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Hello Readers,
This Newsletter is being posted on November 1, the day prior to elections, so, there isn’t much point in giving a pep talk about the markets. We all know what the conventional wisdom is: if Bush wins, the markets will soar, and, if Kerry wins, they will tank. But, all too many times the markets go against conventional wisdom. Our one hope, right now, is that there is not a repeat of 2000, which set the markets into a steady downward grind. Whatever the outcome, we’ll be glad it’s over. However, there is something we learned from all of this, and that is there are entirely too many people with way too much time on their hands.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
CE Franklin (CFK) (5/5/01). Announces 3rd QT profit but we are placing this on the “Endangered List” for the simple reason that oil is hovering around $50 and the stock has basically stood still.
Arotech (ARTX) (6/5/01). Despite more good news about new vehicle launches and order requests, Roth Capital downgrades stock, probably due to the equity offering that put pressure on the stock.
ViroLogic (VLGC) (7/20/01). Expects 3rd QT and full-year revenue to be below expectations. Revises merger terms with Aclara.
VASCO Security (VDSI) (2/5/02). Launches Digipass plug-in for Novell NMAS Version 3. Reports successful first banking and channel summit. Launches VACMAN Middleware 2.3. Swedbank to use Digipass 260 for retail banking applications. Releases pretty good quarterly number and balance sheet still looks good.
Argonaut (AGNT) (4/20/02). Earnings call set for 11/2. Stock faces NASDAQ delisting due to price being under $1. Company has until April to regain compliance. May wind up on NASDAQ Small Caps. This is another one we may soon place on the “Endangered List”, but first need to see the next balance sheet and quarterly numbers.
Art Technology (ARTG) (8/5/03). Technology group opposes merger with Primus. Recent quarter shows a small profit; balance sheet still looks good. ATG may soon announce merger okayed by shareholders.
Insmed (INSM) (11/5/03). Receives European orphan drug designation for SomatoKine for treating extreme insulin resistance. Enters pact with Tzamal to promote and distribute SomatoKine in mid-east countries. Initiates clinical study of small molecule IGF-IR tyrosine kinase inhibitor.
V.I. Technologies (VITX) (11/20/03). Provides update on merger status. This one’s on the “Endangered List”.
Active Power (ACPW) (11/20/03). Receives additional orders from China. Comes out with 3rd QT numbers; balance sheet still appears healthy.
Avant Immuno (AVAN) (12/5/03). Coverage initiated by Caris & Company. 3rd QT balance sheet still seems to be pretty good.
Actuate (ACTU) (1/5/04). Mercy Ships uses Actuate to unlock data assets and drive donations. Quarterly numbers not bad but not great; balance sheet still appears viable.
Peerless Systems (PRLS) (1/20/04). Delivers essential technology for the RISO HC5000 105ppm color digital duplicator.
Crossroads Systems (CRDS) (2/5/04). Demonstrates planned iSCSI products at conference. Will collaborate with iVivity on developing advanced iSCSI products.
Oplink (OPLK) (2/20/04). Broadens portfolio of offerings for the access communications market. Quarterly numbers not bad; balance sheet still looks to be extremely good.
OpenTV (OPTV) (3/20/04). IRG Research initiates coverage. Schedules earnings call for November 4.
Socket Communications (SCKT) (3/20/04). Announces strategic vertical integrator program. Reports profitable third quarter; balance sheet appears good.
NexMed (NEXM) (4/5/04). Announces patent allowance for room temperature stable Alprox-TD.
Palatin (PTN) (4/5/04). Licensee demands arbitration with PTN over what it calls a material breach of the license agreement.
AVI BioPharma (AVII) (4/20/04). Claims NEUGENE Antisense drugs suppress Influenza A virus. Earnings call set for 11/4.
Management Network (TMNG) (4/20/04). Also schedules earnings call for 11/4.
Glenayre (GEMS) (5/5/04). Partners with Microtest to deliver messaging solutions to Russian carriers. Plans earnings call for 11/3.
GlowPoint (GLOW) (5/20/04). Selected as exclusive IP video conferencing provider to leading global medical device company. Third quarter numbers reflect pretty nice revenue growth; balance sheet still looks good.
Network Engines (NENG) (6/5/04). Slates earnings call for 11/4.
Bindview Development (BVEW) (6/5/04). Names new president/COO. Postpones quarterly results amid audit probe. Stands by 4th QT revenue forecast but lowers net income outlook on costs of the probe.
Altair Nanotech (ALTI) (6/20/04). Westrock Advisors give stock a buy rating. Plans earnings call for 11/12.
Genus (GGNS) (7/5/04). Several Aixtron shareholders file suit over GGNS deal. Plans earnings call for 11/3.
Tripath (TRPH) (8/5/04). Ouch! At one point last week the stock nosedived to about 75¢ before recovering to it present levels on news that the company lowered its 3rd QT outlook and that its independent auditors had resigned. Wait and see.
Vitria Technology (VITR) (9/5/04). Quarterly numbers not great but revenue up over 2nd QT; balance sheet still appears very strong. Announces new strategic partnerships in Latin America. FastWeb of Italy has success with Vitria. Company once again is named to Software Magazine’s Software 500 list.
Intraware (ITRA) (9/20/04). QAD extends agreement with Intraware.
Choridant (CHRD) (9/20/04). Although overall quarterly numbers and balance sheet appear good, stock tanks because several analysts said license revenue was below their expectations for the second straight quarter. Doesn’t make much sense to us.
Trikon (TRKN) (10/5/04). Quarterly numbers not bad but show a 3% drop over the second quarter; balance sheet still looks very healthy.
Corio (CRIO) (10/5/04). Declared a leader in 2004 Deloitte Technology Fast 500. Third quarter results exceed guidance; balance sheet still looks good.
