Optiva Faces Value Decline After New Analyst Guidance

In an update to analysts issued on Monday (January 20), Optiva (TSX:OPT,OTC Pink:RKNEF) shared its 2019 result projections along with its plans for 2020.

The communications service provider (CSP) revealed it will most likely see revenue in the low US$90 million range. On top of this, the company is adjusting a variety of goals to meet its new financial targets.

Shares of the company have dipped since the announcement. As of the market close on Wednesday (January 22), it was down to a price of C$44.78, a 14.36 percent decline since the news release.

Monday’s trading session brought a decline as well right after the firm made its official announcement.

One of the company’s big changes is to dedicate resources to the cloud opportunity, which it thinks will be critical for CSPs. “We believe in 10 years every telco will be selecting/using public cloud-based BSS (business support systems) and charging systems,” Optiva said in its document to analysts.

Optiva also confirmed it now plans to raise US$100 million in order to “accelerate investment for the transition to cloud.” As part of its rush to the cloud, the company admitted it is even willing to adjust its cash flow from an even break to potentially losing money.

With this significant adjustment in its strategy, Optiva is asking for patience from investors, since the firm expects the first five years of this route to prove challenging.

According to the company, a large opportunity is present in the race to offer cloud-based BSS and charging systems.

Late last year, CSG (NASDAQ:CSGS), a provider of software and services for customer experience, confirmed the launch of its own cloud-based BSS solution, Ascendon Communications.

“The opportunities that the next generation of technology delivers is radically reshaping how communications service providers are formulating their business models and launching new services to keep pace with their competition,” said Chad Dunavant, global head of product management with CSG.

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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.