Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

InternetQ - The Rebuttal does not wash: target price cut to one eighth of a drachma

By Tom Winnifrith

8 December 2015 05:01

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Full marks to InternetQ (INTQ) for effort. The company has published a lengthy response to the points I raised. here when our initial target price (for the whole company) was one drachma. My response will come in several parts, each begging yet more questions. Part 1.

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Comments

firede

8 December 2015, 06:18

In my opinion their response does not adequately explain their intangible assets position.

In the beginning they explain that only €0.7m of their payroll was capitalised as intangible assets and that they therefor are not reducing their operating costs by capitalizing a significant amount of payroll as development costs. So far so good.

But further down in their response they state that “Any technology company that is focused on cost containment and fast lead times
for developing software platforms is likely to use, in part, expert external
developers for some of the software development work”

I had a look in their annual report for 2014. For 2014 they purchased software worth ca. €18m euro.This means that they are not only using external developers “in part”, but external developers are supposedly responsible for 96% of the software development for this company. Even accounting for that the purchased software may include some licenses like windows, sql server, etc. the ratio is going to still be at least 90% of the software development performed by external developers.

I personally don’t know of any technology company which has a technology offering as a core of their business, while outsourcing 90%+ of the technology development. Well, there was one company which also did this, named Globo.