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Hello Readers,
Since the last Newsletter, we closed three positions; two for some gains and one for a loss.
SAVIENT PHARMA (2/20/05). Closed position 7/11/05 at $4.58 for a 52% GAIN.
ZHONE TECHNOLOGIES(12/5/04) . Closed position 7/6/05 at $3.78 for a 54% GAIN.
INTRAWARE (9/20/04). Closed position 7/6/05 at 39¢ for a 72% LOSS.
Savient had been lingering around our 50%-plus target for nearly a month, and could go higher, but we’ll take the 52% gain, now. Ditto with Zhone as we take a 54% gain. In the last Newsletter, we reported that Intraware was planning a 1 for 10 reverse split, and these sort of splits are seldom good for shareholders, so, we take an ugly loss.
As we said a few weeks back, that despite soaring crude prices we could still get a summer rally and, so far, so good, thanks to decent economic news. We recently heard one wag call the current climate “the bull market that never quits”. Should we be worried about this sort of optimism?
We finally updated our charts. All but the recent Closed Positions are where they should be, which is in the Closed Position chart. Also, we have inverted the Current Positions to show the most recent picks first, and so on.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
Electric City (ELC) (7/5/05). ELC consumers to participate in utility programs in N.Y. State, Long Island, and Massachusetts. Dutton Associates rates stock “strong speculative buy”.
Telecommunications Systems (TSYS) (6/20/05). Collaborates with Skyhook Wireless to bring Wi-Fi positioning to the E9-1-1 markets.
Commerce Energy (EGR) (6/5/05). Offers Texas customers eight free days of electricity when they sign up for a year.
Sirenza Microdevices (SMDI) (6/5/05). To introduce new ultra-low profile antenna for SIRIUS Satellite Radio. Slated to release QT results on July 26. Names new CFO.
Exact Sciences (EXAS) (5/20/05). Schedules earnings call for July 26.
Verticalnet (VERT) (4/5/05). Recognized by leading industry publications as top supply management solution provider. Q&A with VERT CEO at Forbes.com.
Loudeye (LOUD) (4/5/05). Target to launch music subscription service powered by Loudeye. Teams with Exabre for media recommendation technology.
AEHR Testing Systems (AEHR) (3/20/05). Slates earnings call for July 19.
Tumbleweed (TMWD) (3/5/05). Teams with Commtouch to add outbreak detection to MailGate. Names new CEO. Earnings call scheduled for July 26.
E-LOAN (EELN) (3/5/05). Plans to introduce controversial TIC mortgage. Sets 2nd QT earnings call for August 9.
Mindspeed (MSPD) (2/20/05). Slates earnings call for July 25. Several product releases.
Xcyte Therapies(XCYT) (1/20/05) Announces quarterly dividend for 6% convertibles. Hires SG Cowen & Co. to consider strategic options, i.e. sale or merger. We have not placed this on the “Endangered List” because, as of 3/31/05, XCTE had a very good looking balance sheet.
Brillian(BRLC) (1/5/05). Announces stock for stock acquisition of fellow HDTV innovator Syntax Groups; stock got a little boost. Announces $7 million institutional financing.
B.O.S (BOSC) (1/5/05). Stock pulls a Lazarus and jumps over a dollar as BOSC Group signs second quarter new contracts for $3.5 million.
Applied Micro Circuits (AMCC) (11/20/04). Earnings call scheduled for July 27. EEMBC announces benchmark scores for AMCC’s PowerPC processor. LynuxWorks extends support for AMCC processor.
Net2Phone (NTOP) (11/5/04). Company rejects IDT offer. Looks like a battle is shaping up. We may close this one, soon; wait and see.
Nova Measuring (NVMI) (11/5/04). Provides upbeat revenue report; expects revenue growth of 60% for the 2nd QT. Wins multiple system order and implements integrated Metrology within weeks at a key U.S. customer. Introduced several enhanced products.
iGATE (IGTE) (10/20/04). Subsidiary in India announces quarterly results.
