Envivio Struggles Following IPO

Video infrastructure services provider Envivio (Nasdaq:ENVI) has had a troubled run since its IPO in April 2012. The company had filed papers proposing the sale of shares at $9 each. Soon after listing, Envivio downgraded its financial outlook to revenues of $10 million-$11 million compared with earlier issued guidance of $17 million-$18 million.

Envivio’s Financials
The recent quarter’s results, announced a few weeks ago, are not helping to dispel these concerns. Q3 revenues fell 47% over the year to $7.2 million. Net loss of $0.18 per share was also higher than the previous year’s break-even quarter. Envivio blamed its poor performance on persistent macroeconomic conditions that have slowed the growth of the multi-screen video processing solutions market. But Envivio remains optimistic and is focusing on expanding its market reach and product offerings.

Envivio’s International Expansion
Envivio is expanding its geographical presence. Recently, it restructured its sales leadership team to focus on a wider market. The company added David Baranski as the new VP of sales for the Americas. The position should help Evivio address the expanding market presence in Latin America as well. It also added a position for a new VP of sales for APAC to cater to growth in the Asian markets.

Earlier this month, Envivio also opened a new research lab in Rennes, France. Envivio initially planned to expand the research lab in San Francisco and China but ultimately decided on France because of comparatively higher attrition rates in the U.S. and continuously increasing salary costs in China.

Envivio is seeing strong traction in international markets. During the last quarter, LG U+ added its solutions to power the LG u+tv G multi-screen service, the first service offering in South Korea that supports Google TV. In the Middle East, Sky News Arabia, a 24-hour Arabic-language news channel, and Atyaf, a leading IPTV offering in the region, used Envivio’s offerings for their real-time web streaming services. In the Nordic region, Viaplay, the market-leading online TC service, deployed Envivio’s software-based encoders for its service.

Envivio’s Product Improvements
Despite market conditions, Envivio remains focused on product expansion. Its encoding software, Envivio Muse Live on HP blade servers, was recently ranked as the Best Innovation in Video Processing in the fifth annual TelcoTV Vision Awards. Muse claims to be a pioneering solution that enables operators to run traditional TV and multi-screen video operations in a managed IT data center environment.

Shareholder Lawsuit
The lowered outlook has sparked a legal case, and a class action lawsuit has been filed against Envivio by shareholders. Investors claim that Envivio’s directors violated their fiduciary duties and were involved in securities laws violations by allegedly filing false and misleading statements for the IPO.

Overall, video infrastructure spending by operators is expected to rise in the coming years. Analysts estimate that the video infrastructure market will be worth $1.1 billion by 2016. But the recent financials downgrade and the lawsuits have hurt Envivio’s stock significantly. The stock is trading at $1.88 with a market capitalization of $51 million. It had touched a high of $9.88 soon after listing in April 2012.