OTG Software Inc. (Nasdaq: OTGS) is carving out a profitable, yet somewhat anonymous, niche in the networked-storage software market. And it's managing to do so in the shadow of industry giant Veritas Software Corp. (Nasdaq: VRTS).
Though its numbers are dwarfed by Veritas's billion-plus yearly revenues, OTG nevertheless is building a strong balance sheet by selling its data-access and management software packages to small and medium-sized businesses, mainly via the reseller channel.
Even though some analysts expect the company to report a small loss when it announces third-quarter earnings (expected on or near October 24), the few Wall Street types covering OTG are bullish on the company's future. They're setting per-share target prices well above the current $5-per-share trading range, where the stock has been most of this year.
In its second quarter, ended June 30, OTG reported a loss of $71,000 (breakeven on a per-share basis) on $15.9 million in revenues. Though revenues for the third quarter, ended September 30, were originally expected to be in the same range, some analysts say the company might post a penny-per-share loss due to the overall business slowdown related to the September 11 terrorist attacks. For the present fourth quarter, the Thomson Financial Securities Data/First Call consensus is for a breakeven performance.
"I think when storage software comes back, OTG could be one of the best performers on a percentage basis," says Amy Feng, research analyst with Jolson Merchant Partners. Feng, who rates OTG a Strong Buy with a target price of $15 per share, says the company doesn't attract much investor attention, partly because of Veritas's dominance in the market segment and partly because there isn't much OTG stock available.
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