Is IBM Eyeing Mobius?

By Gene G. Marcial

A Time to Buy Low
About 90% of customers at Mobius Management Systems (MOBI ) are the bluest of blue chips: Citigroup (C ), Bank of America (BAC ), J.P. Morgan Chase (JPM ), Abbott Labs (ABT ), and Britain's Defense Ministry. Yet no major Street analyst covers the company, which hasn't helped Mobius shares -- down from 10 in March to 6.95. Goldman Sachs (GS ) took it public in 1998 at 14. Some hedge funds have snapped up shares but declined to be quoted. They see Mobius as a takeover target. It has a 70% share of a niche market: It provides software to help companies organize, store, call up, and manipulate digitized documents.

Mobius' rival, Documentum (EMC ), was acquired by storage giant EMC (EMC ) in 2003. IBM (IBM ) also made a bid for Documentum but failed. So some pros expect IBM to make a run for Mobius. A money manager whose outfit owns 5% of the stock says that on fundamentals alone, Mobius is worth 15. For fiscal 2005 ending June 30, another money pro, who is also buying, expects Mobius to exceed its 2004 results: earnings of $4.8 million, or 24 cents a share, on record sales of $88.1 million. He says Mobius has an estimated cash hoard of $65 million, or nearly $4 a share, with no debt. IBM declined comment. Mobius did not return calls.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

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