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Hello Readers,
Finally! Our multi-month drought has ended as we close three positions since the last Newsletter, one for a nice gain, one for an okay gain (that was forced), and one for a loss that could have been much uglier than it was.
CLICKSOFTWARE (4/5/06). Closed position 8/16/06 at $2.42 for a 53% GAIN.
MICRO LINEAR (6/5/06). Closed position 8/16/06 at $3.30 for a 20% GAIN.
LOUDEYE (4/5/05). Closed position 8/16/06 at $4.36 for a 69% LOSS.
Ever since recommending it back in April, ClickSoftware had been mostly in the black, and may have received a nice shove due to deals with Chubb and Bezeq. The takeover of MicroLinear came out of the blue as Sirenza, a former pick of ours, offered to buy MLIN for about $45 million. Loudeye, which was down over 80% on us a few weeks ago, had a nice pop when Nokia said it was buying LOUD for around $60 million.
For most of this month, so far, it has been a near-perfect world for the markets. The Fed held rates steady, crude oil prices dropped, a terrorist plot was stymied, and fighting in Lebanon came to a cease fire. Not only have the Dow and NASDAQ found their footing, but the Russell 2000 got over 700, again. What happens now? Let’s just try and enjoy the rest of the summer.
Here are the headlines since the last Newsletter about companies in our Current Portfolio. Dates in parentheses are when we first recommended them.
American Technology (ATCO) (8/5/06). Teams with Moog on ruggedized remote operated LRAD system for security applications. Quarterly report upbeat; balance sheet still okay. Announces $9.5 million equity financing, which may be a slight drag on the stock right now.
Microvision (MVIS) (7/20/06). Quarterly report so-so, but balance sheet strengthens thanks to recent financing.
Advanced Life Sciences (ADLS) (7/20/06). Current balance sheet still looks very healthy.
NTN Buzztime (NTN) (7/5/06). Although quarterly report has some plusses, loss widens somewhat; balance sheet still looks good.
Point Therapeutics (POTP) (7/5/06). Quarterly results show balance sheet still appears healthy.
BSQUARE (BSQR) (6/20/06). Quarterly report shows good year-over-year revenue growth; balance sheet still looks good.
Spherix (SPEX) (6/20/06). Signs Anaclim to support diabetes clinical trial.
O2Diesel (OTD) (5/20/06). Receives over $1 million to begin California diesel emissions control strategy verification. 2nd QT results still show okay balance sheet.
Kintera (KNTA) (5/5/06). Marine Corps Scholarship Foundation using Kintera technology. Company has highest quarterly revenue in its history; balance sheet still appears to be good.
Tri-S Security (TRIS) (5/5/06). Quarterly results not bad; balance sheet still holding up.
Pharmos (PARS) (4/20/06). Commences dosing in second Phase 2a study of Cannabinor in experimentally induced pain. Recent balance sheet still looks pretty healthy.
ThermoGenesis (KOOL) (4/5/06). Signs deal with Biomet Biologics to produce blood based adhesive.
Cytogen (CYTO) (3/20/06). Posts a 2nd QT profit on joint venture sale; balance sheet still looks strong. Launches SOLTAMOX for breast cancer patients.
TII Network (TIII) (3/20/06). Names new CEO and president. Quarterly report upbeat; balance sheet still seems to be good.
Q Comm (QMM) (3/5/06). Recent quarterly report reflects diminishing losses; balance sheet still so-so.
Lipid Scineces (LIPD) (2/20/06). Gives positive report on clinical trial. Balance sheet still looks okay and should be strengthened by recent $6.3 million private placement.
Adherex (ADH) (2/20/06). Stock keeps falling like a rock but recent balance sheet still looks okay and company reports positive news about the progress of its various clinical trials.
Gateway (GTW) (2/5/06). Awarded contract from Los Angeles School District for more than 1200 desktop PCs. Threats seen to GTW’s growth forecast in story at Forbes.com. Quarterly results miss estimates, but losses seem to shrink; balance sheet still seems viable.
MIND CTI (MNDO) (2/5/06). Quarterly numbers show good year-over-year revenue growth; balance sheet still looks strong.
8×8 (EGHT) (1/20/06). Launches on-site installation service for Packet8 subscribers. Awarded additional VoIP technology patent. Releases Packet8 Softalk PC softphone with voice, video, and E911 support.
Dynacq Healthcare (DYII)(1/20/06). Settles class action securities litigation, which was probably a good idea.
Digital Angel (DOC) (12/20/05). Quarterly report not that great; balance sheet still looks good. DOC’s livestock tags get okay for USDA program. Hires Raymond James as investment advisor. Gets U.S. Air Force development contract. Will market electronic RFID livestock tagging systems in Brazil.
Fusion Telecom (FSN) 12/5/05). Surpasses 400,000 Efonica subscribers in less than 60 days. Reports revenue increase for third consecutive quarter; balance sheet still looks okay.
Memory Pharma (MEMY) (11/5/05). Here’s another one whose stock also keeps tanking but reports positive progress on its various trials and still shows a healthy cash balance.
Cognitronics (CGN) (10/20/05). Quarterly results not that great; balance sheet still looks okay. Names new president/CEO.
