Radisys (NASDAQ: RSYS), a global leader in open telecom solutions, enables service providers to drive disruption with new open architecture business models. Radisys’ innovative disaggregated and virtualized enabling technology solutions to leverage open reference architectures and standards, combined with open software and hardware to power business transformation for the telecom industry, while its world-class services organization delivers systems integration expertise necessary to solve communications and content providers’ complex deployment challenges.

 

Widespread market reach and robust customer profile:

On June 29, 2018, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Reliance Industries Limited, a company organized and existing under the laws of India (“Reliance”), and Integrated Cloud Orchestration (ICO), Inc., an Oregon corporation and a wholly owned subsidiary of Reliance (“Merger Sub”).

 

Importantly, commensurate with the announcement of the acquisition by Reliance Industries, Radisys also restructured the terms of its credit agreements with both Hale Capital and Marquette Business Credit. The restructured agreements extended all principal and interest payments on the Hale notes previously due in 2018 to February 2019.

 

On December 7^th, Reliance Industries (RIL), Radisys and RIL have agreed to extend the closing date to a date no later than December 14, 2018 and the parties continue to work to close the transaction as promptly as practicable on or before that date. In connection therewith, RIL also acknowledged that Radisys has satisfied all conditions to RIL’s obligations to close the transaction.

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The management believes this transaction will help to accelerate Radisys strategy and provide the scale required by its current and prospective customers to adapt to Radisys’s full suite of products and services. Moreover, the addition of Reliance’s visionary leadership and strong market and financial position will further enhance the company’s ability to develop and integrate large-scale disruptive open centric Indian solutions.

 

Other recent announcements:

• September 13, 2018 – Radisys and NI Collaborate on End-to-End 5G Platform. The market-ready platform enables mobile operators and chipset manufacturers to drive forward 5G use cases in millimeter wave and sub-6 GHz spectrum
• September 12, 2018 – Radisys Introduces Multi-Access Edge Computing Software Platform. Breaking vendor lock-in with application-ready open standards compliant API’s and flexible building block approach
• September 10, 2018 – PHAZR Selects Radisys’ Industry-First 5G gNB Software to Power Its Cloud-Native Virtualized RAN Solution. The vRAN solution enabled by Radisys is undergoing trials with tier-one North American service providers
• July 11, 2018 – Radisys Launches Open Business Accelerator™ Program. Radisys’ New Channel Partner Program Designed to Bring Disruptive Technology Solutions to Service Providers
• July 9, 2018 – Radisys Introduces First-to-Market Decomposed Virtual Media Server for NFV, Delivering Improved ROI for Cloud Services. Decomposed media server platform with open APIs enables developers to support voice, video and content delivery services with unprecedented scale and faster time-to-market.

 

Analyst ratings and target price:

Per www.marketbeat.com, Their average twelve-month price target is $6.00, suggesting that the stock has a possible upside of 252.94%. The high price target for RSYS is $6.00, and the low-price target for RSYS is $6.00.

 

Company’s division/business segments:

• Software-Systems products and services are targeted at delivering differentiated solutions for service providers to enable their deployment of next generation networks and technologies. This segment is comprised of technologies aimed at enabling service providers to more rapidly adopt new technologies while driving down the costs of their network infrastructure
• Hardware Solutions leverages Radisys hardware design expertise, coupled with its robust manufacturing, supply chain, integration, and service capabilities, to enable differentiation from its competition. While the Software-Systems business will be the company’ core strategic focus moving forward, RYSY continue to support existing customers that value the products it delivers within its Hardware Solutions segment

 

Software System Offerings:

Radisys’s unique differentiating factor and competitive advantage:

 

About Reliance Industries:

• Reliance Industries Limited (RIL) is India’s largest private sector company, with a consolidated turnover of USD 66.1 billion, operating cash profit of USD 9.8 billion and a net profit of USD 5.5 billion for the year ended March 31, 2018. It had cash & equivalent balance of USD 12 billion as of March 31, 2018.  It is the first private sector company from India to feature in Fortune’s Global 500 list of ‘World’s Largest Corporations.’ The Company’s business interests span petroleum refining and marketing, petrochemicals, retail, hydrocarbon exploration and production, digital services and telecommunications.
• The Group’s digital communications and services initiatives under Jio brand, have been redefining benchmarks, setting new milestones, inspiring unprecedented adoption, usage and service metrics.

 

Financial Highlights: (In thousands, except share and per share amounts)

• Revenues decreased $1.8 million to $27.0 million for the three months ended September 30, 2018, from $28.8 million for the three months ended September 30, 2017. Hardware Solutions revenue decreased $4.5 million, due to expected declines in revenue from Radisys legacy hardware business. Software-Systems revenue increased $2.8 million as compared to the prior year driven by strong sales of software supporting initial 5G development, expanding voice-over-LTE and conferencing deployments, and increased professional services business from both existing and new customers.
• Gross margin increased 3,930 basis points to 43.4% for the three months ended September 30, 2018, from 4.1% for the three months ended September 30, 2017. Gross margins for the three months ended September 30, 2017, were adversely impacted by a $7.0 million inventory charge associated with a strategic decision to eliminate non-core legacy hardware product lines. Further gross margin expansion was realized in the quarter ended September 30, 2018, given the increasing mix of the company’s Software-Systems business
• Liquidity and Financial Flexibility: Cash and cash equivalents, including restricted cash, on September 30, 2018, increased $6.0 million to $14.1 million from $8.1 million at December 31, 2017. The increase was the result of net increases in the company’s borrowings of $10.6 million offset by $4.1 million in cash consumption from operations predominantly associated with the company’s cost reduction initiatives and payment for inventory purchase commitments not sold to its customers.

 

Key risk factors and potential stock drivers:

• The company’ business risk profile leverages on its strong network deployment and extensive market reach.
• The company’ business and financial risk profile is further strengthened by Reliance’s visionary leadership and strong market and financial position. The market has taken note of the strategic importance and synergies of this acquisition, which is expected to provide strong management and financial support to the Radisys over the medium to longer term.
• Weakening of Radisys’s linkages with its parent RIL or weakening of the parent’s individual financial profile could be negative for the company.
• Any change in Radisys’s strategic importance to the parent or any decrease in RIL’s ownership in the company could be a key stock sensitivity factor.
• Regulatory and policy changes have played a central role in defining the risk characteristics of the industry.
• Failure to identify changing trends and industry preference is an important factor which has a bearing on the company’ performance over the medium to longer term.
• Company’ ability to demonstrate strong financial performance despite competitive pressures
• Weaker than expected revenue growth and or profitability could also impinge the stock performance over the near to medium term.

 

Stock Performance

 

 Comments:

• On Monday, Dec 11^th, 2018, RSYS is trading at $1.70, with an average volume of 0.599 million shares exchanging hands. Market capitalization is $67.355 million. The current RSI is 73.39
• In the past 52 weeks, shares of RSYS have traded as low as $0.53 and as high as $1.72
• At $1.70, shares of RSYS are trading above its 50-day moving average (MA) at $1.58 and above its 200-day moving average (MA) at $1.20
• The present support and resistance levels for the stock are at $1.69 & $1.73 respectively.

 

 

 

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