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Hello Readers,
We have been wondering for the last several months just how high crude oil needs to go before it slops up the markets. Looks as if $65 does it. The major excuses we hear for these nose-bleed prices are that some refineries are offline, or that hurricanes have slowed production, or that there is unrest in Venezuela or Nigeria, blah, blah, blah. The oil industry has always faced these problems in the past; there is no excuse for a $25 increase over the last five or six months. Let’s wonder how low prices would drop if the President opens the Strategic Petroleum Reserve. Our guess is that crude would tank $15 to $25 for the simple reason that one-third of the current price is raw speculation probably caused by traders who have absolutely nothing to do with the cost of actual production.
Keep in mind that between now through September is traditionally a lousy period for the markets, so, hold on tight. Our Current Portfolio was looking healthy until a week ago, then a lot of our picks felt pressure from the market’s recent downdraft. And, we did not close any positions since the last issue.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we recommended them.
Zi Corporation (ZICA) (8/5/05). Releases upbeat quarterly report; balance sheet still looks good. Interim court order blocks request for shareholder meeting. Company issues statement.
CDC Corp (CHINA) (7/20/05). Slates earnings call for August 19. Subsidiary teams up with Pervasive Software to provide solutions to U.S. homebuilders.
Innodata (INOD) (7/5/05). Posts some slightly disappointing numbers; balance sheet still looks pretty good.
Electric City (ELC) (7/5/05). Reports some nice revenue gains for the quarter.
Telecommunications Systems (TSYS) (6/20/05). TCS and Vonage launch VoIP E9-1-1 public safety outreach campaign. Quarterly numbers not great but balance sheet still looks good. Adds GSM network E9-1-1 patent to its portfolio. Partners with Onset Technology for mobile office solutions. Selected by the University of MD to provide IT services.
Osteotech (OSTE) (6/20/05). Completes $16.5 million sale and leaseback transaction.
Commerce Energy (EGR) (6/5/05). Shakes up top management. Names new CEO.
Sirenza Microdevices (SMDI) (6/5/05). Awarded patent on means to improve performance of broadband RF amplifiers in a wide range of applications.
Vion Pharma (VION) (5/20/05). Second quarter balance sheet still remains very healthy-looking.
Loudeye (LOUD) (4/5/05). Teams with Satellite Interactive to launch Coke branded music service in New Zealand. Claims record quarterly revenue; balance sheet still appears to be pretty fair.
E-LOAN (EELN) (3/5/05). Being acquired by Popular, Inc. for $300 million or $4.25 share. We’ll be closing this one, soon. Reports 2nd QT profit.
Centra Software (CTRA) (2/20/05). Releases pretty good quarterly numbers; balance sheet still looks good. Capitol College adopts Centra as their core elearning tool for all graduate programs.
Mindspeed (MSPD) (2/20/05). Joins forces with Legerity to simplify broadband access equipment. Exceeds 2 million DS3/E3 transmission port shipment milestone. Teams with Viking Interworks to offer voice system module.
Brillian (BRLC) (1/5/05). Second quarter results not great; balance sheet has weakened. Preparing for merger with Syntax Groups.
Advancis Pharma (AVNC) (12/20/04). Quarterly results still show a pretty healthy balance sheet, despite company’s recent clinical trials failures. We’ve been tempted to place this on the “Endangered List”.
Nova Measuring (NVMI) (11/5/04). Second quarter results a nice improvement over 1st QT; balance sheet still looks fair.
Igate (IGTE) (10/20/04). Reports improved 2nd QT and year-to-date results; balance sheet still appears strong.
Trikon (TRKN) (10/5/04). Quarterly report upbeat despite wider losses; balance sheet okay but has weakened.
Chordiant (CHRD) (9/20/04). Stock upgraded by CE Unterberg Towbin. Revenue growth highlighted in 3rd QT report; balance sheet still looks good. Wachovia selects CHRD software for enterprise case and work management.
