Ladenburg Issues Mid-Day Downgrade On Qumu Corp Following News Of CEO Shakeup

• Qumu Corp QUMU shares are down 74 percent year-to-date, even after trading above $15 in the first week of March.
• Ladenburg Thalmann’s Glenn G. Mattson downgraded the rating on the company from Buy to Neutral, while removing the price target.
• Mattson cited management changes, pricing pressure and weak channel as the reasons for the downgrade.

Qumu announced the departure of CEO Sherman Black, and the appointment of COO Vern Hanzlik to the chief executive’s role. The company indicated that it had been planning this transition for some time. Analyst Glenn Mattson said, however, that the move was “somewhat surprising” and may have resulted from the current business outlook being weak for the company.

Mattson believes that the video market has shifted, with an increase in price competition. He added, “We have observed price competition in the cloud space from competitors like Kaltura (private) at middle tier price points (deal sizes -$20k- $50K) where the company hoped to bring the European Kulu Valley solution, which it purchased in 3Q:14, to the U.S.”

While QUMU is poised to grow revenues at 38% this year, much of that growth is acquired. QUMU has a high cost structure as its selling expense has been running higher than revenues for four of the last five quarters. At the same time, the sales channel has been realigned.

Last quarter, Qumu added Dimensional Data and Fujitsu as channel partners. Mattson added, however, that “issues at a large North American telco provider (the largest channel partner from 2014) leave QUMU looking for another solid partner in the U.S. to supplement its sales activity.”

Qumu recorded substantially losses in 1H and would need to cut costs to reduce cash burn, Mattson said, while adding, “The company faces the daunting challenge of cutting sales expense while trying to grow revenue with a channel that is in need of repair.”