ALDN

[yukiii]

Picked up some today, Looks like the Russell hit support today, should recover from here.
Some goods buys in small caps today. WPCS, EGO

[BigSully1]

I'm not so sure buying the dips anymore (on anything but the very strongest stocks) will be a good strategy. $RUT still below Feb high. Market seems to be faltering.....

[David Randolph]

I'm not so sure buying the dips anymore (on anything but the very strongest stocks) will be a good strategy. $RUT still below Feb high. Market seems to be faltering.....

Hi BigSully1, you know I'm not in the market timing business anymore, but I read an interesting article on the subject today: Contrarians still smiling

As for ALDN, yukiii has been buying it, probably we're getting to a short term low. Long term fundamental value is much higher.

[BigSully1]

I'm not so sure buying the dips anymore (on anything but the very strongest stocks) will be a good strategy. $RUT still below Feb high. Market seems to be faltering.....

Hi BigSully1, you know I'm not in the market timing business anymore, but I read an interesting article on the subject today: Contrarians still smiling

As for ALDN, yukiii has been buying it, probably we're getting to as short term low. Long term fundamental value is much higher.

Good article David. thanks.

[David Randolph]

Good article David. thanks.

You're welcome BigSully1

ALDN is going through a normal corrective process, mainly because there were no news lately and people need to know the financial details of the Indian deal to see the light on ALDN. To me ALDN is the 4th best stock of the Main Portfolio, with the optimal exit 160% above the current share price, so I'll keep on holding ALDN.

[David Randolph]

We had the following news today on ALDN:

• Aladdin Knowledge Systems to Present at Three Investor Conferences
PR Newswire (Thu 9:06am)

ALDN really needs to speak out about its story, since the stock is terribly undervalued at this point. Perhaps they will shed some more light about the Indian deal, my best hope for revenue growth to go from 10% a year to 30% a year, for the next three years.

My valuation model says the ALDN will be at $80 in late 2009, I'll continue holding it.

[yukiii]

Written by: Andrey Glukhov CFA
Released: 5/10/2007
Provider: Brean Murray & Co., Inc.

Our key take-aways from Aladdin™s analyst day are as follows:- Turn-around in North America in progress, but will take time. We believe the company is taking the right steps to turn around its US business. However, we believe near-term growth rates will still be depressed. The company is executing on a transition from direct to indirect distribution for its enterprise security business. In addition, the company's initial sales leadership change in the US did not work out ...

[David Randolph]

Written by: Andrey Glukhov CFA
Released: 5/10/2007
Provider: Brean Murray & Co., Inc.

Our key take-aways from Aladdin™s analyst day are as follows:- Turn-around in North America in progress, but will take time. We believe the company is taking the right steps to turn around its US business. However, we believe near-term growth rates will still be depressed. The company is executing on a transition from direct to indirect distribution for its enterprise security business. In addition, the company's initial sales leadership change in the US did not work out ...

Thanks for the information yukiii, but what do they say about India? The US is losing importance for the company.

ALDN's management will speak at a conference tomorrow, I wonder if they'll provide some more financial details on the Indian deal:

• Aladdin Knowledge Systems to Present at Three Investor Conferences
PR Newswire (Thu, May 17)

Technically the stock continues to bounce from the $20.41 support level, I'll continue holding ALDN.

[yukiii]

Our key take-aways from Aladdin's analyst day are as follows:

Turn-around in North America in progress, but will take time.  We
believe the company is taking the right steps to turn around its US
business.  However, we believe near-term growth rates will still be
depressed.  The company is executing on a transition from direct to
indirect distribution for its enterprise security business.  In addition, the
company's initial sales leadership change in the US did not work out and
the company is close to hiring another head of sales.  We expect the
company's US business can show signs of recovery by 4Q07/1H08.

eSafe's ISP pipeline reportedly robust, but sales cycles remain long
and unpredictable.  The company signed approximately 10 ISPs to
date, which we consider to be more Tier 3 providers.  In addition, the
company has some mobile providers.  Aladdin is reportedly in
discussions and pilots with larger ISP providers, but the timing of the
decisions remains unpredictable and sales cycles are very long. 
Therefore, we would not expect signing significant ISPs until 2H08.

