GSB

[das317]

Do you think it is a bad idea to sell GSB prior to earnings, especially on a good day like today?  It seems as though most stocks lately when earnings come out go down.  Is it a bad idea to lock in a 100% gain and then hopefully buy back cheaper assuming earnings looks good.  I know there is the risk that it goes up after earnings, but just haven't been seeing much of that lately.

[David Randolph]

Do you think it is a bad idea to sell GSB prior to earnings, especially on a good day like today?  It seems as though most stocks lately when earnings come out go down.  Is it a bad idea to lock in a 100% gain and then hopefully buy back cheaper assuming earnings looks good.  I know there is the risk that it goes up after earnings, but just haven't been seeing much of that lately.

I'll remain invested for the long term with my full position, but perhaps selling half now isn't a bad idea. There's a risk of a disappointment or strong profit taking, since the stock has been up so much.

I hope GSB makes a bullish breakaway gap tomorrow and keeps trending up, but I imagine that will be hard to accomplish.

Good luck

[eggman11]

Do you think it is a bad idea to sell GSB prior to earnings, especially on a good day like today?  It seems as though most stocks lately when earnings come out go down.  Is it a bad idea to lock in a 100% gain and then hopefully buy back cheaper assuming earnings looks good.  I know there is the risk that it goes up after earnings, but just haven't been seeing much of that lately.

I sold my entire position of GSB today before earnings for a couple of reasons:

The stock has had a big run up recently and some of that was to publicity conerning their spectacular 2nd quarter, which was due in large part to a one time DOD order, so incomparison this quarter will look a lot weaker and with the low the float, we could easily drop 2 points or more. The upside surprise potential on the earnings is very limited, therefore the possible amount to gain tomorrow after earnings is extreme low compared to the amount it could lose, so I decided to sell today.

Overall I really like the stock and am looking to buy back in after tomorrow earnings announcement.

P.S.

Thanks David for you quick info on GIGM CC. I bought back in today a 19.07 

[David Randolph]

Thanks David for you quick info on GIGM CC. I bought back in today a 19.07

Good move, you're already up 10% plus

I sold my entire position of GSB today before earnings for a couple of reasons:

The stock has had a big run up recently and some of that was to publicity conerning their spectacular 2nd quarter, which was due in large part to a one time DOD order, so incomparison this quarter will look a lot weaker and with the low the float, we could easily drop 2 points or more. The upside surprise potential on the earnings is very limited, therefore the possible amount to gain tomorrow after earnings is extreme low compared to the amount it could lose, so I decided to sell today.

Overall I really like the stock and am looking to buy back in after tomorrow earnings announcement.

I understand your decision, I have doubts myself ... I'm basing my "hold" decision on the revenue guidance the CEO gave of $20 M for the full year of 2007, meaning $10 M in the 2nd half. Before the DoD order (that is, in Q1 2007) the company had quarterly revenue of $3.6 M, so I'm curious to where the additional $1.4 M will come from, since there wasn't any big deal announced.

It's about time for the trend becoming a friend again, but I agree with you, the odds favor a sell off after earnings. I would view any sell off as a long term buying opportunity so I'll just keep holding for the long term.

[la-onda]

I hesitate between considering taking profits before earnings, to buy back the shares on the pullback, or just hold for the long term disregarding short term swings. Usually I'm inclined for this second hypothesis, but seeing the hype and misinformation around GSB ... well, I'm going to think this over for a few more days, I still have time, and maybe we'll see $8 over the short term.

The following is GSB's quarterly EPS numbers:



EPS was $0.03 for the seven quarters prior to Q2 2007, which was heavily influenced by the following one time order:

DoD order: $2.5 M

However, Randy Poole, GSB's CEO, has been reiterating the $20 M revenue guidance, and in the first half GSB's revenues were just $10.04 M. So the CEO has been saying there will be $10 M more in the second half, even without any new huge order (none was announced in the 2nd half).

I must say that I was really shaking here, considering the company could go back to the $0.03 EPS per quarter number in Q3 and a sell off would follow. But this CEO has been delivering on all his promises, so I have no reason to believe he's lying about the $20 M revenue number for 2007.

In the 1st half GSB earned 15 cents per share, so, if the same $10 M in revenue translate into another $0.15 EPS, the company will earn $0.30 in 2007. This should put the stock at least at $9 over the next 6 months.

You know I love GSB for the long term and I trust the company's CEO and his guidance to hold the stock over the short term, even though there's misleading information on the internet pumping GSB (which ignores the fact that Q2 was heavily influenced by a one time show).

Q3 numbers are out:

GSB: Q3 EPS 4c vs 3c Misses 5c Est
Wednesday, November 14, 2007 17:10ET
QUARTER RESULTS
GlobalSCAPE, Inc (GSB) reported Q3 results ended September 2007. Q3 Revenues were $3.90M; +50.00% vs yr-ago; MISSING revenue consensus by -12.95%. Q3 EPS was 4c; +33.33% vs yr-ago; MISSING earnings consensus by -20.00%.

