In 2011, shares of this small-cap software company plunged 75%, dropping from a January high of $23.35, to an October low near $5.75. If you held during that time, you likely lost your shirt.
So, why would I tell you about a terrible performing stock now?
Because it looks like a potentially highly profitable turn-around story is in the making. Shares have bounced off major support and have moved steadily higher for the past few months.
The name of this potential turn-around play is Avid Technology (Nasdaq: AVID). The company makes specialized audio and video editing software for film and music producers.
Its industry-standard software, such as Media Composer, ProTools and Sibelius, have been used to create some of the greatest music hits, TV commercials and blockbuster films, from Van Halen to Spiderman.
Management has recently undertaken several strategic steps to improve future operating performance. For starters, in 2011, it sold off a number of audio-based products where the end-market was individual consumers, rather than media giants.
By divesting these assets, the company shifted its customer focus to a more well-healed customer base.
This July, the company reduced its workforce 20% and slashed overhead. Both measures are expected to generate cost savings of around $80 million.
With rumors of the upcoming Apple (Nasdaq: AAPL) TV, Avid may also benefit from increased demand for innovative software development tools, aimed at broadcast and entertainment producers.
Traders seem convinced of the company's potential.
After recovering from the October 2011 $5.76 low, shares climbed to a high of $12.64 in late January 2012. This high marks resistance. (more)
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