Stock Preacher

Network Engines Inc. (NASDAQ: NENG)

Network Engines Inc. (NENG) is a provider of purpose-built platforms, appliances and support services for application software developers, original equipment manufacturers (OEMs) and service providers serving storage, security and communications markets worldwide. The Company utilizes leading-edge standard technologies to build custom solutions backed by expert support staff and smart services to solve deployment challenges, accelerate time to market, reduce ownership costs and increase business efficiencies. NEI boasts of the largest selection of purpose-built, turnkey platforms and appliances in the industry. It has partnership with industry-leading technology providers such as Microsoft, GE Fanuc, Emerson, RadiSys and Dialogic, among others.

The Company was founded in 1997 and is headquartered in Canton, Massachusetts.

Source: Reuters.com, SEC Filings

FY End Month: September

Financial Summary

For the fourth fiscal quarter of 2009, NENG reported net revenues of $40.7 million, more than $2 million above the top-end of the guidance of $33 million to $38 million and an increase of 22% sequentially compared to the $33.3 million reported in the third fiscal quarter. It posted a net loss on a GAAP basis of $819,000, or $0.02 per share, which included $313,000 of stock-based compensation expense, $439,000 of amortization expense and a $393,000 charge related to the settlement of an acquisition dispute. For the said quarter, the Company’s cash and cash equivalents totaled approximately $21.0 million.

For the full year ended September 30, 2009, net revenue came in at $148.7 million, down 25% from the previous year’s $197.5 million. Gross profit was $22.5 million, or 15.1% gross margin, also down compared to last year’s $32.3 million, or 16.4%t gross margin. On a GAAP basis, the Company reported a net loss of $3.2 million, or $0.07 per share, an improvement from last year’s net loss of $8.5 million (including the $8.7 million write down for impaired goodwill and $444,000 of restructuring charges), or $0.19 per share.

Source: http://www.reuters.com/finance/stocks/estimates?symbol=NENG.W

Source: http://www.reuters.com/finance/stocks/ratios?symbol=NENG.W

Analyst Consensus

Analysts polled by Thomson Reuters expect NENG to Outperform.

Source: http://markets.ft.com/tearsheets/analysis.asp?s=NENG

Investment Highlights

NENG is a leading provider of application platforms, appliances and support services for software developers, original equipment manufacturers (OEMs) and service providers worldwide. Its products are designed to ease deployment, enhance manageability and increase security.

NENG offers a comprehensive suite of services that include solution design, integration control, support and other value-added service capabilities, enabling customers to more effectively deploy, manage, service and support their solutions. With more than 30 standard products from which to choose, NENG offers the largest selection of purpose-built, turnkey platforms and appliances in the industry. Its expertise ranges from customer-branded chassis to customized motherboards, I/O ports, cooling systems, expansion capabilities, power conservation and virtualized systems – custom designs.

Early this month, the Company announced the general availability of Element Manager 3.0, a complete, light-weight supervisory and alarming console used to monitor appliance health, automate alarming and updates, deploy OS and application patches, schedule backups and restore field-deployed appliances. According to the Company’s press release, “Element Manager 3.0 allows software developers to quickly build and deploy secure, hardened solutions, with low-maintenance lifecycle management in both physical and virtual environments.”

NENG also this month announced it is working with Dell to manufacture and co-market a new line of DC-powered servers based on Dell’s PowerEdge R710 platform.

The Company will be Dell’s exclusive manufacturer of the E-2710, a highly available, open-standard application platform that delivers the speed, computing power and flexibility the market demands for green-compliant data center and carrier-class central office technologies, as said by Rusty Cone, senior vice president of sales and marketing, NEI. The two companies reportedly agreed to co-market the E-2710 to enterprise and telecom application developers and OEMs worldwide.

Through its Smart Services, NENG offers comprehensive lifecycle management solutions that solve the complexities that software developers and their end-users experience when attempting to securely and reliably update, monitor, track and back-up appliances. According to the Company, IT shops can benefit from the automated health, update and backup capabilities when E-2710 is Smart Services enabled.

NENG reported that it had 63 design wins for the fiscal 2009, which includes 33 new customers, of which 13 of the wins were for run-rate business and 20 wins were for new products. This compares to 44 designs wins it achieved during fiscal 2008.

Having achieved a number of key objectives in fiscal 2009, including the acceleration of its pace of design wins and pursuing new large, run-rate business opportunities, the Company is optimistic about profitability for the full-year of fiscal 2010. According to NENG CFO Doug Bryant, the Company expects to leverage its existing operating infrastructure to offset lower gross margins related to aggressive pricing on higher volume opportunities.

Technical Analysis

Source: stockcharts.com

NENG is trading above its 13 day moving average. This is considered to be the sign of a bullish trend. There is added weight to this indication because the moving average is rising and suggests that there has been buying interest in this stock.

NENG’s Bollinger Bands indicate greater than normal volatility as reflected by an increase in distance between the upper and lower bands. Trading within its Bollinger Bands, the stock reflects neither an overbought nor oversold condition relative to its recent price trend.

NENG’s MACD reflects a strong bullish signal, with the indicator above the 9-day moving average signal line, and also above the 0 level, indicating that moving averages are trending higher.

Comparative Analysis

Source: Thomson Financial

Insider Trading Activity

Source: Yahoo Finance

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