Form 10-Q:
http://xml.10kwizard.com/filing_raw.php?repo=tenk&ipage=5282472

Down 13% afterhours, but the CC tomorrow will be important imho
to summarize it:
GSB shows a 50% increase in revs and a 31% INCREASE in net income is NOT that bad.....

and last but not least this news is awesome:

GlobalSCAPE(R) Introduces High Security-PCI Solution
Wednesday November 14, 8:30 am ET
New Tool Facilitates Data Security Compliance and Maintenance with the Payment Card Industry - Data Security Standard (PCI-DSS)

SAN ANTONIO--(BUSINESS WIRE)--GlobalSCAPE (AMEX:GSB - News), a leading provider of products that allow companies to move, store and share files securely over the Internet, today announced the general availability of GlobalSCAPE High Security-PCI (HS-PCI) solution to help ensure compliance with the PCI Data Security Standard. GlobalSCAPE's HS-PCI solution working in conjunction with the Enhanced File Transfer Server provides a high-security, hardened tool that facilitates PCI-DSS compliance and also achieves or exceeds corporate and industry security best practices for data transfer and storage.
The appeal of GlobalSCAPE's solution is broad because the PCI DSS is fast becoming a standard for the safeguarding of all sensitive company data, not just credit card data. It applies equally to patient records in a healthcare company, account balances at financial institutions, or social security numbers in a federal or local government program. Developed in response to soaring levels of credit card crime and fraud at the transaction level and through sensitive data leaks, the PCI DSS is a multifaceted security standard that includes requirements for security management, policies and procedures and IT infrastructure. To date, it has been endorsed by Visa, MasterCard, American Express, Diner's Club, Discover and JCB USA. Any company that transmits, processes or stores Primary Account Number (PAN) must comply with the PCI DSS or face fines up to $500,000 per incident and the potential removal of processing privileges. In response to the stringent requirements, GlobalSCAPE developed its HS-PCI solution to help users simply and efficiently achieve and maintain PCI DSS compliance at a low total cost of ownership.

"As a security model, the PCI DSS requirements can help companies control compliance costs and build a more efficient and reliable IT infrastructure that delivers better service while incurring less risk," said John G. Kelly, Director of Marketing at GlobalSCAPE. "At GlobalSCAPE, we are committed to providing our customers with best-in-class solutions that afford the simplicity and flexibility necessary to adapt to any future compliance mandates quickly and easily. By choosing GlobalSCAPE's High Security-PCI solution, users can meet many of the requirements put in place by the PCI Data Security Standard."

Key benefits of GlobalSCAPE's HS-PCI solution include:

1)
Protecting Data in Transit—enforces the use of secure protocols, strong ciphers and encryption keys, and maintaining password policies that strictly follow PCI DSS guidelines.

2)
Protecting Data at Rest—helps organizations comply with data storage requirements by using repository encryption, securely sanitizing deleted data so that it cannot be reconstituted, and not storing data in the DMZ (when used in conjunction with GlobalSCAPE's DMZ Gateway server).

3)
Controlling Access to Data—enables administrators to restrict and require unique IDs for access. GlobalSCAPE's Authentication Manager can isolate a specific group of users from other groups in the administrator's domain and capture all server activity.

4)
Ensuring Ongoing PCI DSS Compliance—makes it easy for an administrator to create a new site that complies with the PCI standard and create regular or ad hoc reports that provide a status review of the monitored systems.

Availability
GlobalSCAPE High Security-PCI Solution is available immediately for $5,490. For more information or to request a demonstration of the product please visit www.globalscape.com or call 800-290-5054.

=
GlobalSCAPE branching out into the credit-card payment market
from San Antonio Business Journal
GlobalSCAPE Inc. is pooling its expertise in data transfer and storage technologies on a new tool that will allow merchants to securely transmit payment data over the Internet.

Even though the financial data-security market is not new, merchants now are facing even more stringent requirements for accepting and processing credit-card payments.

Companies that fail to meet Payment Card Industry - Data Security Standard (PCI-DSS) requirements could face fines up to $500,000 per incident and could lose their processing privileges for not keeping customer's account data secure.

To capture a slice of this security market, the San Antonio-based company has developed a new system called GlobalSCAPE High Security-PCI that will be marketed to merchants. GlobalSCAPE (AMEX: GSB) developed the tool in response to soaring levels of credit-card fraud at the transaction level and identity theft.

John G. Kelly, director of marketing at GlobalSCAPE, says the company's new product applies to credit card data, but can also be adapted for patient records at a health care company, account balances at financial institutions or Social Security numbers.


A huge revenue driver imho
cheers
Oliver

[David Randolph]

Oh boy, again, the trend wasn't my friend and it would have been better to take a roughly 100% profit than to keep holding for the long term. This has happened to me several times this year.

Remember SILC, for example? When earnings were out I knew the stock would go down, but decided to focus on the long term. Ended up taking just a 38% profit (instead of a 100%) if I recall correctly.

In GSB's case there was plenty of evidence that the company would miss analysts' forecasts, as I pointed out. Fortunately some of you sold half or even sold your position entirely over the last few days. You'll be able to buy it back significantly lower.

