Software group Autonomy has seen a flurry of excitement today, with its shares jumping nearly 6% at one point before easing off their highs.
They are now up 35p to £15.98 after touching £16.50. Traders reported talk of a possible bid from Microsoft at £28 a share. But Microsoft is being linked with all manner of things at the moment, and only today had to dismiss suggestions it was eyeing up video games group Electronic Arts.
A more likely explanation for the rise in Autonomy's share price is that Bank of America/Merrill Lynch analysts have raised their price target on the company from £16.60 to £19. This follows recent positive notes from Goldman Sachs and Investec.
Merrill said the market was underestimating the potential for increased earnings from the company during a recovery. It also suggested that communications with the City might improve now the company has appointed an independent chairman alongside chief executive Mike Lynch. The analyts said:
"For a while now we have seen a large divide in the investor base between bulls and bears. Part of the issue is that the company has grown significantly in size but still deals with the capital markets like a small start-up.
"We believe the recent appointment of an independent chairman (Robert Webb) could address some of the investor concerns by improving the communication and disclosure.
"Some of the bear arguments could easily be discussed with the investment community without creating heated arguments. For example, one argument we hear very often is that Autonomy is just a serial acquirer that focuses on earnings upgrades through acquisitions. However, the long term vision of the management team has always been to create a corporate platform for all unstructured data and so far every acquisition by Autonomy helped it to
make this platform vision more compelling."
The implication from Merrill is clear: perhaps the company will now be able to get this vision across better to the City.
The company would probably point out however that it has won investor relations awards, so it must be doing something right.
