According to "Topix.net", Lackluster earnings reports from Dow Jones industrials General Electric Co. and Citigroup Inc. sent stocks plunging Friday as soaring energy prices compounded the gloom. The Dow lost more than 170 points, and the Nasdaq composite index tumbled more than 45.
A tempered outlook from Motorola Inc. also disappointed traders although its newest cell phone helped double its profit last quarter. Elsewhere, news that supermarket chain Albertson’s Inc. has resumed takeover talks drove gains in its stock.
While GE and Citigroup’s results came in just shy of analysts’ estimates, the large-cap firms that released earnings this week would have needed blockbuster reports to satisfy Wall Street’s overblown expectations, said Rick Pendergraft, an equity trader at Schaeffer’s Investment Research.
"The ramp up we had into earnings let you know that people were expecting big things," Pendergraft said. "Any time we go into an earnings season and the market is overbought, it sends up a caution flag for me."
Iran’s nuclear arms dispute and threats of terrorist attacks on the United States propelled the energy market. A barrel of light crude surged $1.46 to a four-month high of $68.65 on the New York Mercantile Exchange, where natural gas also bounced off recent lows to add 37.5 cents to $9.28 per 1,000 cubic feet.
Citigroup Earning
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According to "bizjourals.com", The Kalkberg Commerce Park will get $725,000 in federal funds to make transportation improvements at the New Baltimore development.
The money, allocated to the Greene County Industrial Development Agency, will fund upgrades to the access road to the park and to widen Route 9W. The improvements will make it easier for traffic to get into and out of the park.
The announcement of the federal funding was made Thursday by U.S. Rep. John Sweeney at the National Bedding Serta Facility Showroom in the Kalkberg park.
The chairman of the Greene County IDA board of directors, Dan Frank, called Sweeney "our point person" in Washington in getting the federal allocation.
Source: http://www.bizjournals.com/industries/banking_financial_services/commercial_banking/2006/01/16/albany_daily48.html
Baltimore commercial park
On Tuesday Sovereign Bancorp Inc. said that its profits increased dramatically last year. It also reported strong results for the year’s fourth quarter.
Sovereign (NYSE: SOV) of Wyomissing, Pa., currently embroiled in a battle with its largest investor, said its 2005 net income of $676 million was up 49 percent from $454 million in 2004. Earnings per diluted share were $1.77, up 31 percent from $1.36 in 2004.
Sovereign officials said 2005 net income included the full-year impact of the bank’s Seacoast Financial Services Corp. and Waypoint Financial Corp. acquisitions, which closed in the third quarter of 2004 and the first quarter of 2005, respectively, as well as stock-based compensation expense of 5 cents per share. Sovereign has been expensing stock options since 2002.
To read more, Visit http://www.bizjournals.com/industries/banking_financial_services/commercial_banking/2006/01/16/philadelphia_daily19.html
Sovereign’s income
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Entrepreneur’s gut value: $25 million-$35 million
Len Green’s value: $30 million
Mary O’Connor’s value: $14 million
Inside your local ATM, your printer, your PDA, and your cell phone is a
tiny computer that makes the device do what it’s designed to do. The
technical term for that little computer is an “embedded system.”
In 1997, Anees Ahmed and two partners founded Mistral, a company that
provides hardware and software for these systems, in Bangalore, India.
At launch, the trio had $12,000, a staff of 16–and a vision to become
an international powerhouse. Ahmed has remained intensely focused ever
since. In 2001, the company landed $2.75 million in first-round
financing. It now employs 260, has three offices in India and three
offices in the United States, and a global base of customers including
Texas Instruments. In 2005, Mistral hit $8.4 million in sales and was
profitable. By 2008, Ahmed and his partners are aiming for revenue of
as much as $24 million. Ahmed wants to pursue another round of
financing–to expand the business and perhaps make an acquisition. In
preparation, he’s undergone a couple of professional appraisals, which
have come in between $20 million and $25 million. But he’d like a
higher number to present to investors. “If we can get the right
person,” he says, “I know we can get between $25 million and $35
million.”
Len Green’s assessment
Green started by scrutinizing the company’s numbers and getting a
sense of Mistral’s niche in the marketplace. Two things jumped out at
him: Mistral was growing faster than the average company in this
sector, and the company was investing more in R&D than rivals of a
similar size. He scheduled an interview with Ahmed. Much of the talk
concerned how far Mistral had come and how much opportunity there was
in the future. In this regard, Green saw little cause for concern.
What’s more, Mistral is on the right side of the outsourcing equation.
Green was impressed by Ahmed’s drive, commitment, and tech smarts. But
savvy entrepreneurs, ironically, also raise some red flags. What if
that founder no longer is able to handle day-to-day operations–or, as
Green likes to put it, “What happens if you get shot by a jealous
lover?” Most entrepreneurs don’t have a good answer, and Green often
drops the value as a result–sometimes as much as 30%. In Mistral’s
case, Green felt that the management team was solid enough to perform
even with Ahmed out of the picture.
