Concurrent's War Drawer
The deal -- comprised of the sale of 11.2 million common shares for $1.25 a piece, plus warrants for an additional 2.8 million shares -- "also improves Concurrent's negotiation position in its efforts to monetize a portion of its Everstream patent portfolio," noted Brian Coyne, a senior analyst for Friedman Billings Ramsey & Co. Inc. , in a note issued Thursday.
Concurrent picked up Everstream in August 2005 for about $15 million. Everstream specializes in systems that analyze performance data and provide historical reporting from VOD and other digital services. (See Concurrent Acquires Everstream.)
FBR maintained its $2 price target and Market Perform rating on Concurrent shares, believing that target is "much more in reach" as a result of the financing.
Shares of Concurrent were down 5 cents to $1.40 apiece in afternoon trading Thursday, but rose 16 cents Wednesday -- the day Concurrent announced the financing.
"We believe the transaction is a net positive for Concurrent despite the dilution impact to existing shareholders, since it effectively removes the liquidity overhang on the shares," Coyne explained.
The infusion, he added, should give Concurrent "sufficient liquidity to reassure customers and suppliers," which, in turn, should boost the company's ability to secure incremental and new VOD business with existing partners such as Cox Communications Inc. and Time Warner Cable Inc. (NYSE: TWC), as well as small and large telcos that are just starting to deploy on-demand services.
The financial deal may also further reduce past speculation that Concurrent is an acquisition target for its entire business, or just its VOD components. In fact, the company recently expressed interest in developing new Flash-based video server products, matching a move already made by rival SeaChange International Inc. (Nasdaq: SEAC). (See A Flashy Approach to VOD.)
Last fall, Arris Group Inc. (Nasdaq: ARRS) was viewed as a possible suitor for Concurrent as Arris sought to flesh out its digital video technology portfolio. Arris then struck a deal to acquire Tandberg Television but was later outbid by Ericsson AB (Nasdaq: ERIC). (See Motorola, Cisco Buyouts Vex VOD Market and Tandberg Board Backs Ericsson Bid .)
— Jeff Baumgartner, Site Editor, Cable Digital News