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Hello Readers,
The present market doldrums are reminiscent of the pre-Iraq War period, or, in a word, terrible. As for closing Current Portfolio positions, it has been almost two years since we have had this sort of a dry spell. Needless to say, much of the Portfolio has gotten whacked pretty hard, but this now may be a good buying opportunity.
Yes, election outcome jitters, higher energy prices, and prospects of more terrorism in the U.S. have contributed to the unease and uncertainty. However, despite all of the worries, we sense that there could be a late summer rally in here someplace. Perhaps around the time of the GOP convention?
Here are the headlines about companies in the Current Portfolio since the last Newsletter. Dates in parentheses are when we first recommended them.
DOR BioPharma(DOR) (9/20/00). Provides update of biodefense programs. Yes, we still may soon place this on the “Endangered List”.
Genetronics (GEB) (10/5/00). Continues building U.S. patent portfolio for electroporation-assisted therapies. Files application to delist from the Berlin Stock Exchange, which doesn’t seem like a big deal.
CE Franklin (CFK) (5/5/01). Releases pretty good quarterly numbers.
Arotech (ARTX) (6/5/01). Training subsidiary receives $800,000 in new orders.
VASCO Security (VDSI) (2/5/02). Quarterly results show nice revenue growth and net income.
Argonaut (AGNT) (4/20/02). Introduces “solvent plate” that prevent cloudy samples and leaking. Quarterly P&L not great, but balance sheet still seems healthy.
Generex (GNBT) (8/5/02). Presents research abstract on the use of novel peptide vaccine for Melanoma. Completes $3 million private placement.
Art Technology (ARTG) (8/5/03). Quarterly revenue growth tops last QT but much lower than same time as last year. Balance sheet still seems to be holding up.
Targeted Genetics (TGEN) (10/5/03). Recent balance sheet still appears to be strong. Plans to sell CellExSys to Chromos.
Insmed (INSM) (11/5/03). Balance sheet weaker since first of the year, but still looks viable. Provides update on pivotal clinical trial with SomatoKine.
Active Power (ACPW) (11/20/03). New analyst rankings. Receives $2.75 million order for new megawatt UPS. Quarterly report pretty upbeat and balance sheet still appears to be good.
AVANT Immuno (AVAN) (12/5/03). To demand immediate delisting from Berlin Stock Exchange. FY2005 Defense appropriations bill dedicates $2.8 million to ongoing development of AVANT’s oral anthrax/plague combination vaccine. Second QT loss widens by 22%.
Actuate (ACTU) (1/5/04). Quarterly numbers look nice while balance sheet appears to be holding strong.
Analysts Int’l (ANLY) (2/5/04). Reports second consecutive quarter of growth and profitability and balance sheet still seems to be healthy.
Somera Communications (SMRA) (2/20/04). Second QT results disappointing but losses seem to be narrowing and balance sheet still appears vibrant.
Oplink (OPLK) (2/20/04). End of FY2004 capped with a break-even EPS for the 4th QT while balance sheet still shows company sitting on a nice pile of cash.
OpenTV (OPTV) (3/20/04). Earnings call set for August 9.
Socket Communications(SCKT) (3/20/04). Reports 33% increase in quarterly revenue and second consecutive quarter of net income and balance sheet still looks good. Acquires bar code scanning patent from Khyber Technologies. Releases industry’s first RFID development kits with CompactFlash RFID readers for pocket PCs.
AVI BioPharma (AVII) (4/20/04). Receives notice of allowance for key patent application covering NEUGENE antisense technology for RNA viruses.
Management Network Group (TMNG) (4/20/04). Schedules earnings call for August 5.
Glenayre (GEMS) (5/5/04). Earnings call set for August 4.
GlowPoint (GLOW) (5/20/04). Revenue growth improves but losses still pretty messy; balance sheet appears to have strengthened.
Network Engines (NENG) (6/5/04). Quarterly results in line with previous guidance and balance sheet still looks good.
Bindview Development (BVEW) (6/5/04). Several releases on product news. Recent quarter shows revenue growth and a healthy-looking balance sheet.
Altair Nanotech (ALTI) (6/20/04). Reports progress on drug delivery system and files two new patents pertaining to drug delivery.
Zi Corporation (ZICA) (6/20/04). Company’s eZiText selected by Panda Mobile, the leading Chinese mobile handset company. EZiTap FEP wins in Handango Champion awards. Announces major shareholder agreements and completes CDN $10 million private placement.
Genus (GGNS) (7/5/04). Second quarter loss increases but much of this is related to the proposed merger with Aixtron; balance sheet still appears to be very viable.
Avanex (AVNX) (7/20/04). Files $100 million shelf registration. Also files notice that Alcatel and Corning will periodically sell up to 56.8 million additional shares of AVNX stock.
V.I. Technologies (VITX) (11/20/03). Will report 2nd QT results on August 5.
Our picks for this Newsletter are another software company and one more semiconductor, both trading on the NASDAQ.