As for competitive threats, Green didn’t see many. The worst that could
happen was that a larger company with deeper pockets might take notice
of Mistral’s success and compete for clients by cutting prices or
advertising more heavily.
The next step was to boil these impressions down to a number. Because
Green believes that a company is worth what someone is willing to pay
for it, he established a baseline of $14 million–the amount the
company was valued at in 2001, when it landed its first investors.
Sales at that time were obviously lower than they are today. Taking the
assumption that a company’s value would increase in direct proportion
with revenue, Green calculated that the top of the range for Mistral’s
value would be about $60 million.
Green now had to decide where Mistral fell in the $14 million to $60
million range. He started by estimating the premium he’d be willing to
pay for Mistral’s advantages: a faster-than-average growth rate, a
strong management team, the heavy R&D investments that might pay
off down the line. This brought him to around $50 million. Then he
reduced the sum by 20%–something he generally does when assessing
small companies that run the risk of having a large competitor swoop
into the market; the discount also took into account the risk of Ahmed
leaving the company and the risk of the company trying to expand too
fast. The bottom line: “I believe this company justifies a value of $30
million today.”
Mary O’Connor’s assessment
Preparing for her interviews with Ahmed, O’Connor found herself
curious about his motivation. Did he found Mistral because he loved the
idea of running his own company? Or was he determined to make it as
profitable as possible? Venture capital investors, of course, care a
lot more about the latter than the former. As a result, entrepreneurs
with a solid exit strategy tend to get higher valuations.
O’Connor pored over Mistral’s old business plans and mission
statements. Ahmed did not disappoint. “The vision was always to get to
the next profitable stage as quickly as possible,” she says, “and then
identify where they would go for the next round of funding.” It sounds
like basic business strategy, but O’Connor says such methodical
planning is rare. “So many entrepreneurs think that somehow the funding
will just be there and luck will prevail because they have a good
idea,” she says.
After delving into background research on the industry, she began
her calculations. Given the company’s track record, she proceeded with
the assumption that an investor would be satisfied with a 35% return
after a holding period of three years. Based on Mistral’s projections,
if a venture capitalist sold its stake in the company in 2008, it would
walk away with $34.5 million. To get that number, the VC would have to
invest $14 million today–which is the value she assigns to Mistral.
She admits it’s conservative. The company has other potential assets,
but O’Connor had a hard time pinning a value on them. Most important,
Mistral is developing software that it eventually plans to license.
“This may become 30% of their business and can provide substantial
funding for growth,” she says. “But given the information available, it
can’t be adequately valued. Financial statements just don’t help us
with this kind of intellectual property.”
Anees Ahmed’s response:
Not surprisingly, Ahmed prefers Green’s assessment. “Len has done a
valuation with an entrepreneur’s insight,” Ahmed says. “He has not just
checked financial numbers, but also the technology and expertise that
we have, along with the customers and future prospects.” But at the
same time, Ahmed voices the typical entrepreneurial complaint: The
number should have been higher. “With future growth and more focus on
intellectual-property development, this valuation can increase
substantially,” he says.
O’Connor’s assessment, on the other hand, “only gives part of the
value,” he says. If you add such factors as Mistral’s intellectual
property and the loyalty of its customers, “the numbers will add up.
How much is in the eye of the beholder.”
Indeed, Ahmed was struck by the extent to which a company’s value can
depend on who is doing the assessing. As he searches for both new
financing and potential partners, he plans to look for entities that
will be more likely to give him credit for the intellectual property
he’s created and place a strategic value on his company’s technical
capabilities and engineering team.
http://www.inc.com/magazine/20060101/valuation-mistral.html
Technorati Tags: ValuationofSoftwareCompany
According to "Stephen Hall" Its 2006. Do you know where the industry is going?
Until someone invents a crystal ball or a time machine that allows us to answer that question, well rely on the extensive knowledge, the years of experience, and the well-informed predictions of LOMAs Board of Directors.
Resource recently surveyed members of the board to solicit their views on where they see the industry headed for 2006. As in recent years, they see the usual dose of complex issues economic, legislative and regulatory in naturemaking sure that nothing in the industry will remain untouched by change for long. And for the most part, they were in agreement on their responses to the six-question survey. Among the major points of agreement were the following:
* Sales and premiums for 2006 will either remain flat or will rise modestly. Profits will be under great pressure from spread compression, moderate sales growth and costs associated with regulation and compliance, but higher interest rates and price increases due to additional capital may help.
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The Main Street America Group has launched a new online quoting system to allow independent insurance agents access to new business quotes for homeowners and personal auto insurance.
Main Street’s Personal Lines (PL) Quick Quote will provide information directly from the agents-only section of the company’s Web site.
PL Quick Quote will have information on drivers, such as operator license number, and vehicles, such as vehicle information number. It is also connected to motor vehicle records, underwriting databases and insurance score information.
Jacksonville-based Main Street America Group operates four property and casualty insurance carriers — NGM Insurance Co., Old Dominion Insurance Co., Main Street America Assurance Co. and MSA Insurance Co.
Source: http://www.bizjournals.com/industries/banking_financial_services/insurance/2006/01/16/jacksonville_daily6.html