All this being said, there are some weird issues here:

- It's strange, and I'm sorry for having mislead Garoh on this, that the 10-Q was filed yesterday, since the conference call will happen just today after the close. Investors will be reacting to results today without having listened to the conference call. What's the trick here?

- It's strange that the CEO has talked so often about his $20 M revenue guidance for the full year of 2007 and then reports just $3.9 M in Q3. Revenues for the 9 months so far in 2007 were $13.94 M. So, how come he's been promising $20 M? Is GSB going to make $6.1 M in Q4? Management beat guidance in Q1 and Q2 2007, it will be weird if the CEO mislead investors with his "$20 M talk". Especially since he didn't sell none of his 242,666 shares over the last few days and the company didn't dilute shareholder's value. What would be the point?

The answers will only be given in the conference call today after the close. It is possible that the CEO knows there's going to be, or already has been, a huge order in Q4, which will bring revenue for that quarter towards $6 M plus and the full year number on target with the $20 M guidance.

I hope the CEO wasn't infantile enough to play with investors expectations. A miss of this guidance will make investors lose trust and make GSB carry a lower than average earnings multiple.

Anyway, I already suspected this would happen and, because I love the company's products and believe there's going to be huge growth in demand for them, I'll keep holding GSB for the long term whatever happens.

If I were to sell, I should have sold yesterday. Now there's no point in selling to buy back just a bit lower.

[Garoh]

It's ok David 

In fact , I was planning to sell half of my position today before the earnings , But it already came out just after the maket closed yesterday 

But It's kind of weird thing !! how come they announce earnings after market close and they hold the Call after market close next day ??!!   
Is it legal ??

[David Randolph]

In fact , I was planning to sell half of my position today before the earnings , But it already came out just after the maket closed yesterday

I was hoping that you had sold yesterday. Again, I apologize. They made an announcement saying the conference call would be held on November 15th, after the close, so I naturally concluded that earnings would also be released on that date.

But It's kind of weird thing !! how come they announce earnings after market close and they hold the Call after market close next day ??!!
Is it legal ??

Yeah, I guess it's legal, they don't have to pre-announce the earnings release date or even make a conference call.

I'll be curious to know if there will be a trick here, for example, most people selling because of the earnings miss, an hedge fund buying and then, after the close and at the conference call, the CEO announces a big order or acquisition or something like that. But probably this is just my hope talking.

[Garoh]

Yes david It looks like a trick !!
I hope so .

[terainvestment]

Hi David,

I don't think that a CEO can afford to give not good numbers on earnings, so to shock down the prices...in the meantime an hedge fund buys and the day after with the conference call suddently appears a huge order...this would mean market manipulation and insider trading.

[David Randolph]

Hi David,

I don't think that a CEO can afford to give not good numbers on earnings, so to shock down the prices...in the meantime an hedge fund buys and the day after with the conference call suddently appears a huge order...this would mean market manipulation and insider trading.

I'm not saying that the company reported lower than reality numbers. The facts are:

- The 10-Q was filed 24 hours before the conference call;
- The CEO repeatedly gave a $20 M revenue guidance for the full year of 2007, revenue in Q3 was just $3.9 M and for the nine months so far it was $13.9 M. So, what will he say at the conference call to justify the $20 M guidance?

The difference in timing, guidance and reality is weird. But probably what's happening is that the CEO lied, he's a liar. And that's bad ... well, time will tell.

[berloga]

I shared eggman's worries yesterday and still did not press the button. I am selling today no matter what. The company begins to look dodgy. Who knows what the CEO mutters today, it is not fair to present results yesterday in a flash with little visibility and then talk about it the next day. What a disappointment!

We should consider holding only legit businesses, at least while they appear to be such and sell no matter what once we smell fish.

[eggman11]

I sold off my whole positiom yesterday, thinking I would get back after earnings are announced, but after the way they released earnings and the earnings themselves based on what the CEO said -$20M in revenues as David previously mentioned, I am not so sure, about getting back in.

[berloga]

Somehow my order got filled at $6.50. I will wait for the CC and David's analysis on it. If the share price is justified and the company foresees further revenue growth on a consistent basis, I will gladly buy back, even at a higher price. Better be safe than sorry.

Good move, eggman!

[capricho]

I googled Randy Poole (CEO) and came up with this interesting tidbit. It's a letter written by him to the SEC complaining about market manipulation:

From: Randy Poole
Sent: July 11, 2005
To: [email protected]
Subject: File No. 4-500

Dear Mr. Katz,

I am writing regarding SEC File No. 4-500.

Small issuers traded on the Pink sheets and the OTCBB deserve rulemaking regarding member records of "short" positions and reportng and public dissemination of aggregate positions by security.

Why would you not amend NASD Rule 3360 and require NASD broker dealers to maintain a record of total "short" positions in all customer and proprietary firm accounts in all publicly traded equity securities as well as report this information to the NASD for public dissemination of the short positions by security?

We urgently need the SEC's action to prevent fraudulent acts, expose market manipulation, and promote fair principles of trade and protect investors.

Companies like Globalscape form the next generation of economic drivers. We are easily prone to market manipulation which at times threatens our very existence, and certainly has helped to destroy many promising young companies.

Thank you for your consideration,

Sincerely,