AUTONOMY divides the bulls and the bears more than most companies. In some respects, the bears have a point. There have always been nagging doubts about the firm’s ability to generate cash; the fourth quarter was no exception, with cash conversion down at 58 per cent compared to 64 per cent in 2008 and 2007. That said, the average number of days it takes the firm to collect revenue after making a sale was 88 in the final quarter, down from 97 in the preceding three months. And the firm moved back to a net cash position, with a balance sheet $45m (£23m) in the black (this was less than some hoped, due to the huge and often unpredictable amounts the firm spends when developing new products).
Still, savvy investors will use the uncertainty that surrounds Autonomy’s complex products and business plan as a buying opportunity. There were signs in the fourth quarter that improvements in the macroeconomic environment are driving sales higher, with sales up by 18 per cent compared to a 16 per cent increase for the full year. The Silicon Fens firm isn’t cheap, trading at 19 times estimated earnings for 2010. But it has a pipeline of impressive products and truly unique intellectual property. It’s time to capitalise on the confusion.