InterCloud Systems Inc (NASDAQ:ICLD) Making A Comeback

Source: pcmag.com

2016 is looking like a better year for InterCloud Systems Inc (NASDAQ:ICLD). Shares have been trending higher ever since they bottomed in February and after ICLD announced the sale of its online data backup business. Now it looks like the worst is behind the company and we see the company getting back above $1.

InterCloud is a leading provider of cloud networking orchestration and automation, for Software Defined Networking (SDN) and Network Function Virtualization (NFV) cloud environments to the telecommunications service provider (carrier) and corporate enterprise markets through cloud solutions and professional services. InterCloud's cloud solutions offer enterprise and service-provider customers the opportunity to adopt an operational expense model by outsourcing cloud deployment and management to InterCloud rather than the capital expense model that has dominated in recent decades in IT infrastructure management.

In February, InterCloud announced the sale of its online data backup related business assets to KeepItSafe, Inc. Under the terms of the asset sale, InterCloud received $24 Million in cash, and retained an additional $2.1 Million, comprised of cash on hand, accounts receivable and net of other closing adjustments. $2 Million of the purchase price was placed into an interest bearing escrow account that management expects to be released at the end of twelve months. The divested assets represented approximately 11% of the ICLD’s annualized revenue. With the sale of these assets, InterCloud is embarking on a turnaround and the market is taking notice. CEO Mark Munro said:

"In addition to the added liquidity, this is the first step in InterCloud’s commitment to reorganize the company with continued focus in the emerging market of SDN (Software Defined Networking) and VNF (Virtual Network Function) orchestration and automation. The Board is considering several options including strategic partnerships, strategic investment partners and other opportunities to allow InterCloud to increase value from our new products in the SDN/NFV (Network Function Virtualization) cloud space. Despite the slow development of the SDN and NFV market over the past two years, the adoption of SDN and NFV has begun to accelerate. Our teams have seen much greater interest in open source private cloud opportunities in enterprise markets, and in the service provider markets where multi-vendor orchestration and VNF validation are critical. Service providers are now taking formal steps to implement SDN and NFV into their global networks. This is the start of a long term IT transformation and migration for which, we believe, InterCloud is perfectly positioned."

In its latest shareholder update, the company reported its pipeline of sales opportunities remains at an all-time high of over $149 million. For the nine months ended September 30, 2015, ICLD reported that revenue was up 25% over the period in 2014 and revenue for the nine months ended September 30, 2015 was approximately $65 million. In December, CEO Mark Munro purchased $100,000 worth of stock at $1.26 per share. This is on top of the 1.4m shares he already owned. In his outlook, he said:

"InterCloud has long-term, profitable relationships with some of the world’s largest businesses, including AT&T, Verizon, Crown Castle, Ericsson, Comcast, The New York Times and Sony, to name just a few. In 2015, we continued to develop and grow our relationship with Juniper Networks, and in August 2015, we were featured in a CIO Magazine Juniper Networks special edition. The article described InterCloud’s latest initiatives around cloud, network virtualization and automation via unified orchestration and the solutions developed by InterCloud."

Currently trading at just a $23 million market cap, InterCloud is undervalued on several metrics. Shares are trading at just 0.2x sales and 0.6x book. With the sale of the online data backup business and a turnaround in the works, Mr. Market is starting to take notice and shares have been ticking up as a result. We will be updating Insider Financial as soon as we know more. For continuing coverage on ICLD and our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!

Disclosure: We have no position in ICLD and have not been compensated for this article.