Wednesday, June 29, 2022

InterCloud Systems Inc (OTCMKTS:ICLD) Searches For A Bottom

InterCloud Systems Inc (OTCMKTS:ICLD) is a stock we have persistently warned against for one very simple reason: a disastrous balance sheet land mine of dilution. ICLD has been in a constant battle to keep shareholders from jumping ship to avoid the consequences of its various forms of liability. But as ICLD trends lower, the company has to resort to more damaging deals for funding operations, increasing the future dilution risk at each turn. It’s a bit like having only salt water to quench the thirst of dehydration.
In any case, management keeps fighting the fight, and for that, there is at least some sort of dignity. In that vein, it’s interesting to see that ICLD just announced it has entered into a contract with Tekmark Global Solutions for its automated provisioning and management software system for multi-location and multi data center networks – NFVgrid SD-WAN.  Tekmark is a multi-national, New Jersey based IT professional services company.
InterCloud Systems Inc (OTCMKTS:ICLD) offers cloud data and network management and security to telecommunications companies. That’s the gist here.
As ICLD the story, it provides “end-to-end IT and network solutions to the telecommunications service provider and corporate enterprise markets through cloud platforms and professional services in the United States and internationally.”
InterCloud operates through four segments: Applications and Infrastructure, Professional Services, Managed Services, and Cloud Services.
ICLD offers various services, including platform as a service, infrastructure as a service, database as a service, and software as a service; and network management, 24x7x365 monitoring, security monitoring, and storage and backup services.
It also provides software-defined networking (SDN) training, SDN software development, and integration, virtualized network functions validation in a multi-vendor environment, unified communications, interactive voice response, and session initiation protocol based call centers, as well as structured cabling and other field installations.
According to company materials, “ICLD is a leading provider of cloud networking orchestration and automation, for  Software Defined Networking (SDN) and Network Function Virtualization (NFV) cloud environments to the telecommunications service provider (carrier) and corporate enterprise markets through cloud solutions and professional services. InterCloud’s cloud solutions offer enterprise and service-provider customers the opportunity to adopt an operational expense model by outsourcing cloud deployment and management to InterCloud rather than the capital expense model that has dominated in recent decades in IT infrastructure management.”
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As noted above, this has been a vicious circle of dilution and debt for some time. And we don’t have any clear evidence that that pattern is changing right now. That said, the company did just announce that it has entered into a contract with Tekmark Global Solutions for its automated provisioning and management software system for multi-location and multi data center networks, which, in theory, could be taken by the market as a long game strategy to influence margins – the heart of the issue for ICLD.
Guy DelGrande, CEO of Tekmark stated: “The implementation of NFVgrid SD-WAN will allow Tekmark to manage its wide area network more efficiently.  A lot of network configurations, management and monitoring functions that were traditionally handled manually are now automated utilizing NFVgrid SD-WAN.”
Mark Munro, CEO of ICLD states that “As we begin to transform InterCloud from a professional services-oriented business to a SaaS solutions company, contracts such as these are critical steps in this transition.  The public markets recognize the value of SaaS modeled companies versus traditional, professional services companies.  The anticipated revenue growth, increased gross margins and the recurring revenue nature of this business is compelling.”
Recent action has seen -20% stripped out of the price per share just during the trailing week. We wrote about this stock about a week ago and warned of this type of downside follow through. Hopefully, that helped you lay off the value trap.
Currently trading at a market capitalization of $3.53M, ICLD has a reserve ($407K) of cash on the books, which is balanced by about $34.8M in total current liabilities. One should also note that debt has been growing over recent quarters. ICLD is pulling in trailing 12-month revenues of $59.8M. However, the company is seeing declines on the top line on a quarterly y/y basis, with revenues falling at -64.1%. We will update the story again soon as further details emerge. Sign-up for continuing coverage on shares of $ICLD stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!
Disclosure: We hold no position in $ICLD, either long or short, and we have not been compensated for this article.

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