Friday, October 3, 2008

Holincheck and Corsello are nuts re: Authoria!

God I wish these guys would go to an intensive week-long retreat and learn a thing or two about financial analysis, private equity, and corporate operations. In both of their recent posts about the Authoria acquisition and they respectively assert that this is good for Authoria customers.

Well, I suppose it is from a certain perspective, meaning, it's good that Authoria is not insolvent. But, from their customers' perspective, did they really understand that Authoria had almost no growth over the last four years, was burning tons of cash, and was enormously debt laden? I doubt it. I suppose their customers are now relieved that their supplier didn't fall off the cliff.

Had Bedford not come along, Authoria was heading towards receivership, or more likely, an even worse deal than they got from Bedford. Adding $8M of cash to a company that just burned easily $10M plus in the past year hardly sets that company off to invest even more. Hollincheck's assertion that "Authoria will have more resources to invest in the product, implementation services, and support" is utter rubbish. If Authoria simply kept its previous burn rate, it would be out of cash again in the Springtime. They won't be increasing their spend.

As I noted in comments on Corsello's blog, I am quite certain that the Bedford guys will do just the opposite of what Holincheck suggests, that is, to massively cut spending and bring Authoria to profitability. Ultimately, this will be a good thing for Authoria shareholders (mainly Bedford), but unfortunately it's going to be a while before it's anything but bad-to-neutral for their customers.

Interestingly, Vurv, now that their financials are available via Taleo's recent filing, was a much healthier company than Authoria at the time of their respective acquisitions.


Anonymous said...

Amen brother on all fronts. Authoria was a financial shipwreck headed for the rocks. While their customers will ultimately benefit by not having to panic had they folded, there is still the question of the platform which is certainly not Tier I.
I echo your point regarding the analysis by Corsello and others in our space. The Authoria situation is a re-cap where the previous investors are getting crushed and Bedford will do what is necessary to right this ship if they can - thus the severe discount.

Anonymous said...

Well, there is one positive for customers compared to other deals in that it preserves a strong alternative choice in the market. Taleo's winding-up of Vurv looks like a pretty good move for Taleo but I have yet to see any way it's good for clients.

TechSphinx said...

Well, Vurv customers will clearly have to ride through a transistion, which will be painful in some cases. Ultimately, they will likely have a stronger recruiting solution with Taleo though.