JMP Downgrades Rally Software, Says Additional Bid Is 'Less Probable'

In a report published Tuesday, JMP Securities analyst Patrick Walravens downgraded the rating on

from Market Outperform and Market Perform, following a review of the merger filed by the company on Monday. "The background to the merger filing significantly reduces our estimate of the likelihood of the company receiving another bid as none of the five strategic partners that Rally approached wished to participate in further discussions," Walravens explained.

first expressed interest in Rally Software in November 2014, following which, two private equity companies also approached Rally Software. A non-binding offer was made by CA Technologies in the end December 2014, which was deemed inadequate by Rally Software's board of directors. It was in March 2015 that Rally Software's board declared that "the increasingly competitive business environment anticipated for fiscal year 2016, noting, in particular, that smaller customers were becoming more price sensitive and larger enterprise buyers were slow to make buying decisions," Walravens reported. Through April, CEO Tim Miller of Rally Software and CEO Michael Gregoire of CA Technologies were able to come to a consensus on the bid amount, at $19.50 per share, which was approved by the board in May 2015. The analyst expects the company to reports its FY16 non-GAAP EPS at ($0.80), with an FY17 non-GAAP EPS estimate of ($0.35). For FY18, the analyst expects Rally Software to post its non-GAAP EPS at $0.05.