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Hello Readers,
And so, the carnage continued during the last half of March. The Russell 2000, which hit all-time highs just a few months ago, was even on the verge of sub-600, and that can still happen. Oil, more than interest rates scares, is the Great Satan of the markets, and, until we see crude drop to under $50 and stay there for a while, things will remain pretty much the same. However, during the last week, oil did appear to be heading downward, so, maybe, just maybe…
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
Arotech (ARTX) (6/5/01). Many of our picks have had a slew of good news lately only to see their stock prices hardly budge thanks to the recent market stagnation, and ARTX is no different. The company achieved record revenues during FY2005 and its 4th QT loss narrowed. Also, ARTX bagged a three-year $24 million battery contract from the U.S. Army.
ViroLogic (VLGC) (7/20/01). Study says that company’s Penosense is superior to Virco’s Antivirogram.
Generex (GNBT) (8/5/02). Files provisional application for Oral/Buccal Metformin patent. Subsidiary initiates clinical trials in patients with Her-2/neu positive breast cancer. This is on the “Endangered List”.
Art Technology (ARTG) (8/5/03). Kana rolls out e-mail response application to go up against ARTG’s. CFO plans resignation.
Targeted Genetics (TGEN) (10/5/03). Here’s one with not-so good news as its cystic fibrosis drug fails trial and we now place this on the “Endangered List”.
Insmed (INSM) (11/5/03). Announces exclusive option agreement with UCSF for series of IGF-1 receptor antagonists. Balance sheet weakens a lot, but INSM completes $35 million financing.
Peerless Systems (PRLS) (1/20/04). ). Year-end results a mixed bag but balance sheet still looks okay. Focus now is on the Kyocera Mita pact’s impact.
Open TV (OPTV) (3/20/04). Signs technology deal with Gemstar-TV Guide. FY2004 numbers look pretty good and balance sheet appears to be very strong. However, company needs to fix a flaw in its internal controls, which it says has begun.
Socket Communications (SCKT) (3/20/04). Launches next generation KwikBlue modules with Bluetooth 2.0 wireless technology.
Palatin (PTN) (4/5/04). Ptn and King Pharma report positive data from clinical trial evaluating co-administration of PT-141 and Viagra. This could get interesting.
GoRemote (GRIC) (5/5/04). Coverage on GRIC initiated by Thomas Weisel. GRIC provides innovative solutions for Lockheed Martin. Launches comprehensive Enterprise Application deployment and patch management solution.
GlowPoint (GLOW) (5/20/04). Sony and GLOW selected as pick of the 2005 NFL draft. Year-end numbers show good revenue growth and balance sheet still looks very good.
Network Engines (NENG) (6/5/04). Partners with Microsoft and InTechnology to sell security appliances in Europe.
Aixtron (AIXG) (7/5/04). This was Genus until last month when the merger went through. Genus shareholders received .51 shares of AIXG for every GGNS share they held. This could work out. AIXG’s FY2004 balance sheet looks strong and the company showed a profit for the year.
Avanex (AVNX) (7/20/04). Opens operations center in Asia. Needham & Co. downgrades stock but AVNX is selected by Alcatel to provide optical components in major new submarine networks.
Intraware (ITRA) (9/20/04). Reports FY2005 numbers, which aren’t bad; balance sheet still looks okay.
Chordiant (CHRD) (9/20/04). Advances inbound real-time marketing. Provides Basel 2 iRB compliance with advanced credit risk decisioning and monitoring Stock downgraded by Pacific Growth Equities.
Trikon (TRKN) (10/5/04). Claims its new Omega i2L dry-etch system takes the risk out of IC production for mainstream silicon applications. Aligns business strategy.
Applied Micro (AMCC) (11/20/04). Stock upgraded by Pacific Growth Equities.
Advancis Pharma (AVNC) (12/20/04). Completes enrollment in adult/adolescent amoxicillin PULSYS Phase 3 trial.
B.O.S. Better On-Line Solutions (BOSC) (1/5/05). Subsidiary signs a $3 million deal with the Israeli aircraft industry. Yearly/quarterly numbers show good revenue growth coupled with some losses; balance sheet still looks healthy.
Brillian (BRLC) (1/5/04). Electrograph to distribute Brillian HDTVs to CEDIA Home Theater and specialty A/V retailers.
Xcyte (XCYT) (1/20/05). Names new chairman. Updates clinical development plans. Year-end balance sheet appears healthy.
Savient (SVNT) (2/5/04). Reports fiscal year loss versus income a year earlier, but balance sheet appears to be quite healthy and could get even better as company announces it will sell its Global Biologics manufacturing business for $80 million. SVNT will now focus on its pipeline products.
Three-Five Systems (TFS) (2/5/04). To sell its display unit to International DisplayWorks for at least $8 million plus potential considerations. Is still exploring other strategic alternatives including selling part or all of the company.
Mindspeed (MSPD) (2/20/05). Selected by Harbour Networks to supply VoIP processors.
Centra Software (CTRA) (2/20/05). IRS empowers workforce for modernization of nation’s tax collection agency with CTRA powered Web collaboration. Cited by IDC as a leader in worldwide conferencing application software market.
Tumbleweed (TMWD) (3/5/05). Selected by Diversified Data for secure data exchange. Releases “Dark Traffic Report”. Announces partnership in Hong Kong with Edvance.
