Tuesday, January 16, 2007

Calls of Note Part 4

- CIBC notes see further support for their theory that Verint (NASDAQ:VRNT) won a major contract with WMT that could propel FY07 ests. A week after VRNT announced a $12M order from an unnamed big boxer, March, formerly WMT's sole video source, said its WMT orders had slowed to a trickle. MN shares fell 43%.

The precipitous fall-off in March's previous ~$14M/qtr business from WMT suggests that the big-boxer has picked a new primary source for video surveillance software. If that new source is Verint, it could see ~$200M in incremental orders over the next 2-4 years, by ofirm's estimates.

A major relationship with WMT would also amount to a major endorsement, potentially further catalyzing VRNT's already enviable position in retail video surveillance solutions. CIBC believes WMT's video business has decent gross margin of ~50%-55%, compared with VRNT's 58% corporate average.

Firm does not believe that the WMT opportunity was fully baked in to 4Q06 guidance, making current Street estimates ($99.7M in revenues vs. firm's $104.8M) appear very conservative. They also see 5%-10% of potential upside to their and consensus FY07 revenue estimates.

Notablecalls: Expect to see a move in VRNT today. The chart looks like it wants to go higher.

No comments: