The purchase of UStream by IBM (NYSE:IBM), and the dire financial straits of small cloud-based companies, puts a spotlight on Box (NYSE:BOX) as a stock to buy for a buy-out. After a 50% fall in the stock price, is now the time to buy Box stock?
Source: BOX stock price chart by amigobulls.com
Box originally rose to prominence for its simple cloud storage business model, but that quickly became commoditized and its second act is more promising. Box now bills itself as a content management and collaboration platform, developing new types of workflows and focusing on services for enterprises. It even opened an office in New York City.
Box continues to have a negative bottom line, however. For the quarter ending in October it lost 45 cents per share.
Source: BOX EPS chart by amigobulls.com
For the next quarter, ending this month, it’s expected to lose another 41 cents per share.
All this remains possible, in part, because Box has enough cash, $152 million, to continue sustaining losses, at the current rate, for some time. It could also tap debt markets, having just $1 in debt for each $10 in assets currently.
What is of most interest to speculators, however, are its growing relationships with both Salesforce (NYSE:CRM) and IBM. With Salesforce it has created new content management solutions. With IBM it has announced a host of initiatives, described in a recent press release as a strategic partnership.
To both these companies, Box is worth far more alive than dead. Storage systems, the manipulation of storage in real time along with processing, is becoming an important niche within the greater cloud market, and Box is addressing these opportunities at a price that both Salesforce and IBM find quite acceptable – practically free.
Still, Box would be a snip for either of these companies – or one of their competitors – to buy. If Oracle (NYSE:ORCL) made a move for Box, as part of its own expansion in the cloud, Salesforce would be forced to respond. Given its market cap of $1.36 billion, Box could sustain a rather extreme bidding war that wouldn’t break the bidders at all.
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