Stock of the Day
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Open Text Corporation (OTEX)
Canadian software maker's stock plummets after warnings of weaker than expected profit reports.
Shares of Open Text Corporation, a software company based out of Ontario, saw a hefty decrease in its share value after warnings of a poor fiscal first quarter. The company blames the setback on a number of deals that couldn't be closed early in the year. This news coincides with reports that a number of large organizations have agreed to use Open Text software for their content management solutions.
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We believe management credibility issues will not be appeased in the short term," UBS analyst Martin Cecchetto told clients as he downgraded the shares to "neutral" from "buy" and slashed his price target to $20 from $26. The stock price fell 21% on Wednesday following the earnings news, and subsequent downgrades. The company said that it expects net losses of 1 to 4 cents a share, with revenue between 84 and 86 million dollars. While first-quarter earning disappointed greatly, Tom Jenkins, company CEO, claimed, in a press release, that 2005 fiscal earnings should not be affected by the poor performance. On the other hand, some analysts are concerned that the company's refusal to revise its 2005 outlook foreshadows more missed earnings and more downward revisions. This is the second consecutive earnings estimate that Open Text has missed.
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In other recent news, the U.S. Office of Naval Research announced that it will be adopting Open Text Corporation's, and partner Formark's, Livelink software to improve collaboration and to better manage documents and data for the organization's research projects. This system is designed to help the Navy manage documents, improve cycle time, and eliminate some of the handling of physical documents. This news should help Open Text to overcome some deficits created by the failure of several unclosed deal that hurt its first-quarter financials. Also going the way of the Office of Naval Research is the British Council, an agency responsible for educational opportunities and cultural research. The agency plans to save well over $2 million by 2005, all thanks to Open Text's content management system.
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So is it all bad news for the Canadian software company? Not necessarily. They have been criticized for not closing deals and not meeting expectations on several occasions. They have fallen short on earnings, and have been downgraded by many analysts. And yet they continue to close large deals with the likes of very large companies like the ones mentioned above. Overall, shares of Open Text dropped 21% on Wednesday and analysts have said that it is not the stock to have buy now, but at the same time they continue to make deals that prove they are the largest provided of Enterprise Content Management Software.
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Profile |
Open Text Corp. has pioneered the development of innovative intranet, extranet and e-Business applications. Since creating one of the first search engines to index the World Wide Web, the company has remained at the forefront of Internet-based technologies. Today, Open Text solutions allow individuals, teams, organizations, and global trading communities to collaborate on projects, share ideas and accelerate innovation to the fastest possible speed. The company is the largest provider of Enterprise Content Management in the world.
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