Trading volumes have significantly spiked, ever since we made the case on the potential impact of InterCloud Systems Inc (OTCMKTS:ICLD) restructuring plan. Investors are slowly taking note of the efforts put in place to create new shareholder value, as the company tries to bounce back after one of the worst runs in recent years.While the stock is still engulfed in a strong bearish trend, it has started to power high, fueling optimism that it could be a bounce back. However, the stock needs to close above the $ 0.01 handle, if it is to be taken seriously as a long-term play taking into consideration 52-week highs of $0.39. ICLD Daily ChartTrading volumes soaring to the 50 million mark, underscores the fact that investors are starting to take note of its long-term prospects. However, Investors’ confidence in the stock is still at all-time lows.Before we carry out a detailed analysis of recent developments, let us first understand what InterCloud System does, in pursuit of a value proposition.InterCloud Systems Business Description InterCloud Systems is a leading provider of cloud networking orchestration and automation for Software Defined Networking. The company’s cloud solutions offer enterprise and service providers a way of adopting operation expense model by outsourcing cloud deployment.InterCloud Systems operates through four segments all of which are geared towards ensuring seamless integration of cloud solutions and products. Recent DevelopmentIn our previous analysis, we detailed how InterCloud Systems has been working round the clock to trim its debt levels. Part of the restructuring has seen the company enter into exchange agreements with holders of specific notes to convert debt holdings into equity.Over the past three months, InterCloud Systems has changed over $10.4 million of convertible debt and in the process eliminated over $4.7 million of accrued interest for $15.1 million worth of preferred Equity. The exchange has significantly increased the company’s common book value per share. Asset Divestiture Divestiture of non-core assets is the latest strategy that the company has deployed, as it seeks additional cash to further trim its debt. Under the push, InterCloud system has entered into a definitive agreement for the sale of Adex Corporation, one of its subsidiary.Under the terms of the proposed asset sale, the company is set to generate $5 million in a combination cash and seller note.
Mark Munro, CEO of InterCloud stated, “The sale of this asset continues the realignment of InterCloud business strategy and reduction of our outstanding liabilities.” The closing is subject to completion of a financing by the acquirer and other standard closing conditions.
The selloff is part of a drive that seeks to eliminate toxic debt, thus position the company on a steady financial path for developing and producing cutting-edge products. X-Barrier and NFVgrid are part of a new suite of network management automation products that the company is currently working on. Slated for launch sometime in the year, the products should strengthen the company’s cloud networking and orchestration business thus lead to healthy margins.In addition to pursuing financial strength, InterCloud Systems through its Netalayer.io software platform has partnered with Computers Associates. The partnership is part of an effort that seeks to broaden the platform’s popularity as well as reach in pursuit of substantial growth opportunities.Integration of Netlater.io with Computer Associates Network will result in end-to-end orchestration and monitoring functions for next-gen virtualized networking environments.
"We spent over a year working closely with teams at Computer Associates to integrate into several CA platforms including Spectrum and health. The ultimate goal was to add value by providing an opportunity for customers to increase service level optimization to existing IT monitoring systems,” said Chief Technology Officer Konstantine Babenko
HeadwindsAmidst the efforts, that InterCloud System has put in place to strengthen its financial position and core business, it still faces an uphill path to return to profitability. A 49% decrease in revenue in the third quarter of last year compounded by a net loss of (-$5.5) million underscores an underperformance that continues to spook investors.Stock dilution is another issue that ails the stock’s sentiments among investors. Conversion of debt into preferred equity has led to substantial stock dilution, which could significantly affect the company’s earnings per share going forward. Bottom Line InterCloud is still far off from being considered a short-term investment play. However, efforts put in place to trim the massive debt levels should place the company on a path to recovery, on the financial front.The company has also divested a number of assets as it looks to increase focus on the core business which has the potential to generate significant shareholder value. An increase in trading volume in recent weeks is an indication of easing selling pressure. That said, the stock should first close above the $0.01 mark to be considered a worthy long-term investment play.We will be updating our subscribers as soon as we know more. For the latest updates on ICLD, sign up below!Disclosure: We have no position in ICLD and have not been compensated for this article.
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