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Hello Readers,
Over the last week, or so, we closed three positions; two for some moderate gains and one for a long expected loss.
QUIDEL CORP (8/20/04). Closed position 9/13/04 at $4.92 for a 56% GAIN.
TEGAL CORP (8/20/04). Closed position 9/13/04 at $1.40 for a 55% GAIN.
DOR BIOPHARMA (9/20/00). Closed position 9/13/04 at 57¢ for a 77% LOSS.
We have no clue as to what moved Quidel and Tegal, both of which were picks in the August 20, 2004 Newsletter. Strange coincidence, perhaps, but with 50%-plus gains for each, we’re content to closed them out. After a very long siege, we finally closed DOR, which we had recently placed on the “Endangered List”, again.
The markets made some strides over the last several weeks, but it appears that we are locked in a pretty monotonous trading range, at least until after the elections, which, thankfully, are just 40-plus days away. So, in the meantime, we still believe there is a lot of good bottom-fishing to be done, particularly among stocks in our Current Portfolio.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
Genetronics (GEB) (10/5/00). Here we go again with this one as it goes back onto the “Endangered List”. The company did a 1 for 4 reverse split, and these seldomly help current shareholders.
CE Franklin (CFK) (5/5/01). Provides transaction update on the Wilson purchase.
Arotech (ARTX) (6/5/01). Company’s Armour Division receives order from Israel for 22 armored land rover defenders.
VASCO Security (VDSI) (2/5/02). Strengthens indirect sales network in Europe. Joins with Protocom Development to bring strong authentication to Microsoft Windows environments.
Generex (GNBT) (8/5/02). Tests novel vaccine for Melanoma with clinician at Fred Hutchinson Cancer Research Center. Reports developments in stimulating immune responses of juvenile diabetics. Demonstrates efficacy of oral delivery of insulin.
Art Technology (ARTG) (8/5/03). The Body Shop picks ARTG partner to redesign online store. Wins KMWorld’s editor’s choice award.
Insmed (INSM) (11/5/03). Reports results from nine months of SomatoKine therapy for a patient with extreme insulin resistance. Initiates Phase I clinical study for novel anti-tumor protein.
V.I. Technologies (VITX) (11/20/03). Reschedules special shareholder meeting. Receives notification from NASDAQ that isn’t too worrisome, for the moment.
Actuate (ACTU) (1/5/04). Completes IBM grid computing enablement program. Independent report names ACTU the strongest current offering in the Enterprise Reporting market.
Crossroads Systems (CRDS) (2/5/04). Announces new product family extending SAN benefits to standard IP servers. New analyst rankings. Joins SNIA Europe as a voting member. Third quarter nothing to cheer about, but balance sheet still looks good.
Oplink (OPLK) (2/20/04). Debuts user-friendly NET-ready subsystem platform.
OpenTV (OPTV) (3/20/04). Introduces TVOS and PVROS product lines at IBC. Stifel Nicolaus initiates coverage.
Socket Communications (SCKT) (3/20/04). Delivers powerful new user interface and security features for Pocket PC WLAN connectivity. Announces Siebel Systems validation; joins alliance program. CFO stepping down at end of year.
Palatin (PTN) (4/5/04). Huge loss, apparently due to cumulative effect of accounting change; balance sheet stills looks healthy.
AVI BioPharma (AVII) (4/20/04). Presents Antisense approach to transplant acceptance by regulating activated lymphocytes.
Glenayre (GEMS) (5/5/04). Announces first commercial deployment of new Versera Intelligent Communications Environment (Versera ICE). SabaFon selects GEMS for Missed Call notification.
GoRemote (GRIC) (5/5/04). Aligns strategy with key enterprise technology priorities.
Glowpoint (GLOW) (5/20/04). At one point, over the last week, the stock fell to around 78¢ before getting back to current levels, and company issued a release saying that it knew of no reason for the sell off, and neither do we. Forbes.com to use GLOW for enhanced content and communications.
Network Engines (NENG) (6/5/04). Adds Promise Vtrak 15100 Raid System to its portfolio of storage solution capabilities.
Altair Nanotechnologies (ALTI) (6/20/04). Reports results of testing and likely patient dosing for phosphate binding dialysis drug.
Zi Corporation (ZICA) (6/20/04). Launches advanced version of eZiTap FEP.
Gensus (GGNS) (7/5/04). Secures order for StrataGem 300 ALD system from a major manufacturer in Asia.
Avanex (AVNX) (7/20/04). AVNX and SHF announce breakthrough in 40Gb/S duobinary signal generation for commercial applications.
IONA Technologies (IONA) (8/5/04). Orbix picked for high profile Turkish e-government project.
Tripath (TRPH) (8/5/04). Company’s Class-T 1-bit digital amplifier to power Denon’s new AV receiver. Names new CFO.
Convera (CNVR) (9/5/04). Taiwanese information retrieval and linguistic company to sell Convera’s search software in Asia Pacific market.
