Citigroup is speculating whether Sage will dispose of its US healthcare business. AccountancyAge conflates that to mean its entire US operation:
Citigroup analysts said Sage stock was undervalued and speculated whether the company would sell its US arm.
“Sage has been de-rated as it is widely viewed as ex-growth. We disagree with this assessment,” Citigroup analysts said.
“We think inflated US healthcare software valuations offer an opportunity for disposal.”
I’m not going to add to any speculation except to say that if Sage was to sell its US healthcare division then it would be a case of good riddance to bad rubbish. In August 2006 I said:
Sage has a good record of turning around its acquisitions but I can’t help thinking that on a first pass, this looks like a mighty price to pay for what’s really a slice of market share. The market seems to agree.
The company is clearly experiencing challenges in the North American market, which now accounts for 44% of total revenue. Growth was a sluggish 4% and Sage has announced a significant reorganisation as it seeks to digest the Emdeon acquisition for its healthcare business and figure out how to manage the overlaps between its Peachtree Quantum product and MAS 90.
Despite frequent management changes, I have seen precious few signs that Sage has figured out how to turn the healthcare division around. If it does dispose of the healthcare division then it will be interesting to see what price they fetch. Citigroup thinks it’s a good time to deal – sure – if you’ve got a decent asset. So far, that acquisition has proven to be a lemon.