Editor's Note

This company hired Morgan Stanley to find a buyer. With multiple companies possibly interested there could be a bidding war. While a bidder may not appear the odds are pretty good something will happen.


NEW BULLISH Plays


CUDA - Barracuda Networks - Company Profile

This is going to be a simple play description because the main objective is to be long CUDA when the buyers begin making offers.

Barracuda Networks designs and delivers security and storage solutions for clouds and corporate data centers. They protect against unwanted intrusions, malicious activities, they provide spam filtering to prevent phishing schemes to gain access to the internal networks. They are especially active in protecting websites from hackers and providing load balancing solutions for high volume websites.

Shares have been declining since June at $40 to trade under $10 in January. The company promised some new initiatives and restructuring that has not worked out to investor satisfaction.

On February 1st, Bloomberg reported that Barracuda had retained Morgan Stanley to "seek potential buyers" citing unnamed sources. While the process is ongoing BWS Financial reported there could be a number of companies interested in the Barracuda brand. BWS also said a complete turnaround if no buyers emerged would take 1-2 more quarters but it would be completed as subscribers transition to a cloud based product. They have a $20 price target on the shares.

Ahmet Okumus, Okumus Fund, reported in a 13G a couple weeks ago they had established a new position in CUDA of 3.73 million shares or 7.03%. Apparently they believe a bidder will appear.

Shares have rallied from $10 to $14 over the last four weeks. With the share price near $20 in early January any acquisition price would likely be in that range. If a bidding war emerges it could be higher. There is always the possibility that no bidder emerges and Barracuda continues on its restructuring path.

Earnings are April 25th and I would plan on exiting before that report. I am not recommending any options because the spreads are too wide.

The high on Thursday was $14.11 and I am putting a $14.25 entry trigger to open the position. If by chance we are late to the party the position will not be opened.

With a CUDA trade at $14.25

Buy CUDA shares, initial stop loss $12.65




NEW BEARISH Plays


No New Bearish Plays