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Hello Readers,
Our apologies for the butchered February 5 Newsletter. Even the best quality controls run amok. It is now fixed and can be read in its entirety.
We did not close any positions since the last Newsletter. Remember what we have said continuously over the years – these things usually come in bunches. Case in point was in January when we closed 15 of them.
While the Dow has been making 32-month highs, the NASDAQ and Russell 2000 have been marking time. There was a small sell off earlier this month, but the averages have mostly back-and-filled. It looks like the markets are just digesting the gains of the last ten months. Barring any major crisis or domestic terrorism, we expect the markets to roar right through spring. Even the Fed seems to be accommodating, for the moment.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
DOR BioPharma (DOR) (9/20/00). Stock had a nice run up thanks to the ricin scare, before settling back to its current levels. Provides update on its ricin vaccine development program; in short, University of Texas, the licensee, plans to file an IND with the FDA sometime over the next few months.
Genetronics (GEB) (10/5/00). Brokerage firm initiates coverage on stock. GEB enters into strategic alliance with RMR Technologies.
MCF Corp (MEM) (1/20/01). Pretty good numbers for FY2003. Balance sheet seems to have strengthened.
Hauppauge Digital (HAUP) (2/5/01). Numbers for 1st QT send stock on a nice upswing; balance sheet also improves a little.
Arotech (ARTX) (6/5/01). Gets first order for new training simulator from Detroit Metropolitan Airport. Settles lawsuit. Receives $2.2 million military battery and charger order.
ViroLogic (VLGC) (7/20/01). Another one reporting much-improved numbers for FY2003; balance sheet still appears healthy. Presents data on its drug developments.
Orthovita (VITA) (12/20/01). Reports that full year 2003 sales increased 49% over 2002, coupled with a slight decrease in losses; balance sheet improves compared to 2002. Upgraded by First Albany.
VASCO Security (VDSI) (2/5/02). And yet another with improved numbers versus 2002; and it, too, has a better balance sheet.
Allos Therapeutics (ALTH) (6/20/03). Stock has a nice pop on a slew of good news. FDA accepts NDA application with priority review for RSR13 in brain metastases from breast cancer. FY2003 numbers not great overall, but 4th QT got a lift thanks to a $5.1 million settlement; balance sheet still appears very viable. Begins Phase 3 study of RSR13. Stock upgraded by CE Unterberg Towbin.
Art Technology (ARTG) (8/5/03). Announces premier technology and consulting firms as ATG Insight sponsors.
Targeted Genetics (TGEN) (10/5/03). Announces secondary offering of about 10.9 million shares, which, or course, may put pressure on stock price. Says it has positive results from a Phase 2 clinical trial of its cystic fibrosis product candidate. Cancels joint venture with Itochu Corp.
Trio-Tech (TRT) (10/20/03). Releases FY2004 2nd QT numbers; balance still ok.
Insmed (INSM) (11/5/03). End of FY2003 shows healthy-looking balance sheet.
V.I. Technologies (VITX) (11/20/03). Some rollercoaster ride, huh? Completes funding of $10.9 million private placement. Receives NIH grant of $885,000 for pathogen reduction process.
AVANT Immuno (AVAN) (12/5/03). Receives commitments for $25 million equity financing, which could put downward pressure on stock.
SatCon (SATC) (12/5/03). 1st QT for FY2004 shows slight improvement in revenue compared to previous quarter, and losses seem to have almost evaporated; balance sheet also improves.
Actuate (ACTU) (1/5/04). Its ReportingEngines division now gives java developers complete control over report development using exposed APIs.
ImageWare (IW) (1/20/04). Closes $6.6 million financing. Will debut latest version of PDI Studio at PMA annual conference.
SOMERA COMMUNICATIONS, INC. (NASDAQ: SMRA) – $2.64. Twelve-month hi-low has been $3.35 – 81 cents. Located in Santa Barbara, CA, with about 350 employees, this telecom equipment provider has 49.2 million shares outstanding, $91 million in total current assets, $98.84 million in total assets, little debt, and $28.7 million in total current liabilities. Institutional ownership is around 29%. One analyst rates the stock a “strong buy”, one as a “moderate buy”, and two as a “hold”. http://www.somera.com
Judging from recent upticks in such stocks as Nokia, Lucent, and Nortel, one gets the idea that the telecoms and networkers may finally come back to life, and, if that is the case, so should Somera Communications, Inc.