IONA TECHNOLOGIES PLC (NASDAQ: IONA) – $3.15. Twelve-month hi-low has been $9.46 – $2.02. Based in Dublin, Ireland with a U.S. headquarters in Waltham, MA, and with about 350 employees, this software and services company has 34.5 million shares outstanding, $68.2 million in total current assets, $74.1 million in total assets, little debt, and $38.03 million in total current liabilities. Two analysts rate the stock as a “hold”. Institutional ownership is around 30%. http://www.iona.com
In case no one has noticed, over the last few months, many companies with decent technologies and good-looking balance sheets have seen their stock prices get hammered, so, it may be time to bottom-feed. And, this looks to be a good time to add IONA Technologies PLC to the Current Portfolio.
Founded in 1991, and trading on NASDAQ for nearly seven years, IONA is in the integration software business. The companies software products allow their more than 4500 customers to build, maintain, and scale their disparate computing environments while preserving and extending existing IT investments. IONA offers two product families – Artix, which is the newest, and Orbix, which has been with the company almost from inception. While these two product families are built upon different technology foundations, each promotes a service-oriented architecture (SOA) and standards-based approach to enterprise integration.
IONA claims Orbix is the world’s leading CORBA ORB and that it is a proven platform for extending or integrating the most demanding systems. Artix, which is a family of Web services integration products, is suppose to make it possible for enterprises to use Web services to solve complex and demanding integration problems. The company also offers Mobile Orchestrator that allows mobile workers to work with enterprise applications and data regardless of their Internet connectivity. Then, through its alliance with the JBoss Group, the company provides JBoss users with J2EE consulting, training, and support services.
IONA’s customers are a wide variety of Global 2000 companies and include AT&T, Verizon, BellSouth, Deutsche Telekom, British Telecom, NTT, Credit Suisse, Merrill Lynch, Winterthur Insurance, Zurich Insurance, and Boeing.
A few weeks ago, Business Objects, one of the world’s leading providers of business intelligence solutions, deployed Orbix integration software within its business intelligence and analytical software products. Also, in July, IONA announced that revenues for the current quarter should be between $15-$19 million, which is in line with analysts’ estimates.
For FY2003, ending 12/31/03, revenue was $74.19 million with a net loss of $44.24 million.
During the first six months of the current FY, ending 6/30/04, revenue was $32 million with $1.67 million in losses.
IONA is offering its 4500 customers new and updated technology and the company still has a healthy-looking balance sheet.
Our 24-month target for the stock is $5.50 to $6.00.
For more information, contact IONA’s Beth Mittleman at 781-902-8033; beth.mittleman@iona.com
TRIPATH TECHNOLOGY, INC. (NASDAQ: TRPH) – $2.30. Twelve-month hi-low has been $8.65 – $1.10. Headquartered in San Jose, CA, with about 50 employees, this semiconductor has 47.4 million shares outstanding, $19.1 million in total current assets, $21.18 million in total assets, little debt, and $8.41 million in total liabilities. One analyst rates the stock a “strong buy” and another as a “moderate buy”. Institutional ownership is around 20%.. http://www.tripath.com
We’re picking TriPath Technologies, Inc. for pretty much the same reasons as to why we selected IONA up above – decent looking balance sheet, nifty technologies, and a beaten-down stock price. But, the stock may not have too much more downside, since the company has already cut its second quarter revenue outlook due to a “temporary inventory correction” resulting in decreased demand in the gaming market.
Founded in 1995 and trading on NASDAQ for nearly four years, TriPath is a fabless semiconductor that has created a patented technology called Digital Power Processing (DPP), which combines advances in digital signal processing and power processing. Its technology is aimed at the consumer electronics, DSL, and wireless markets.
In consumer electronics, the company targets the consumer audio and automotive audio market segments with Class-T digital amplifiers that provide the audio fidelity of traditional linear (Class-A/B) amplifiers with more than twice the power efficiency of these devices. Within the DSL market, TriPath is developing line drivers that significantly lower the power consumption of DSL line cards in central office equipment. In wireless, TRPH has a R&D program aimed at developing a family of amplifier products for use in wireless handsets, also known as Radio Frequency (RF) Power Amplifiers.
TriPath’s current customers include a mix of consumer electronic companies and communications equipment providers such as Denon, Eizo, Hitachi, Motorola, Onkyo, Sanyo, Samsung, Sharp, Sony, TCL, Alcatel, and Toshiba.
In July, TriPath announced that its TA2022 Class-T audio amplifier was selected to power Denon’s latest sub-woofer, which is part of their latest multi-channel speaker series, the 55XG. Also, last month, the company introduced a new amplifier device for the flat panel TV market. For FY2003, ending 12/31/03, revenue was $13.89 million with $7.22 million in net losses. During the 1stQT of this FY, ending 3/31/04, revenue was $4.2 million with $1.8 million in net losses.
We believe TriPath’s stock has been badly oversold, which seems to be in vogue, today, when companies fall slightly shy of expectations. When the markets rebound, TRPH should get a nice lift.
Our 20-month target for the stock is $3.75 to $4.00.
For more information, contact TRPH’s David Eichler at 408-750-6801; deichler@tripath.com
Look for the August 20, 2004 Newsletter to be posted on 8/16 or 8/17.
Thank you,
George