Our picks for this Newsletter are two NASDAQ-traded software companies that seem to be staying above their 12-month lows.
INTRAWARE, INC. (NASDAQ: ITRA) – $1.35. Twelve-month hi-low has been $2.86 – $1.20. Based in Orinda, CA, with about 60 employees, this software company has 60.2 million shares outstanding, $12.9 million in total current assets, $13.96 million in total assets, little debt, and $5.32 million in total liabilities. Institutional ownership is around 36%. http://www.intraware.com
With the markets bouncing around their yearly lows, perhaps it’s time for some more bottom-fishing, particularly among the small techs that have good-looking balance sheets, like Intraware, Inc.
Founded in 1996 and public since 1999, when the stock hit nearly $80 during the Net stock frenzy, Intraware provides global electronic software delivery and management (EDSM) services for the enterprise software industry. The company’s EDSM patent pending platform, known as SubscribeNet, helps software publishers streamline manufacturing, distribution and support costs; gather business intelligence about their customers; strengthen customer retention and renewals; accelerate and document software delivery for revenue recognition purposes, and comply with U.S. export controls. Intraware also offers complementary services, including enterprise software sales and marketing, digital rights management, as well as automatic desktop update management and deployment through alliances with such companies as Software Spectrum, Macrovision, and InstallShield Software.
Intraware claims that more than 80% of the Fortune 500 have received access to their licensed software through the SubscribeNet service, and in surveys typically rank satisfaction higher than 92%.
Early last month, Intraware signed an expanded digital delivery agreement with Avid Technology, a company involved in digital nonlinear media creation. Also, at around the same time, Phoenix Technologies announced it would adopt SubscribeNet for its channel applications software and license delivery. In July, Ascential Software renewed its contract for ITRA’s SubscribeNet service. Also, in July, Intraware launched Channel Manager module for SubscribeNet, a digital delivery solution for end-to-end channel management.
For FY2004, ending 2/29/04, revenue was $10.9 million with $2.38 million in losses versus FY2003 revenue of $14 million and $9.7 million in losses. During the 1stQT of FY2005, ending 5/31/04, revenue was $2.84 million with a net loss of $105,000. In June, ITRA guided for the current quarter with revenues falling between $2.5-$2.8 million and breakeven earnings to a penny a share loss.
Unless there is a big bad boogie man lurking in the closet, Intraware appears to be somewhat oversold. If the company can meet that 2ndQT guidance, and maintain that pace, the stock could get a nice bounce.
Our 20-month target for the stock is $2.25 to $2.60.
For more information, call ITRA at 925-253-4500; ir@intraware.com
CHORDIANT SOFTWARE, INC. (NASDAQ: CHRD) – $2.60. Twelve-month hi-low has been $6.10 – $2.55. Headquartered in Cupertino, CA, with about 280 employees, this software vendor has 72.1 million shares outstanding, $85.48 million in total current assets, $116.26 million in total assets, and $41.4 million in total liabilities, of which $3.5 million is deferred revenue. Institutional ownership is around 68%. Five analysts rate the stock a “strong buy”, two as a “moderate buy”, and one as a “hold”. http://www.chordiant.com
More bottom fishing, and, besides having a decent-looking balance sheet, Chordiant Software, Inc. has garnered quite a following of analysts, which is a little rare for a small stock. Founded in 1997 and public since 2000, Chordiant is an enterprise software provider of solutions that automate operational business processes that enable a business from the back-office systems, existing applications and processes through to communications with customers. The company’s solutions are designed to meet the needs of service-driven organizations such as retail banks, consumer credit companies, insurance providers, and telecommunications companies. Chordiant has specifically focused on these industries, and, in doing so, has been able to develop out-of-the-box business process models that customers can utilize or adopt quickly.
Some of Chordiant’s customers include Barclaycard, CIBC, AEON, Chase, Deutsche Bank, Ohio Savings Bank, Quick & Reilly, Bank of Ireland, MetLife, Allianz, GenAmerica, Prudential, AXA, Nokia, Cox Communications, Time Warner Cable, Telestra, and Eircom.
At the end of August, Austria’s leading mobile provider, mobilkom austria, selected CHRD to conduct target group specific marketing. Also, during that month, European travel provider, L’Tur Tourismus AG, selected Chordiant for all of its direct market campaigns.
For FY2003, ending 12/31/03, revenues were $68.3 million with a net loss of $16.4 million. During the first six months of the current FY, ending 6/30/04, revenues were $37 million with $2.04 million in net losses. CHRD appears to be trimming its losses and anticipates that final FY2004 revenues will be in the range of $80-$85 million, which would be a nice jump in revenue growth.
This is one where we are following the crowd. The seven analysts who have “buys” on the stock probably know a little more than we do.
Our 24-month target for the stock is $4.75 to $5.50.
For more information, contact CHRD’s Steve Polcyn at 408-517-6290; ir@chordiant.com
Look for the October 5, 2004 Newsletter to be posted on 10/1 or 10/4.
Thank you,
George