhaps a syndicate of Leon, IBM, Santander and/or others. The company will complete its transition with respect to both its business model and its technology away from the glare of the headlights. And in 2-3 years time, an IPO at several or many times the purchase price will be made and the partners will handsomely profit.
Hold on seeon. Santander will probably not sell. And someone is buying up the massive numbers of shares over the last two days. This is not retail selling or shorts covering. Some are actively accumulating a remarkable number of shares for practically nothing.
It's not as if these are products that are contracted for and then rolled out overnight. These are very complicated systems. I am more concerned about the absence of new agreements. That's the real issue as far as I'm concerned. When companies roll out products is, as I've mentioned, beyond the company's control.
the share price has slightly increased. There are buyers that are taking large positions here. Maybe they will show up on the major shareholders list at some point. And maybe, just maybe there is some insider buys too.
Will they step up and invest more in the business? How has the relationship deepened over the past year? And as I've mentioned before, the company can be bought for far less than what it would take to develop an in-house solution. Will there be interest to simply buy the company from IBM, Oracle, Microsoft, PayPal? The potential list is quite long.
Seeon: I doubt their partners would have established relationships if the product was garbage. That's not the issue. It might be that banks do not yet see how Apple and Google pay are like Trojan horses, whose purpose is to render them to be like dumb pipes, i.e., places where the money is and nothing else rather than as hubs that connect everyone to everyone else in the mobile money space. I will try to find out more information to obtain an answer to my question.