I’m tired of talking about the financials, about oil and commodities. Let’s talk tech for a moment instead: The Larry Ellison model of a consolidating software space is gaining acceptance as the destiny for a software market riddled with too many companies and solutions.

In an earnings season that had very little good news I was encouraged by the number of software stocks reporting positive surprises. Despite the weakness today, Symantec (SYMC), BMC Software (BMC), Autodesk (ADSK) and Sybase (SY), to name a few, have been out-performing the broad market. We crunched some numbers and found that Open Text (OTEX) looked good in my firm's models and I accumulated some shares coming off a great quarter, about 6% higher than yesterday’s close. OTEX is a leader in the Enterprise Content Management space and there has been consistent M&A noise in this sector, especially on the heels of recent acquisitions at IBM (IBM), Hewlett-Packard (HPQ) and EMC (EMC).

The question I kept asking myself was “Why is the short position so large?”

Actually, "large" doesn’t really cover it. According to NASDAQ, short interest is over 17 million shares, which is a staggering 34% of the float and over 25 days to cover.

In any event RBC Asset Management disclosed in a recent 13-G filing it had accumulated an 11% stake in OTEX.

Now clearly someone is wrong here and wrong in a big way. With the stakes so high on both sides of the table we have a very combustible mixture. The next few weeks should be very interesting.

I guess you know who I’m pulling for.
 

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