Good morning!
Blinkx (LON:BLNX)
This is on the cusp of what I define as a small cap (upper limit in a grey area between £200-300m - other people use varying figures), but I suspect it might be coming down more firmly into my territory. The market cap at 66p is around £262m.
I've never quite understood their business model, nor how they managed to generate such strong growth in turnover & profit. It seems to revolve around online videos, and the selling of associated advertising.
You may recall that this is the company that was the subject of a critical blog from a Harvard Associate Professor, Ben Edelman. He also presented at the UK Investor Show in April 2014 in London. I freely admit to not having a clue about the technicalities of what he said, but it sounded credible, and he is credible - you don't get to be a Harvard Associate Professor if you're daft. If his allegations were untrue, then he wouldn't have risked his career by making them, is my reading of the situation.
That's why I have avoided buying shares in Blinkx - on the no smoke without fire principle, even though as noted here on 6 May 2014, they appear reasonably good value - with strong profits that look real (i.e. not created by accounting tricks), and piles of cash on the Balance Sheet.
Also I am suspicious of situations where the share price does not rebound when it should, if all was well. That again makes you feel that there must be some substance to the bearish case against a company.
Anyway, this morning the situation seems to have got a lot worse for Blinkx shareholders, as a trading update is issued which is clearly a profit warning. The company refers to H1 trading to date, but seeing as they have a 31 Mar year end, then this looks like a Q1 update to me (Apr-Jun). The key figures are not good;
...As a consequence, while revenues grew c. 5% year-on-year, EBITDA will be c. $5M below management expectations for the Period, based on the Company's internal models.
"the period" presumably is H1 rather than Q1, i.e. expectations for H1, based on trading in Q1, that's how I read it anyway.
Interestingly the reasons given for the profit shortfall specifically mention the attack by Edelman;
Historically, blinkx's business…
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