Why Shares of Synchronoss Technologies Rebounded Today

By Timothy Green Markets Fool.com

What happened

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Shares of Synchronoss Technologies (NASDAQ: SNCR) surged on Friday, undoing a portion of Thursday's dramatic decline. The abrupt departure of the CEO and CFO after only a short time on the job, coupled with preliminary results that were well below expectations, led investors to pummel the stock. Shares were up 20% on Friday at 3:30 p.m. EDT, with investors betting that Thursday's collapse was an overreaction.

So what

The drama revolves around Intralinks, a company that Synchronoss agreed to acquire last December. The $821 million deal promised to give Synchronoss increased scale in the enterprise market. The transaction closed early this year, and Intralinks CEO Ron Hovsepian was named CEO, replacing founder Stephen Waldis.

Image source: Synchronoss Technologies.

On Thursday, Synchronoss announced that Hovsepian was stepping down, with Waldis coming back on as CEO. CFO John Frederick was also replaced by former CEO Lawrence Irving just two months after he took the job. Along with this announcement, the company disclosed that it would badly miss its first-quarter revenue and operating-margin guidance.

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It's clear that something went wrong with the integration of Intralinks, but Synchronoss provided little in the way of details. The stock plunged on Thursday, closing down 46%. The rebound on Friday gave investors some relief, but the stock remains down sharply from market close on Wednesday.

Now what

Synchronoss will report its first-quarter results on May 9, and the company will provide additional information at that time. There was no new information that drove the 20% rise on Friday -- it's likely a case of investors simply not knowing how strongly to react to this debacle.

The big question: Did the Intralinks integration hit a temporary speed bump, or are there major issues that will negatively affect the company's performance for more than just a single quarter? The departure of the CEO and CFO, so soon after the acquisition closed, points to the latter. But investors will have to wait until the May earnings report to find out.

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Timothy Green has no position in any stocks mentioned. The Motley Fool recommends Synchronoss Technologies. The Motley Fool has a disclosure policy.