(B)(N) CPWR Compuware Corporation

Deal Book. Armed with some accounting fundamentals, 5% of the stock and a vision and maybe some proxies, activist shareholders are stalking the forty-year old Compuware Corporation of Detroit, Michigan (The New York Times, November 14, 2013, The Deal: Compuware Told to Sell or Fight). Their offer to buy the company at $11 per share ($2.4 billion) in December last year fell with a thud; the company was trading at $10.50 to $11.50 at the time and one wonders where the “shareholder value” is in $11 per share?

The Lonely Hunters

In the interim, they combined forces with several other investment groups and hedge funds and took down BMC Software in September which had a market value of $6.5 billion at the time but the two companies combined (Compuware plus BMC) still falls far short of competitors such as Oracle Corporation ($158 billion), SAP AG ($98  billion), Salesforce ($34 billion), Adobe Systems ($29 billion) and Intuit Incorporated ($27 billion) and the mainframe and network application software divisions of Microsoft Incorporated and IBM.

Compuware has also been eroding cash from the balance sheet ($100 million last  year and $50 million now) and building receivables from $400 million to the current $450 million which might say something about its customers in government and the auto industry (who will eventually be “good for it”) but despite that, the “enterprise value” (described as the “Coase Dividend“) of Compuware has been increasing at a time in the which the enterprise value of BMC Software was significantly decreasing (please see our Post for more details).

Compuware will pay a dividend of $110 million to its shareholders this year for a current yield of 4.6%. In our view, Compushare is “fairly valued” at the “price of risk” which we estimate as the Risk Price (SF) of $9.60 per share and rising. Please see Exhibit 1 below.

Exhibit 1: (B)(N) CPWR Compushare Corporation – Risk Price Chart

(B)(N) CPWR Compushare Corporation

Compuware Corporation delivers services and software that enable its customers’ important technologies to perform at their peak.

(Please Click on the Chart to make it larger if required.)

From the Company: Compuware Corporation provides services, software, and practices for information technology (IT) organizations worldwide. The company’s Application Performance Management segment offers software-as-a-service solutions to test and monitor the performance, availability, and quality of companies Web and mobile applications; and on-premises licensed solutions that provide detailed application insight that identifies and helps correct the causes of poor application performance within client workstations, network, server, Java, and .NET environments. Its Mainframe segment provides solutions to enhance the productivity of development, maintenance, and support teams in application analysis, testing, defect detection and remediation, fault management, file and data management, data compliance, and application performance management in International Business Machines mainframe environments. The company’s Changepoint segment provides business portfolio management and professional services automation solutions for technology companies, enterprise IT, and professional services organizations. Its Uniface segment provides application development environment for building, renewing, and integrating the complex enterprise applications. This segment enables enterprises to meet increasing demand for developing complex, secure, and global Web 2.0 applications, deployable on any platform, including the cloud. The company’s Professional Services segment offers various IT services for mainframe, distributed, and mobile environments, including mobile computing application development and integration, package software customization, cloud computing consulting, and development and integration of legacy systems. Its Covisint Application Services segment uses business-to-business applications to integrate vital business information and processes between partners, customers, and suppliers. The company was founded in 1973, has 4,500 employees  and is headquartered in Detroit, Michigan.

For more information and additional references to the theory, please see our recent Post, The RiskWerk Company Glossary.

And for more on what risk averse investing has done for us this year, please see our recent Posts on The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or (B)(N) The Woods Are Burning, or for the real class action, La Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

And for more stocks at high prices, The World’s Most Talked About Stocks or Earnings Don’t Matter – NASDAQ 100.

And for more on what’s Working in America, Big Oil, Shopping in America or Banking in America, to name just a few.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™
Alpha-smart with 100% Capital Safety and 100% Liquidity
Guaranteed
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Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.