Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Workday Inc (WDAY): An Intriguing Move by This Company Would Not Help the Stock

Page 1 of 2

In my recent article about Workday Inc (NYSE:WDAY), I pointed out that the company has a huge number of shares that are authorized for issue. The company did not wait long before taking advantage of that. Workday has announced that it proposes to offer $220 million of convertible senior notes due 2018 and $220 million of convertible senior notes due 2020. Later, the company increased the size of the first offering to $310 million.


What’s the reason?

At the end of April, Workday Inc (NYSE:WDAY) had $805.8 million in cash and marketable securities. The company finished the quarter with a net loss of $33 million. Other things being equal, this would have allowed Workday to last 24 quarters without the need for additional financing. Of course, this is not a realistic example. I give this one to give you a feeling that the company was not cash-strapped at the moment it took the decision to issue debt.

The company has stated that it will use proceeds for general corporate purposes. It was not alone. On the same day, its peer, Cornerstone OnDemand, Inc. (NASDAQ:CSOD) stated its plans to sell $220 million of convertible senior notes due 2018 with the same goal. Just as Workday Inc (NYSE:WDAY), Cornerstone offers cloud HR solutions.

Cornerstone had $76 million in cash and cash equivalents at the end of the first quarter. The net loss for the quarter was $10 million. The situation looks different from the one of Workday. Cornerstone OnDemand, Inc. (NASDAQ:CSOD) is not so cash-rich, and it would be great for the company to enhance its liquidity situation.

After, inc. (NYSE:CRM) acquired ExactTarget Inc (NYSE:ET) for $2.5 billion, paying a 53% premium, everyone is searching for the next target of M&A boom. It seems like Workday Inc (NYSE:WDAY) is targeting some company to make an offer. Otherwise, it does not seem logical to raise funds while the company has more than enough cash for its operations.

Good or bad?

What does this news make from an investor’s point of view? It seems like Workday would be purchasing something to expand its cloud presence and battle giants like SAP AG (ADR) (NYSE:SAP) and Oracle Corporation (NASDAQ:ORCL), which also have their HR management solutions. These firms have already bought themselves a piece of the HR management pie. SAP has made its move with the purchase of SuccessFactors, spending as much as $3.4 billion. Oracle bought Taleo for $1.9 billion.

I would like to remind that Workday Inc (NYSE:WDAY) is expected to post losses in the next two fiscal years. Workday is seen as a growth company, so the key factor for the success of its stock would be growth. Growth companies are often acquired by bigger peers that want to defend their market share. As Workday would not be profitable in the near future, it is important to examine whether it could be bought by someone.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!