AEHR Test Systems (AEHR) (3/20/05). Third quarter loss lower than same time a year ago.
Our picks for this issue are an Internet software and services provider and an information provider with a pretty interesting story.
LOUDEYE CORPORATION (NASDAQ: LOUD) – $1.45. Twelve-month hi-low has been $3.02 – 78 cents. Based in Seattle, WA, with about 50 employees, this Internet software and services provider has 82 million shares outstanding, $45.5 million in total current assets, $103.8 million in total assets ($43.55 million is goodwill), $1 million in long-term debt, and $37.26 million in total liabilities. Institutional ownership is around 24%. One analyst rates the stock a “strong buy” and another as a “hold”. http://www.loudeye.com
As most of us know, small stocks have be on vacation for the last few months, and the strategy, as always, is to keep mining for ones with good balance sheets and revenue growth. Loudeye Corporation looks to have both as we add it to the Current Portfolio.
Founded in 1998, and trading on NASDAQ for about five years, Loudeye provides B2B services that facilitate distribution and promotion of digital media content to media and entertainment, retail, and enterprise customers. These digital media products and services include private branded digital music stores, such as the Digital Music Store and iRadio Service; digital music encoding; metadata licensing; advanced fingerprint database generation; hosted music sample services; hosted music download services, including digital rights management licensing clearing; online radio solutions; and rich media advertisement insertion. LOUD also provides enhanced enterprise communication services, which include scalable, live and on-demand audio and video Webcasting services, supported by proprietary applications such as synchronized streaming slide presentation capabilities. The company boasts that its solutions have helped launch more than 80 online music stores. Its iRadio Service offers 100 channels of CD-quality streaming music delivered through a partner’s own privately-branded player interface. Loudeye’s digital media solutions come in three services tiers – application services, hosting and streaming, and encoding.
About a month ago, 02 Germany signed up with Nokia for a mobile music solution powered by Loudeye. This was prefaced when, in February, LOUD and Nokia together unveiled a mobile music solution for operators worldwide. Also, in February, the company announced that its OD2 services launched a customized music store for Migros Electronics in Switzerland. For FY2004, ending 12/31/04, revenues were $16.74 million with $16.29 million in net losses versus 2003 revenues of $11.94 million and $19.17 million in losses. Yes, those are ugly losses, however, for 2005 Loudeye expects revenues to more than double and to achieve pro forma profitability by year’s end.
We like the fact that Loudeye is teamed with Nokia. Even more, we like the 2005 projections, and if they come to fruition, things could get interesting.
Our 24-month target for the stock is $2.50 to $3.00.
For more information, contact LOUD at 877-502-5488; ir@loudeye.com
VERTICALNET, INC. (NASDAQ: VERT) – 88 cents. Twelve-month hi-low has been $2.47 – 82 cents. Located in Malvern, PA, with about 100 employees, this information provider has 34 million shares outstanding, $16 million in total current assets, $40.3 million in total assets, little debt, and $8.5 million in total liabilities. Institutional ownership is around 12%. One analyst rates the stock a “moderate buy”. http://www.verticalnet.com
Factoring in all of its reverse stock splits over the years, Verticalnet, Inc. once saw its stock price theoretically hit $1200 in January, 2000, at the peak of the Net stock craze. Obviously, since then, VERT hit a lot of bumps and detours in the road. Two years ago, the company even faced bankruptcy. However, it has apparently vastly improved both its balance sheet and revenues. Of concern, for now, is that the stock price needs to get over a dollar before the NASD starts grumbling about delisting.
Founded in 1995, and public since 1999, Verticalnet started as a company that matched buyers with suppliers and managed Internet portals for sundry industries; once there were 59 such sites. It has since transformed itself into a provider of supply management solutions to Global 2000 companies. VERT provides supply management software, services, and domain expertise in areas that include spend analysis, advanced sourcing, e-procurement, contract management, and supplier scorecards. Its solutions are bundled into four process steps: Supply Strategy, Supply Selection, Supply Execution, and Supply Performance. In addition, Verticalnet provides customers with project management, architecture and design, custom development services, and training.
Some of VERT’s customers include H.J. Heinz, J&J, Pepsi, Bayer, Eli Lilly, Wyeth, IKEA, Federal-Mogul, Georgia Pacific, Sears, NBC, Delta Airlines, New York Life, Sara Lee, and Lowe’s.
In late March, Mittal Steel selected VERT’s Spend Analysis solution to achieve a single global view of spending across its recently merged entities. At the end of February, Verticalnet announced that a global chemicals manufacturer had inked a long-term subscription to the company’s XE Negotiation Manager module to automate its sourcing processes.
For FY2004, ending 12/31/04, revenues were $22.9 million with $9.16 million in losses compared to FY2003 revenues of $9.6 million and $4.5 million in losses. Yes, the losses need trimming, but what is important to remember here is that a year or so ago VERT only had eight customers with two of them accounting for 80% of its revenues; today, it has 65 customers.
Our 24-month target for the stock is $1.75 to $2.25.
For more information, contact VERT’s David Kaplan at 610-695-2310; davidkaplan@verticalnet.com
Look for the April 20, 2005 Newsletter to be posted on 4/18 or 4/19.
Thank you,
George