There was a cloud of uncertainty that kept shareholders in Digital River, Inc. (NASDAQ:DRIV) anxious. That anxiety has now been cleared with the latest announcement that Microsoft Corporation (NASDAQ:MSFT) agreed to extend its deal with Digital River for a few more years.
Shareholder concern settled
Microsoft is a significant customer for Digital River. It accounted for about 33% of revenue that Digital River generated in 2013. There were fears earlier this month after it emerged that Digital River had given Microsoft more time to make a decision on whether they will continue their contract or not. After a short lull, Microsoft extended its contract with Digital River and helped take away a major shareholder concern.
In a regulatory filing this week, Digital River, Inc. (NASDAQ:DRIV) disclosed that its contract with Microsoft will run through March 2017.
Buyout on course
Digital River, Inc. (NASDAQ:DRIV) is earmarked for sale to a group of investors that include Siri Capital Partners. The company agreed to about $840 million buyout offer from the investors. However, it was allowed to go shopping for a sweeter deal within a 45-day window. The window closed earlier this month. That means that the buyout deal with Siris and its collaborators is on course.
The buyout offer valued shares of Digital River, Inc. (NASDAQ:DRIV) at a premium of about 50%. At the time of the announcement of the buyout agreement with Siris, Digital River’s CEO, David Dobson, said that the deal was good as it will give them flexibility to innovate.
In the e-commerce space, things move fast, and competition is ever high, which explains why Digital River, Inc. (NASDAQ:DRIV) agreed to a buyout deal with Siris. The extension of business contract with Microsoft also comes as a milestone for the company whose shareholders have been demanding for more value.
A look at Digital River, Inc. (NASDAQ:DRIV)’s financial statement reveals that things are not very bad in the company. However, it is easy to notice revenue fluctuation, which may not be sweet music to the ears of shareholders that are hungry for growth. The company disclosed $88.83 million in revenue in the most recent quarter. That was higher than $87.39 million in the prior quarter but fell short of $97.81 million in the earlier quarter.
Digital River, Inc. (NASDAQ:DRIV) concluded the latest quarter with $233.41 in cash, which was higher than $225.23 million in the previous quarter.
Digital River, Inc. (NASDAQ:DRIV) was affected by the 2011 bear phase like any other stock in its segment but the drop then transformed to a sideways phase in the band of $13-$19 for the next 3 years and considering the performance of most other smallcaps in that period, it must be said that this stock outperformed. The strong base building came to a conclusion 3 months back when the stock exploded to $25.88 levels. Now it’s a very turbulent period going on but the price must go above $26.50 to think of the next target of $29.50.