Absolute Software (TSX:ABT) reported its Q1 2013 results yesterday. The company earned (US) $470,768 on sales contracts that totaled $20.6-million, a 19% dip from the first quarter of fiscal 2012.
Absolute CEO John Livingston said the tough quarter was partly a result of a rapidly changing industry:
“…we faced broader PC industry challenges in the quarter that placed downward pressure on our overall first quarter results.” he said, adding: “The magnitude of the impact of these challenges was unforeseen by our PC OEM and infrastructure partners, most of whom also underwent layoffs and reduced their guidance late in the September quarter. While we are disappointed with our overall results for the quarter, we are encouraged by industry forecasts, which are predicting a transition to an improved sales environment toward the end of the fiscal year.”
Livingston added that the Vancouver-based company is excited about the mobile-device management space, where it is seeing growth.
Cantor Fitzgerald analyst Tom Liston says a changing industry won’t leave Absolute out in the cold for long. In fact, he says, the company is positioned to capitalize on the bring-your-own-device trend, which is characterized by high amounts of loss and theft. Liston also says Absolute is strong in the mobile aspect of this space, pointing out that the company was one of the first vendors to secure, track and manage iOS devices, including the iPad and iPhone. In a research report to clients this morning, Liston initiated coverage of Absolute Software with a BUY rating and a one-year price target of $6.
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Absolute Software sprung to attention midway through the last decade. In 2005, the company teamed up with Lojack (NASDAQ:LOJN) to introduce Lojack for Laptops. The product, which worked by periodically dialing Absolute servers and could not be disabled even by wiping the hard drive, was a new level of security for laptops which were, increasingly, becoming a target for thieves.
In 2001, laptop computers were twenty-first among stolen items. By 2010, laptops were the second most stolen object in household burglaries, with one being taken in every four break-ins.
The success of Lojack for Laptops was a boon to Absolute Software. The company’s revenue climbed from under $37 million in 2007 to more than $74-million in fiscal 2012. Along the way, Absolute made OEM deals with Acer, Dell, Fujitsu, Samsung, Toshiba, Intel and HP. Today, the bulk of the money the company makes is through these deals.
Liston says Absolute has effectively entered a space in device management that is magnitudes bigger than the mere theft recovery market it has occupied to date. He points to Gartner’s 2010 $2.2-billion estimate of the market’s size as evidence of this. The Cantor analyst says while there is competition, no incumbent has yet carved out a dominant market share of the device management space, with the top three, LANDesk, Symantec’s Altiris, and IBM’s Tivoli Endpoint Manager, having less than a half-billion in revenue combined.
Shares of Absolute Software closed today down 2.6% to $3.70.