Random Thoughts on a Wayward Bus

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OPTV: Value Find: OpenTV Corp (1.18).

http://www.smallcapinvestor.com/articles/01082008-value_find_opentv_corp
Matt Ragas | Jan 08, 2008 6:20am EST

Massive insider buying, a badly beaten-down stock price, a strong balance sheet and a still solid market position make for an interesting situation at a small-cap interactive TV solutions provider.

Founded a decade ago, San Francisco, Calif.-based OpenTV Corp. (Nasdaq: OPTV) survived the tech crash and today is one of the world’s largest providers of solutions for the delivery of digital and interactive television. OpenTV’s middleware solutions have been deployed by more than 40 network operators in over 96 million digital set-top boxes and digital TVs. Clients include EchoStar Communications (Nasdaq: DISH), BSkyB, Sky Italia and FOXTEL. OpenTV believes that it holds 60% market share worldwide in the middleware market.

While these are all impressive sounding numbers, OpenTV’s survival skills and large installed customer base hasn’t historically resulted in steady profits. As of this writing, OpenTV trades for a paltry $1.25 a share, near the bottom of a 52-week range of $0.93 to $2.85. Once a Wall Street darling, OpenTV attracts little analyst coverage these days. The stock suffered from a string of missed expectations and lowered guidance in 2007. The $175 million market capitalization firm’s competitors are a potent group, which includes heavyweights Microsoft Corporation (Nasdaq: MSFT), Scientific-Atlanta, a unit of Cisco Systems, Inc. (Nasdaq: CSCO), and NDS Group plc (Nasdaq: NNDS), which is controlled by News Corp. (NYSE: NWS).

Given the stagnant stock price, its unprofitable ways and a scary group of competitors, it might be easy to write-off OpenTV on first glance. However, every dog has its day and, under closer review, this looks like a dog that may still have some bark in it. For starters, OpenTV ended its most recent quarter with more than $71 million in cash (over $0.50 share) and no debt on its balance sheet. Revenue inched up to $71.8 million from $70.1 million for the first nine months of 2007, while earnings before interest, taxes, depreciation and amortization (EBITDA) flipped to a negative $3.8 million from a positive $3.9 million in the year-ago period. Given OpenTV’s sturdy balance sheet and modest cash burn, it isn’t going out of business anytime soon.



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