Trading on NASDAQ since 1999, Somera provides telecommunications operators with equipment network and deployment services to support their need to optimize their networks and equipment assets more efficiently and cost effectively. Between 1996 and 2001, the nearly 2000 global telecom operators purchased over $5 trillion of new equipment, and, since then, there has been limited capital to upgrade or build-out their networks. As a result, there is still a large inventory of excess equipment; an imbalance within each network of equipment that an operator currently owns versus equipment they need, coupled with fewer technical personnel to support deployment requirements.
Enter Somera. Their services are three-pronged: The company works with operators to determine the feasibility of redeploying existing equipment within their own network or valuing that same equipment for possible re-marketing to another operator’s network; it supplies operators with the optimum combination of new and used equipment based on their strategy, budgets, and time requirements; and SMRA offers value-added resources to execute programs and projects that its customers traditionally managed themselves.
At the end of January, Somera signed a supplier agreement with T-Mobile Netherlands to provide new or redeployed equipment for their network. Also, at that time, the company raised its outlook for the first half of 2004. Last November, SMRA secured a series of asset disposal contracts with Canada’s largest wireless operator.
For FY2003, ending 12/31/03, revenue was $136.56 million with $58.5 million in losses versus 2002 revenue of $199.2 million and $5.2 million in losses.
The thought here is that better days are ahead for the telecoms and the sector will need the Someras of the world to help them muddle through.
Our 24-month target for the stock is $5.25 to $5.50.
For more information, contact SMRA’s Kelly Delany at 805-699-3384; kdelany@somera.com
OPLINK COMMUNICATIONS, INC. (NASDAQ: OPLK) – $2.47. Twelve-month hi-low has been $3.28 – 77 cents. Based in San Jose, CA, with about 670 employees, this semiconductor has 145.2 million shares outstanding, $186 million in total current assets, $232.2 million in total assets, little debt, and $13.45 million in total liabilities. Institutional ownership is around 20%. One analyst has the stock as a “hold”. http://www.oplink.com
Even though the semiconductors have begun to perk, lately, we know it is still a small leap of faith to pick at them, but we like Oplink Communications, Inc.’s balance sheet, and it appears they are keeping their technology updated. And yes, hold your nose when glancing at the insider selling.
Public since 2000, Oplink manufactures and markets fiber optic components and modules that expand optical bandwidth, amplify optical signals, monitor and protect wavelength performance and redirect light signals within an optical network. It also offers customers optical manufacturing services (OMS) for producing and packaging highly integrated optical subsystems and turnkey solutions based upon a customer’s specifications. The company has developed over 20 types of primary components that can be integrated through various combinations to create over 100 custom solutions.
Oplink’s product portfolio includes solutions for next-generation all-optical dense wavelength division multiplexing (DWDM), optical amplifications, switching and routing, and monitoring and conditioning applications. In sum, the company’s full suite of components and integrated modules expand the capacity of fiber optic networks, enable optical signals to travel over greater distances, and control the direction of light signals through next-generation optical networks.
The company markets worldwide and its customers include Alcatel, Agere, Cisco, Corning, Lucent, NEC, Nortel, Siemens Sycamore, and Xtera.
For now, Oplink appears to be pushing its OMS business which grew in the last quarter and represented nearly 50% of revenue.
For FY2003, ending 7/31/03, revenue was $22.63 million with $36.8 million in losses (ouch!). Things seem a little better, so far, in FY2004. For the first six months, ending 12/31/04, revenue was $15.3 million with $4.4 million in losses.
The worse may be behind the industry and the company, and the numbers for the first six months of FY2004 seem to be a positive sign.
Our 24-month target for the stock is $4.50 to $5.00.
For more information, contact OPLK’s Janey Lin at 408-965-7288; janeyl@oplink.com
Look for the March 5, 2004 issue to be posted on 3/1/04 or 3/2/04.
Thank you,
George