Trikon (TRKN) (10/5/04). Claims four-market focus is paying dividends. Extends and amends revolving credit facility with Lloyds TSB.
Choridant Software (CHRD) (9/20/04). Stock upgraded by JMP Securities. Picks new independent auditor.
Tripath (TRPH) (8/5/04). Stock gets a nude upward as it agrees to settle class action litigation for $200K, 2.4 million shares.
Optical Communication (OCPI) (4/20/04). To announce quarterly results July 28.
Avanex (AVNX) (7/20/04). Opens office in Shanghai, China.
BindView (BVEW) (6/5/04). Earnings call set for July 28. A slew of releases about new products and services.
Network Engines (NENG) (6/5/04). Provides embedded support for Websense enterprise and security suites with new NS Series appliances.
Glowpoint (GLOW) (5/20/04). Slates earnings call for August 4. To provide broadcast services for national talent search. Exclusive provider of video communications at Wainhouse Research summit. Announces new multi-service customer.
GoRemote (GRIC) (5/5/04). Equant teams with GRIC to complete its existing small office solutions portfolio.
Transgene (TRGNY) (3/5/04). Raises Euro 34.9 million.
Somera Communications (SMRA) (2/20/04). Stock takes a hit as company foresees more than expected loss for second quarter, which will be released August 4.
Crossroads Systems (CRDS) (2/5/04). Announces OEM agreement with Tributary Systems.
Actuate (ACTU) (1/5/04). Earnings call set for July 27.
Active Power (ACPW) (11/20/03). Places CoolAir DC unit with Houston-based Freescale Semiconductor.
Trio-Tech (TRT) (10/20/03). To close Irish test center.
Targeted Genetics (TGEN) (10/5/03). Biogen plans to sell a portion of its TGEN stock. Remember, this is on the “Endangered List”.
Art Technology (ARTG) (8/5/03). Slates quarterly release for July 28. Names new co-CEO and CFO.
ViroLogic (VLGC) (7/20/01). Signs $4.8 million multi-year HIV deal with Schering-Plough.
AROTECH (ARTX) (6/5/01). County of Los Angeles Fire Department chooses ARTX’s Incident Command Training System. This one’s on the “Endangered List”.
Our picks for this issue are a supplier of semiconductor products and a China play with what appears could be long-term potential, both companies are on NASDAQ.
CENTILLIUM COMMUNICATIONS, INC. (NASDAQ: CTLM) – $2.37. Twelve-month hi-low has been $3.75 – $1.83. Based in Fremont, CA, with about 440 employees, this supplier of communications equipment has 38.9 million shares outstanding, $69.79 million in total current assets, $75.9 million in total assets, little debt, and $26.8 million in total liabilities. Institutional ownership is around 45%. One analyst rates the stock as a “moderate buy” and another as a “hold”. www.centillium.com
There are still some small techs with good-looking balance sheets and a lot of promise that are still lingering in some sort of limbo. Centillium Communications, Inc. appears to be one of them. Founded in 1997, and public since 2000 when the stock neared $100, Centillium provides semiconductor products that enable broadband communications. Its product portfolio includes silicon integrated circuits and software that are used in communications equipment for various broadband markets, including digital subscriber line (DSL) and Voice over Packet (VoP) applications. The company claims its technology can increase DSL data rates to 50Mbps, extending the reach of DSL services to 22,000 feet, and can support more than 1,000 VoIP channels on a single chip.
Centillium’s Maximus and CopperFlite families of DSL infrastructure products are used in various types of communications equipment that aggregate and process data traffic from a substantial number of individual phone lines for transmission through a data network. Its Palladia products are used in various types of customer-premises equipment that process data signals between a regular phone line and a computer. The company provides three products for the VoP market: Entropia III, which is sold to manufacturers of broadband infrastructure products for use in central-office-based voice switching equipment; Entropia II LP that is marketed for use in central office and enterprise voice equipment; and Entropia II EG, which is used in central office access gateways. In addition, CTLM is developing a family of optical access products targeting optical infrastructure in the fiber-to-the-premises markets.
