Selling Radvision on Poor Sales Outlook

On Monday, our pick Radvision (NASDAQ: RVSN) reported that third quarter sales would come in 18% lower than previously expected. This was the second time that Radvision slashed revenue guidance for the upcoming quarter; the company declined to issue a profit forecast.

The company blamed canceled and delayed government contracts, as well as a loss of video conferencing market share due to the lack of a high-definitional video presence feature. Although Radvision plans to release an updated version of its software, Scopia, with the new feature later this month, it may be too late. As Radvision has struggled, competitors like Polycom have picked up market share in the fast-growing videoconferencing industry.

Despite its struggles, Radvision still operates in a dynamic growth industry, and sports a rock-solid balance sheet with nearly $5/share in cash. As the stock price declines, the company becomes an ever more tempting acquisition target for Cisco, its largest customer.

For these reasons, I’m not willing to totally write off Radvision quite yet. However, I don’t want to be saddled with further losses when the company reports what will almost certainly be a lackluster third quarter, leaving me praying for a buyout. For now, I will keep Radvision on my watch list and wait until the stock gets too cheap or evidence of a turnaround emerges.

Disclosure: SmartGuyAB no longer owns shares of RVSN