E-Mailbag Monday: Sequoia IPO, Intuit, Employee Stock Options
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What's good in the IPO market this week?
Reply: Yet again, the IPO market has been anemic. Yet, it is times like this that you can typically find strong companies at reasonable valuations. One of the few IPOs for the week is Sequoia Software. And, with little competition for investment dollars in the IPO market this week, Sequoia may have a chance at a good performance.
The company is a developer of XML (extensible markup language) applications. XML is becoming a standard method for building sophisticated solutions. Sequoia has its own standard called the XML Portal Server, which helps companies integrate customers, suppliers and anyone else.
The lead underwriter is Lehman Brothers and the proposed ticker symbol is SQSW. The company intends to sell 4.2 million shares in the price range of $8-$10.
Intuit Still Good?
What's your opinion on Intuit?
Reply: I wrote about this company before the NASDAQ had its massacre. Like just about every other tech stock, Intuit (INTU) also plunged. But the fact remains that Intuit has an incredible array of lucrative properties. It is a mega hub of people's personal finances. At current valuations, it seems that a company like Intuit would make an attractive buyout candidate for a company like Schwab.
P-E ratio? You bet. And it is affordable: a mere 19 times. Although, keep in mind that Intuit is a seasonal business, with much of the company's profits generated during the tax season. But, this may make it more likely that the company will be buyout bait in the next few quarters.
Of course, Intuit is leveraging its technology and offline distribution onto the Web. This should help spark growth. Last February, Quicken.com logged 4.4 million unique visitors. Also, Intuit is rapidly becoming an all-purpose service provider, offering such things as insurance and mortgages - which should dampen the seasonality. Eventually Intuit may become a Schwab.
Stock Options: What to do?
I have employee stock options in a Net company I work for. Some of the shares have vested. Should I sell or keep them?
Reply: The decision to exercise stock options is not an easy one. The tax complications can be mind boggling - especially if the options are ISOs (incentive stock options). For example, they may either be taxed as ordinary income or capital gains, which could be a huge difference in taxes paid to the IRS. Then again, in order to get preferential treatment, you need to hold onto your stock for at least a year after you exercise the shares or two years after the options were granted to you. With the extreme volatility in the markets, it oftentimes makes sense to sell some shares, so as to diversify. To protect yourself, you need a plan. So, it is a smart idea to get a financial planner who specializes in these matters.