In June, Centillium debuted its expanded Palladia 400 family offering first-ever integrated-system-on-a-chip solution that converges voice and data over DSL; or what CTLM claims to deliver the industry’s first VoIP solution for the ADSL market. Also, last month, the Palladia 400 family received Communications Solutions Magazine’s “Product of the Year” award for 2004. For FY2004, ending 12/31/04, revenue was $71 million with $43.1 million in losses compared to FY2003 revenue of $125 million with $13.34 million in losses. During the 1stQT of this FY, ending 3/31/05, revenues were $17.19 million with $6.35 million in losses.
CTLM took a major revenue hit in 2004 and reorganized during the latter part of that year. During this time, the company has made product upgrades and has launched a few new ones. Our 24-month target for the stock is $3.75 to $4.25.
For more information, contact J. Scott Kamsler at 510-771-3917; skamsler@centillium.com
CDC CORPORATION (NASDAQ: CHINA) – $2.80. Twelve-month hi-low has been $6.81 – $2.37. Located in Hong Kong, with about 1800 employees, this Internet information provider has 110.7 million shares outstanding, $341.68 million in total current assets, $664.33 million in total assets, and $224.6 million in total liabilities, of which $63.78 million in total debt. One analyst has the stock on “hold”. www.cdccorporation.net
It’s been several years since we last picked a China stock, so, we thought it long overdue that we find a company that should benefit from that country’s exploding economy, and CDC Corporation seems well-positioned to do just that. We are not thrilled about the debt, but it appears much of it is due to the company’s appetite for acquisitions; also, CDC doesn’t look to be cash-starved.
Founded in 1997, and, until recently, was known as Chinadotcom, CDC provides enterprise software solutions to medium and large enterprises in the Asia-Pacific region, North America, and the UK. In FY2003, Greater China accounted for about 28% of the company’s total revenue, however, we suspect that number will probably increase. With around 3500 customers worldwide, its solutions include enterprise resource planning, supply chain management, customer relationship management, human resources and business performance management. It also offers IT services, e-Business consulting, Web development, and outsourcing. In addition, CDC provides mobile applications service that comprise wireless services, including SMS, interactive voice response, MMS, and wireless application protocol.
Besides all of the above, CDC offers Internet media services focused on vertical channels covering news, military, automobile, sports, games and wireless services. At last count, CDC owned or has strategic investments in about 15 companies, including two very well known Internet portals www.china.com and www.hongkong.com. We can imagine the growth potential of these two sites and how they can possibly enhance the revenues of the other subsidiaries/investments. One of these investments is 17Game, a Beijing online games company which has launched and distributed several successful online games in the China market.
A few weeks ago, CDC signed an exclusive partnership with Arsenal Football Club to launch the official Chinese website and wireless services in Greater China for the 2005 FA Cup winners. Also, this month, Illinois health benefits provider OSF HealthPlans selected Pivotal, a CDC company, to streamline administrative processes. At the end of June, Microsoft granted Gold Certificate Partner status to CDC Software’s operations in China and Japan.
For FY2004, ending 12/31/04, revenue was $182.68 million with $10.56 million in losses. During the 1stQT of FY2005, ending 3/31/05, revenues, which were up 58% year-on-year, were $56.2 million with $3.72 million in losses. CDC attributes much of the losses on acquisitions. CDC has a lot of pots on the stove and appears to have a lot more growth in its future. With domain names like China.com and HongKong.com, the stock may be worth a bet.
Our 24-month target for the stock is $5.25 to $6.00.
For more information, contact CDC’s Craig Celek at 212-661-2160; craig.celek@cdccorporation.net
Look for the August 5, 2005 Newsletter to be posted on 8/1 or 8/2.
Thank you,
George