TMWD

[la-onda]

additional information:

Tuesday, September 20, 2005
Watching the tumbleweed roll
One stock at the top of my watch list is Tumbleweed Communications (TMWD). Tumbleweed provides enterprise software that secures email and other communications. I first looked at Tumbleweed several years ago after a nice run shorting its competitor Zixit (ZIXI). I never took a position, but now TMWD is getting interesting on the long side.

Tumbleweed has now put together two cash flow positive quarters in a row, and after four years of reporting GAAP losses, seems to be on a trajectory towards GAAP profitability. TMWD just upgraded its corporate suite, bringing in Craig Brennan as president and CEO. Brennan previously was CEO of Brio, Inc., a business intelligence software company that was acquired by Hyperion. It provides security software to many top banks, healthcare institutions and, as of last month, the U.S. Marine Corps. In a recent interview, Brennan explained Tumbleweed's position within the industry:

    When I look at the landscape, there are 50+ competitors in this space, 30 of whom are under $25M. This tells me that the industry is still fairly immature and fragmented. The space is growing rapidly, and I expect we'll see the same consolidation we've seen in ERP, CRM and BI: fewer players with more comprehensive, complete solutions. The focus will inevitably move from point products to solution suites, and right now there are no clear dominant leaders. Tumbleweed has an advantage right there -- the company's products were developed to interoperate and provide complete functionality for our customers. We've had a complete, single-vendor approach for some time, have been battle-tested in some of the most demanding companies in the world, and we're well-positioned to lead the market as consolidation occurs.

TMWD trades at an enterprise value to revenue ratio of 3.55. That is a lot more than I usually like to see in a stock, but my research shows that is not atypical for software stocks. Zixit trades at 5.72x sales, Symantec at 8.35x sales, Microsoft at 6.05x sales, and Oracle at 5.64x sales. I don't mean to suggest that TMWD is in the same league as the latter three; just that its valuation is by no means rich for a software stock.

Two concerns. First, there is a bit of insider selling, but nothing too extreme. Second, the stock is somewhat extended technically and is nearing resistance from the last runup in late October 2004.

DISCLOSURE: No position. Not a recommendation to buy or sell any security -- for educational/informational use only.

http://themicrocapspeculator.blogspot.com/2005/09/watching-tumbleweed-roll.html

[Terliso]

good day for TMWD, another high, & also volume is increasing

[Terliso]

Well, the cup with handle... it's confirmed false breakout... how about bottom fishing in TMWD looks like its time again 

[setravis]

Yesterday's closing chart,
Could be a bottom........

[la-onda]

TMWD: Henley & Co Starts @ Speculative Buy; Sets Tgt @ $8; Analyst Notes
Tuesday , August 28, 2007 08:44ET

Issuer: Tumbleweed Communications Corporation (NasdaqNM: TMWD)

Analyst Firm:  Henley & Company, LLC

Ratings Action: INITIATE

Current Rating: Speculative Buy

Target Price Action: INITIATE
Target Price: $8.00

Analyst Comments: The firm believes TMWD is terribly undervalued at the current time, and a Sum of the Parts of $8.00 is a better reflection of its valuation. With the core business of TMWD's business growing 38% YoY, email security, with solid customer additions (bringing the total customer base to more than 2,700 enterprises and governments) they would currently be aggressive buyers of the stock. Even without counting $280 million plus of NOLs, the firm believes the stock in 12 months is worth their sum of the parts estimate of $8. They feel very confident that the investments Tumbleweed is making in its business in 2007 should turn into substantial 20%+ revenue growth in 2008 and 5% operating margins in 2008 with approximately $75 million in revenues.

attached report and chart:

[la-onda]