The case for GraphOn
Cloud is not the endpoint of change, just as virtualization was not. One change enables the next. Corporations still spend over $ trillion annually on desktops and laptops, Windows apps like MSOffice, and Windows support under the expectation that job-critical applications are deployed to these traditional devices. The next layer of change is to maximize the cost savings of cloud app by getting all remaining desktops/applications deployed on server and delivered over network to any device. Companies are not going to throw away their $200B installed base of MSOffice and other Windows apps. Most will not want to go pay a cloud subscription on these things they've already licensed. But they need to transform this legacy architecture underneath so that all apps are delivered to user devices, not deployed on them. Then huge savings are possible on top of Cloud, particularly with support labor after changing the IT's user support model. This is user virtual computing, with trends called 'consumerization of IT' and 'BYOD', and VDI. IT will invest in this infrastructure. Good companies here are CTXS for large cap, LOGM as a med cap, but a lot is priced in. Ground floor microcap opportunity exists with GOJO. It stands alone in having application virtualization/presentation technology that is not dependent upon Windows terminal services, and is far more efficient. This leads to a better user experience on the client. Last year they ensured their survival by delivering must have 64-bit Windows host support. Now they have redefined their relevance for the new decade with the Go-Global Cloud product, its Flash client, and new support for mobile devices. Tablet devices are ideal for people who will want to use their heavyweight Office apps. GraphOn is well positioned to ride today's revolution in mobile computing on new non-Windows devices. The company is low on cash, which is reflected in the discount stock price. The business is very scalable, with product gross margins near 90% and support margins 50% that can support high growth. Good solution partners are needed but should not be hard to find to tap this mobile growth opportunity with high-margin software solution sales. GraphOn has a solid small partner in emerging-market of Brazil, Centric systems. This growth can be replicated to emerging markets worldwide. For established IT in US and Europe, an equity investment-sales partnership is ideal, but any meaningful partnership deal could transform Graphon into a $200M market cap within months. With most revenue falling to the bottom line, a simple $30M annual partner could easily yield $15M net profit to GraphOn. A high margin and PEG likely produce over $500M market cap in that scenario. The market opportunity is in the $ Billions. A few years ago, Intel did a $10M equity-sales deal with LOGM, and LOGM is now a $1B market cap. LOGM and CTXS trade at P/S ratios of over 8 and 7 respectively, while GOJO P/S is still near 1 currently. GraphOn must grow its sales nearly 20% this year, which is possible even organically without new partner deals. If they achieve that, the stock would likely to go up about 5 fold on that basis alone. No stock with this much upside at this price discount is a certain thing. There are real risks and there are possibility of failure that investors should evaluate. Please do your own research about the company. Read the SEC filings. The company has been fully-reporting for many years.
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