Q1 Earnings: Radcom

I’ve fallen behind writing about the earnings reports so far this season.  In the next few posts I am going to catch up with a few brief thoughts on a number of the reports that came out over the last week and a half.  Starting with…

Radcom

I’m surprised the stock has moved so much after the company reported first quarter results on Thursday.  I didn’t think there was a lot of new information provided.  Revenues ($8 million) were in-line with expectations, guidance was maintained, the trials are progressing.  On this the stock has jumped almost 20%.  Go figure.

I guess investors have focused on the progress.  The four trials are wrapping up, and within the next 6-9 months they expect so be able to announce wins, though nothing specific was provided.  Ravkaie (the CEO) gave positive color around the potential for wins, but that isn’t anything new, he’s been saying that since the trials were announced last summer.  They indicated discussions with new carriers that will begin trials in the third and fourth quarter. And some of the tenders that are now coming in are for pure NFV solutions, which is a new development (most of their engagements were for hybrid deployments as carriers transitioned slowly to NFV) and one that should play right into their wheelhouse.

I unfortunately got shaken out of about 25% of my position the day before earnings.  Doesn’t it always happen that way.  Netscout, a competitor, announced a win with Vodafone that day, and my initial reaction was that maybe Radcom had lost that trial (though no one is sure who Radcom is in trials with, one of the companies that comes up in discussions is Vodafone).

On further reflection, that might be wrong.  It was pointed out to me that the Netscout press release refers to passive probes, which are not the same thing as the active probes that Radcom’s MaveriQ solution uses (passive probes are more akin to offline testing and measurement which would be like the sort of thing Exfo does).  Second, on the conference call, Ravkaie was specific about calling out Netscout as a competitor and saying that they do not have a comparable NFV ready solution to compete with Radcom.  So it seems more doubtful to me now that the Vodafone win is a loss for Radcom then it did at first glance.

Honestly, I think my move was driven as much by position size as the Netscout news.  Whenever I have a position that is big I get quick on the trigger with any rumor to the contrary.  The fact is that the morning of earnings I had the opportunity to add back at 18, but I didn’t.  I was not convinced the results were incrementally better to justify running back in.  That proved to be wrong, at least for now.  So I will just participate in the move with the shares I have and see whether it is for real.