RIMG fell today, most likely a function of certain shareholders who want the cash returned rather than deployed voting with their feet. I had spoken to the CFO earlier this year, and this morning's announcement is 100% consistent with the strategy that they have previously conveyed.
I will share my notes below from this morning's call. First, though, some background info. The company is a dinosaur in that it is a candlemaker in an electric lightbulb era. It's technology allows storage to DVD and CD - you have probably seen examples of their products at Walgreen's or CVS (bring in your photos, get a disc). One thing that they have been doing is to penetrate Chinese Healthcare companies, but that will never be enough. Their real goal is to leverage their 10,000 existing customer relationships with new technology, which today's buy does. Here is a link to the presentation on the new company, Qumu.
The CEO, Sherman Black (46) joined the company as COO in 2009 and the Board quickly booted the CEO and promoted him at the beginning of 2010. He was a senior executive with Seagate for many years. He totally shuffled senior management, bringing in a new CFO, a former Seagate employee as CTO and a new head of Marketing from Grainger (GWW), a very well-run company.
There are some big holders - Royce, Fidelity and Amerprise. Insiders own 5% of the company, including 1.3% for the CEO. The stock has just two analysts (Dougherty and Sidoti). I mentioned the valuation metric earlier of .9X P/TB. The company was trading at about 16PE before today, but remember that more than half the value of the company is represented by cash. After the 70% dividend hike today, which may capture some attention, the yield is in excess of 5%.
The call explained how RIMG has "push" technology that complements the "pull" technology of Qumu. Europe will be a big growth market for Qumu. Qumu's CEO is staying to run the unit. Qumu grew out of Yahoo! technology and had some impressive VC owners. Video to the desktop, digital signage and mobile devices, 100 Global 1000 customers. 1/3 of 1mm shares used to purchse are locked up 6 mos, rest rolls off over next year.
Qumu runs, per customer choice, as hardware appliance, software license or subscription. 30% currently is subscription and maintenance. There are no high concentrations among customers. RIMG has looked at 100 companies - this transaction evolved over six months. The company indicated that there will be no more acquisitions for now as they focus on internal growth initiatives as well as integrating this deal (this is positive).
After watching this for many months now, RIMG now has my attention. It's not on the watchlist, at least yet, but I will be trying to learn more about this acquisition: Is it as transformative as the company indicates? In this market, there may be no need to rush, but the price sure looks like a bargain here, especially after the selling today.