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Valuation Applied - Does ShoreTel's Market Cap Make Sense?

Valuation is my favorite subject to teach. Beyond tutoring the subject and applying it every day at work, I also use the same concepts to invest. Many of you may be familiar with a sum of the parts valuation. What if I told you there was a company out there with a business that comprises 20% of its revenue that would be worth $250-400mm on a standalone basis. Not that exciting yet. What if I told you that the entire company's market cap is $220mm!!! If you're still not excited, you may want to sign up for a few lessons. If that caught your attention, keep reading. ShoreTel acquired M5 a while back for around $180mm (I'm writing this all from memory so please excuse approximations). M5 is around $70mm of revenue inside SHOR (total company revenue >$300mm) and is growing at over 20% per year. A good comp for M5 is 8X8 (EIGHT), which trades at a whopping 6.0x revenue. Both 8X8 and M5 are off-premise Unified Communications solutions. The question to ask to... read more

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