SCM Microsystems (SCMM) (10/20/04). Plans earnings call for 11/4. SCMM, OMNIKEY, and Kobil define new standard for PINPad smart card readers. Delivers smart card readers for Belgium’s national e-ID program. Resolves claims made by digital TV customer.
iGate (IGTE) (10/20//04). Slates earnings call for 11/4.
Our picks for this Newsletter is another Israeli company – we’ve had nice gains with this genre in the past – and a communications outfit that is probably familiar to many of you.
NOVA MEASURING INSTRUMENTS, LTD. (NASDAQ: NVMI) – $3.70. Twelve-month hi-low has been $8.21 – $3.00. Based in Rehovot, Israel, with about 200 employees, this supplier to the semiconductor industry has 15.1 million shares outstanding, $34.5 million in total current assets, $47.69 million in total assets, and $14.3 million in total liabilities. Institutional ownership is around 20%. One analyst rates the stock a “strong buy”. http://www.nova.co.il
Over the years, we have had some nice successes with Israeli companies, and, so, we add another one to the Current Portfolio. And, it’s worth noting that Nova Measuring Instruments, Ltd. appears to have a healthy-looking balance sheet.
Founded in 1993 and trading on NASDAQ for nearly four years, Nova develops and produces monitoring and measurement systems for the semiconductor industry. The company boasts of pioneering the development of integrated in-water monitoring for semiconductor manufacturing of product wafers in the CMP process, and, today, it claims to be the recognized leader in integrated process control. Nova is now expanding its activities by developing integrated monitoring (ITM) and process control systems for CMP, CVD, photolithography, and etch manufacturing processes. NVMI says its ITM systems for CMP process control, delivering an unequaled degree of wafer-to-wafer closed loop control, have measured more wafers than all other metrology companies combined.
Operating through four wholly-owned subsidiaries in the U.S., Japan, and the Netherlands, Nova seems to be investing heavily in its new developments. The NovaReady open architecture policy enables installation of ITM systems on all process equipment and delivers advanced process control for the entire fab along with rapid advancement of the semiconductor manufacturing processes.
Nova supplies its metrology systems to semiconductor manufacturers worldwide, either directly or through process equipment manufacturers such as TSMC, UMC, AMD, Micron Technology, Elpida, IBM, Infineon, Intel, Motorola, Phillips, Texas Instruments, and Samsung. Process equipment manufacturers that purchase the company’s systems include Applied Materials, Ebara, Novellus, and Lam Research.
For FY2003, ending 12/30/03, revenue was $26.68 million with $4.21 million in net losses versus FY2002 revenues of $20.37 million and $13 million in net losses. During the first six months of the current FY, ending 6/30/04, revenue was $19.38 million with $188,000 in net income. Recently, Nova reported that 3rdQT guidance is in line with previous forecasts. Currently, the main drag on the stock is perhaps due to the popular belief that the semiconductor industry won’t see another growth spurt for awhile. We don’t fully buy that.
Our 24-month target for the stock is $6.50 to $7.00.
For more information, contact NVMI at 728-938-7505; info@nova.co.il
NET2PHONE, INC. (NASDAQ: NTOP) – $3.45. Twelve-month hi-low has been $8.39 – $2.54. Located in Newark, NJ, with about 240 employees, this telecom service provider has 76.4 million shares outstanding, $121.2 million in total current assets, $165.3 million in total assets, and $36.63 million in total liabilities, of which $17.33 million is long-term debt. Institutional ownership is around 24%. One analyst rates the stock a “moderate buy” and three have it as a “hold”. http://www.net2phone.com.
This is for those of you who make phone calls over the Net and believe that within five to ten years the rest of us will be joining you. Net2Phone, Inc. has made a mark in this field and has the chance to dial up even more dollars. And yes, NTOP has over $17 million in long-term debt, but it also has $110 million in cash/investments.
Founded in 1996 and trading on NASDAQ since 1999, Net2Phone provides retail Voice over IP (VoIP) services, either directly or through partners. Many recognize the company as the first to bridge the Internet with the public switched telephone network. Currently routing millions of minutes daily over the Internet/data networks, the company saves users up to 90% off traditional long distance calls. Calls within the U.S. run as low as two cents and internationally as low as three cents.
NTOP operates through two wholly-owned subsidiaries, Net2Phone Global Services (NGS) and Net2Phone Cable Telephony (NCT). NGS delivers the VoIP telephone services to businesses and consumers directly and through its global distribution network of over 450 resellers in over 130 countries. NCT offers cable operators a complete suite of services that allows them to deliver to their customers residential phone services having comparable qualities and features that are offered by traditional phone companies.
This is one of those companies that seems to be in perpetual motion. During October alone, Net2Phone signed a deal to provide cable telephony services to Rural West, a cable operator serving numerous military bases; entered into a marketing pact with Motorola and Cedar Point Communications; announced the availability of Wi-Fi VoIP service; was selected by the National Cable Television Cooperative (NCTC) to be their Platinum Vendor of VoIP services to members; and announced that it was selected by TV Cidade, a cable operator in Brazil, to provide a suite of broadband telephony solutions to be offered in the Brazilian corporate market.
For FY2004, ending 7/31/04, revenue was $82.77 million with $11.17 million in losses compared to FY2003 revenues of $91.75 million and $16.79 million in net income. The first half of FY2004 was very bumpy while the company underwent a restructuring. The company appears ready for ready for another growth spurt thanks to its technology upgrades and promising new business, such as with the 1000-member NCTC.
Our 24-month target for the stock is $6.00 to $7.00.
For more information, call NTOP at 973-438-3200; investor@net2phone.com
The November 20, 2004 Newsletter should be posted on 11/16 or 11/17.
Thank you,
George