Mr. Materne: It's across a fairly large group of enterprise software companies, from the large-cap names, like Microsoft and Oracle, down through some of the system management companies, such as BMC and Compuware, and even includes a number of application companies, such as Art Technology Group, which is a name we just launched on. Obviously, there are a lot of software companies out there, but as an independent brokerage firm, we tend to focus on those names that we think hold the most opportunity for our clients, and where we can add the most value. So our coverage tends to revolve around that premise versus any preordained coverage list.
TWST: Let's look at software in general. How bad were software companies hit in the economic downturn last year?
Mr. Materne: Overall, software held up fairly well from a fundamental standpoint, which is partially due to the fact that so many of these companies are now getting a meaningful portion of their revenue and earnings from maintenance, which is a recurring source of revenue. So while all the stocks got beaten up fairly dramatically with the rest of the market, the fundamentals held up pretty well, especially when it came to being able to maintain earnings and cash flow. As you head into 2010, I think the big questions are going to be at what pace do we see IT budgets start to pick back up? And which companies are best positioned to outperform expectations, since valuations have normalized over the past six to 12 months, after bottoming last March? Given that most enterprise budgets tend to be a little back-half loaded, investors may need some patience in the first half of the year. But the overall outlook definitely looks more stable today versus 12 months ago.
Tickers included in this excerpt: ARTG, BMC, CPWR, CSCO, CTXS, HPQ, IBM, MSFT, ORCL, SAP, SWI
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