eToken continues to be solid performer, though growth
investments still penalize profitability.  We continue to expect strong
performance from eToken worldwide.  We believe this remains a very
strong growth option for Aladdin, though since the company continues
its aggressive investments in future opportunities, eToken business unit is
still losing money and is likely going to lose money until at least 2H08. 
eToken's growth should accelerate as a function of the CIITE
deployment, though this deal is unusually large and there do not appear
any similar size deals in the near-term pipeline.
CIITE deal could represent FY07 upside, but size and timing
remain unknown.  Aladdin stated its core business is on track to
achieve the upper end of the FY07 guidance (consistent with current
Street expectations), and CIITE deal is not in the numbers and
represents an upside to projections.  CIITE deal has three revenue
sources – token deployment with potential of up to 3.8 million tokens,
content security kits and DVDs, and service and support revenue around
the eSafe installations.  However, CIITE is still finalizing the business
model around the token roll out and, therefore, the timing of the revenue
and the reasonable assumptions around the deployment are difficult.  For
instance, CIITE still has not decided whether it will pay for tokens or will
make students buy tokens.  In addition, the distribution model is still
being worked out.

HASP SRM could accelerate DRM growth, but won't meaningfully contribute till at earliest 4Q07.  The company
believes HASP SRM platform can return DRM growth to double-digits by introducing software components that allow it
to address new customers and deeper penetrate existing customers.  At the same time, since software ASPs are
significantly lower, the company does not expect to accumulate sufficient revenue base to have meaningful impact on
numbers till at earliest 4Q07.
Keeping operating margin flat, can the company inflect the revenue growth?  Aladdin reiterated that while
operating leverage is possible, the company would prefer to keep operating margin at 15-17% and step up on investments
in growth.  Consequently, EPS growth will be a function of the revenue growth, which to date has been less than exciting. 
The bull case would be that the company can finally significantly accelerate its revenue growth after a prolonged period of
sloppy performance.   Absent of the significant revenue acceleration, we feel the shares are fairly priced if EPS growth
remains in low double-digits.
Maintaining HOLD.  We believe current valuation adequately reflects the company's current growth profile,
inconsistent execution and recent strength in numbers.  Therefore, until we get more proof-points that there is a
sustainable inflection in revenue, we remain on the sidelines on ALDN.

Sell ALDN buy PRFT much better growth .49 2006  .71 2007  .87 2008 25% growth

[David Randolph]

Sell ALDN buy PRFT much better growth

Thanks, but no thanks. PRFT trades at 58 times 2006 EPS, ALDN trades at 23 times 2006 EPS. And I expect strong growth for ALDN too, with the revenue growth rate accelerating from 10-11% to 30% due to the Indian deal alone.

I couldn't find a link to Sunday's CIBC world markets conference, more specifically the ALDN presentation, but given the market's response, probably it went well. The next conference
will be in New York on May 30th, I hope there will be a webcast for that one.

I'll continue holding ALDN.

[David Randolph]

ALDN continues to push higher, it is just a matter of time before the stock breaks out above the $22.27 high. There wasn't any new fundamental information today. I'll keep holding ALDN.

[David Randolph]

Financial details of the Indian deal were not yet disclosed, maybe only in August when the company releases second quarter results and a new guidance for the full year of 2007. I'll continue holding ALDN.

[David Randolph]

ALDN continues to consolidate recent gains in a tight range. Since fundamentals seem very attractive I believe the stock will ultimately breakout on the upside. But technically it would still be bullish if the stock were to come down to test the 50 days SMA before pushing higher.

I'll continue holding ALDN for the long term.

[David Randolph]

Over the 1st quarter earnings press release, we got the following in terms of 2007 guidance:



So, we're looking at about $100 M revenue and $1 EPS, excluding the Indian deal. Now, that deal is huge, since we're talking about 3.8 million e-Tokens:

• Aladdin Wins Deal to Supply Up to 3.8 Million Indian IT Students with eToken Authentication Keys
PR Newswire (Wed, Apr 4)

But eToken prices differ a lot, depending on the type of eToken, look here: eToken Prices

So, which eToken, and at what price? The company didn't disclose that information yet, here's what they had to say about this issue:



And again ...



But, even without the Indian deal, we have the following revenue and EPS trends ...



... so I'll continue holding ALDN.

[David Randolph]

I wonder if ALDN will reveal the financial details of the Indian deal only at their 2nd quarter earnings release. I wouldn't mind that, since I see the stock rising even without that deal (but it would certainly help boosting the stock).

I'll continue holding ALDN.