Tripath (TRPH) (8/5/04). Secures $6 million line of credit and upgrades guidance for 4th QT. This is on the “Endangered List”.
AIXTRON (AIXG) (7/5/04). Revises its second half outlook downward.
BindView (BVEW) (6/5/04). Advances compliance center with Oracle, SQL server and exchange capabilities. Issues RapidFire updates for Microsoft and Cisco vulnerabilities. Other releases about various products. Coverage initiated by Southwest Securities.
Network Engines (NENG) ((6/5/04). NENG and Allin deploy next generation security solution at SESCO.
GlowPoint (GLOW) (5/20/04). Presents managed IP-based video communications at conference. National law firm switches to GLOW’s video services. Stock feels some pressure as company will restate financials for prior fiscal periods.
GoRemote (GRIC) (5/5/04). Signs broadband contract with Hallmark to securely connect 400 stores.
Management Network (TMNG) (4/20/04). Quarterly numbers show big improvement over this time last year; balance sheet still remains strong.
AVI BioPharma (AVII) (4/20/04). Releases optimistic 2nd AT report; balance sheet still looks very healthy.
Palatin (PTN) (4/5/04). PTN and King Pharma initiate Phase 2b clinical trials evaluating PT-141 in patients suffering from erectile dysfunction.
NexMed (NEXM) (4/5/04). Coverage initiated by Brean Murray & Co. Joins the NASDAQ Health Care Index. Releases 2nd QT numbers.
Socket Communications (SCKT) (3/20/04). Launches Go Wi-Fi E300 for Windows Mobile 2003 devices.
OpenTV (OPTV) (3/20/04). To provide StarHub with latest generation middleware and PVR technology. Releases pretty attractive quarterly numbers; balance sheet still looks pretty good.
Transgene (TRGNY) (3/5/04). Balance sheet still seems viable.
Somera Communications (SMRA) (2/20/04). Second quarter numbers disappoint; balance sheet still looks good. Signs first LifeCycle management services pact in Asia Pacific region.
Crossroads Systems (CRDS) (2/5/04). To release earnings on August 25; let’s hope for some good news because stock is fading fast.
Actuate (ACTU) (1/5/04). BIRT Certified for MySQL Network. Announces offshore enterprise reporting application development services. Incorporates graphical workflow enabled interface into e.Report Designer Professional.
AVANT Immuno (AVAN) (12/5/03). Balance sheet still looks okay but our patience has worn thin.
Active Power (ACPW) (11/20/03). Receives 5.4 MVA UPS order; largest megawatt class UPS order to date.
Insmed (INSM) (11/5/03). Files petition against Increlex. Balance sheet still looks okay.
Targeted Genetics (TGEN) (10/5/03). Claims to strengthen intellectual property for AAV vector manufacturing. On “Endangered List”.
Art Technology (ARTG) (8/5/03). Selected by Meredith Corp. for commerce and customer service.
Our picks for this issue are another semiconductor and a IT services provider, both trade on the NASDAQ.
IBIS TECHNOLOGY CORPORATION (NASDAQ: IBIS) – $1.90. Twelve-month hi-low has been $5.88 – $1.14. Located in Danvers, MA, with about 55 employees, this semiconductor has 10.7 million shares outstanding, $14.27 million in total current assets, $22.28 million in total assets, little debt, and $1.86 million in current liabilities. Institutional ownership is around 16%.http://www.ibis.com
Overall, the semiconductor sector has been staging a mild rebound, which has helped some of our Current Portfolio picks. And so, we are adding Ibis Technology Corp. to that list. Over the last year, the company made a major change that could start paying off by year’s end.
