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Software Stocks Upate: September 2005

The Software Stock Index was down 0.9% in September compared to the NASDAQ's 0.0% flat line.  The average stock was actually up 3.0% indicating the small caps had a much better month than big caps.  In fact if it wasn't for a 6% loss by Microsoft, the whole sector would have been up 1.9%.  As it was, the best performing sectors were Operating Systems (+34%) led by Redhat's surge on positive earnings, Content  Management (+16.1%)  thanks largely to Convera's continued speculative ascent, and Customer Relationship Managment (+12.2%) thanks largely to Siebel's jump on Oracle's takeover bid and resulting sympathy rallies from CRM and RNOW.

The worst performing sector was Microsoft (-6%), a sector all to itself given that it comprises 1/3 of the software market's $776BN in market cap. Databases (-4%), led by Oracle's decline on disappointing earnings, was the second worst performing sector while PC-Based Financial Services Software declined 2.2% due exclusively to a bit of weakness in Intuit.

From a valuation standpoint, the weigthed average average Price/Sales was 4.6X and the weighted average P/E was 26.5.

On the M&A front, the software industry continued to consolidate with the acquisitions of Nuance and Aspect Communications closing as well as a number of new bids being announced.  Since the beginning of 2004 for every new software company that has gone public, 6 companies have either been acquired or have gone out of business.

For a detailed breakdown of all the stock statistics including a record of all of the M&A in the space, click here to download an Excel spreadsheet with the data and click here to get Microsoft's automatic stock quote downloading plug-in for Excel if you don't already have it.

I have improved the spreadsheet this month with a more fundamental financial data and ratio's for about 85% of the companies in the index.

October 5, 2005 in Software, Stocks | Permalink


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The thoughts and opinions on this blog are mine and mine alone and not affiliated in any way with Inductive Capital LP, San Andreas Capital LLC, or any other company I am involved with. Nothing written in this blog should be considered investment, tax, legal,financial or any other kind of advice. These writings, misinformed as they may be, are just my personal opinions.