Wednesday, July 8, 2009

MSC Software throwing in the towel...(MSCS)

AlphaNinja - Now don't get me wrong -->> I'd never scoff at a 12% jump in one of my holdings, but these guys are not doing their shareholders any favors. Strategic Simulation software designer MSC Software (MSCS) is to be acquired for a 12% premium.

"After a careful and thorough review of all strategic alternatives available to MSC, the MSC Board of Directors has approved this agreement as it represents the best option for our stockholders," said Ash Munshi, Interim Chief Executive Officer and President of MSC. "This decision is the culmination of a long process of review and examination, and in addition to maximizing value for our stockholders, provides excellent opportunities for our employees and customers."

"This transaction will allow the company to stay focused on delivering leading simulation solutions. We are pleased that Symphony has recognized MSC's success to date and look forward to this next stage in the company's life," continued Mr. Munshi.

After losing almost 50cents per share last year, MSC Software(MSCS) is about to turn a profit in 2009. In 2010 the street is looking for 13cents of earnings. The kicker is that like other software companies, MSCS expenses (runs through the income statement) noncash charges, so actual cash earnings are understated by about 47cents annually. Net out the company's $150m in cash and it trades at a 10(ish) multiple to cash earnings -->> so why sell?

MSCS isn't a leading company in its space...still, this agreement to be acquired values the company at .73times sales after netting out cash -->> a low valuation, but such is the norm for companies in this industry. Expect some shareholders to be upset with this decision...

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