Founded in 1987 and public since 1994, IBIS bills itself as the leading provider of SIMOX-SOI implantation equipment to the semiconductor industry. SIMOX is short for Separation by Implantation of Oxygen and SOI means silicon-on-insulator. One year ago, the company announced discontinuance of its wafer manufacturing business so as to focus on its equipment business. SIMOX is a form of SOI technology that creates an insulating barrier below the top surface of a silicon wafer. The company’s proprietary oxygen implanters produce SIMOX-SOI wafers by implanting oxygen atoms just below the surface of a silicon wafer to create a very thin layer of silicon dioxide between the thin operating region of the transistor at the surface and the underlying silicon wafer itself. The buried layer of silicon dioxide acts as an insulator for the devices fabricated on the surface of the silicon wafer and reduces the electrical current leakage.
Ibis’ SIMOX-SOI wafers and finished integrated circuits (ICs) are used in such applications as servers and work stations; portable and desktop computers; wireless communications and battery-powered devices like laptops, PDAs, and mobile phones; integrated optical components; and harsh environment electronics. The company has strategic alliances with Sumitomo Mitsubishi Silicon (SUMCO), IBM, and MEMC Electronic Materials.
In June, IBIS shipped a i2000 oxygen implanter to SUMCO, its third overall and the second implanter shipped to a major silicon wafer manufacturer. Obviously, the company has bet a great deal of its future on the i2000.
For FY2004, ending 12/31/04, revenue was $7.9 million with $10.92 million in net losses. During the first six months of FY2005, ending 6/30/05, revenue was $411,000 with $6.84 million in losses.
IBIS is rolling the dice on future acceptance from the SOI market. At the stock’s current price, it may be worth a bet.
Our 24-month target for the stock is $3.50 to $3.75.
For more information, contact IBIS’ Marianne Dunn at 978-539-2226; ir@ibis.com
@ROAD, INC. (NASDAQ: ARDI) – $3.50. Twelve-month hi-low has been $7.25 – $2.39. Based in Fremont, CA, with about 425 employees, this IT services provider has 60.6 million shares outstanding, $141 million in total current assets, $206.5 million in total assets, little debt, and $42.83 million in total liabilities. Institutional ownership is around 29%. Five analysts have the stock on “hold”. http://www.atroad.com
The current stock price may be too pricey for some of you, but the @Road, Inc. balance sheet and the company’s emphasis on customer productivity make it a pick for the Current Portfolio.
Founded in 1996 and public since late 2000, @Road provides mobile resource management (MRM) services, a rapidly growing category of business productivity solutions that are based on its LocationSmart platform. This platform seamlessly integrates various technologies including wireless communications, global positioning systems (GPS), hosted software applications, transaction processing, and Internet technologies. Presently ARDI has over 100,000 subscribers using their family of MRM solutions, which include GeoManager, GeoManager Pocket Edition, @Road Pathway Internet Location Manager, @Road Pathway PE, and @Road Portico iLM.
@Road’s MRM solutions allow customers to manage employees activities, and goods and services; and provide for two-way communications between its customers and their mobile workers. The MRM solutions facilitate business processes such as event confirmation, signature verification, forms processing, project management, and timekeeping while workers are in the field. So, these solutions also provide location, reporting, dispatch, messaging, and other management services. @Road’s technology is designed for such markets as telecom, construction, facilities/waste management, freight and passenger transportation, courier/delivery, distribution, cable/broadband, and utilities.
At the beginning of August, the Chemical Distribution Network (CDN), a $750 million distributor owned network comprising 21 leading chemical distribution companies, selected @Road as its preferred MRM solutions provider.
For FY2004, ending 12/31/04, revenue was $75.2 million with $9.22 million in net income. During the first six months of FY2005, ending 6/30/05, revenue was $40.6 million with $8.5 million in losses. An acquisition earlier this year, and technology transformation costs account for some of the losses. The company is expecting 15% to 20% growth for the rest of 2005.
There are some companies that have a good feel to them and @Road seems to be one.
Our 24-month target for the stock is $6.00 to $7.00.
For more information, contact ARDI’s Donald Lebedeff at 510-870-1317; dlebedeff@road-inc.com
Look for the September 5, 2005 Newsletter to be posted on 9/1 or 9/2.
Thank you,
George