RAE Systems (RAE) (10/5/05). Stock falls despite what appears to be decent quarterly numbers; balance sheet still looks very strong.
Discovery Partners (DPII) (10/5/05). Infinity merger takes a major step toward completion. Balance sheet still looks very healthy.
EntreMed (ENMD) (9/5/05). Balance sheet still looks very strong. Gets patent covering composition of matter for 2ME2.
ZiCorp (ZICA) (8/5/05). Stock drops as loss widens; balance sheet still seems viable.
Innodata (INOD) (7/5/05). Although revenue growth is up year-over-year, losses seem to be weighing on the stock; balance sheet still looks good.
Electric City (ELCY.OB) (7/5/05). Several news releases, including quarterly numbers. This one is on the “Endangered List”.
Vion Pharma (VION) (5/20/05). Balance sheet still looks very healthy.
Verticalnet (VERT) (4/5/05). Several releases, including quarterly report. This is on the “Endangered List”.
Advancis Pharma (AVNC) (12/20/04). Stock rises from the dead as company announces strep throat drug passes late-stage trial. Balance sheet still looks okay.
Applied Micro Circuits (AMCC) (11/20/04). Gets another NASDAQ warning. Wins Storage Magazine award. Will buy Quake Technologies for $69 million. Has very upbeat quarterly report, sees 5% to 8% sequential revenue growth.
Nova Measuring (NVMI) (11/5/04). Names new CEO. Completes HyperNex buyout. Quarterly report reflects continued growth in revenues and bookings; balance sheet still looks good.
Aviza Technology (AVZA) (10/5/04). Quarterly numbers show dip in revenue but losses appear to be abating; balance sheet still seems okay.
Chordiant Software (CHRD) (9/20/04). Receives NASDAQ non-compliance letter over option grants (basically). Faces shareholder suit. Preliminary 3rd QT numbers seem pretty good, as does balance sheet.
AIXTRON (AIXG) (7/5/04). Quarterly report pretty positive; balance sheet still seems good.
TMNG Global (TMNG) (4/20/04). Second quarter numbers reflect wider losses; balance sheet still looks very strong.
Palatin (PTN) (4/5/04). PTN and King Pharma report results of clinical trial evaluating drug for female sexual dysfunction.
NexMed (NEXM) (4/5/05). Several releases, including quarterly report. This is on the “Endangered List”.
Socket Communications (SCKT) (3/20/04). Achieves RoHS compliance. Delivers Go Wi-Fi P300 802.11g WLAN card.
OpenTV (OPTV) (3/20/04). Shuffles management. Surpasses 1500 interactive TV ad campaigns. Quarterly numbers seem upbeat; balance sheet still appears to be very strong.
AVANT Immuno (AVAN) (12/5/03). CholeraGarde vaccine development program gets more funding from Gates Foundation. Cash balance/equivalents at $53.5 million.
Insmed (INSM) (11/5/03). Recent balance sheet looks strong.
Monogram Biosciences (MGRM) (7/20/01). Says four studies affirm its Trofile HIV co-receptor tropism assay.
Our picks for this Newsletter are both on NASDAQ; one is an equipment maker and other owns the UNIX operating system.
TELULAR CORPORATION (NASDAQ: WRLS) – $2.00. Twelve-month hi-low has been $5.10 – $1.71. Based in Vernon Hills, IL, with about 160 employees, this equipment maker has 18.01 million shares outstanding, $49.09 million in total current assets, $61.69 million in total assets, and $21 million in current liabilities. Institutional ownership is around 29%. http://www.telular.com
The best we can do in choppy markets is to stick with our basic formula, and, so we add Telular Corporation to the Current Portfolio because it has a decent-looking balance sheet and some proven technology. It also appears to be digging out from under a revenue slump.
Founded in 1986, and public for over a dozen years, Telular makes and markets wireless products. By using existing cellular infrastructures, the company’s Telular Phonecell Fixed Cellular Terminals and Fixed Cellular Phones can provide voice and data in Wireless Local Loop (WLL) scenarios or where there is a cellular network signal. The Fixed Cellular Terminals bridge wireline telecommunications customer premises equipment with cellular type transceivers for use in wireless communication networks. Telular also has a Security Products segment that provides wireless backup systems for both commercial and residential alarm systems.
With a customer base in over 130 countries, Telular’s products provide the capability to connect standard telecommunications equipment, including standard telephones, fax machines, data modems, and alarm panels with wireless communication networks in the cellular and personal communications system frequency bands. Telular offers wireless basic telephone service, wireless security products, machine-to-machine least cost routing, cellular public phones, portable cellular access, and disaster recovery and emergency back-up services for the wireless security market. It also serves security system installation companies and security system distributors.
At the end of July, Telular announced several large order deals. One was for $6 million with Wintel, Ltd., which is a distributor for WorldTel. The other was for $21.3 million, of which $12.6 million was recurring business, with Latin American wireless network providers in El Salvador, Guatemala, Mexico, Panama, and Venezuela.
For the FY ending 9/30/05, revenue was $52.43 million with $10.9 million in losses. During the first nine months of the current FY, ending, 6/30/06, revenue was $67.68 million with $9.63 million in losses.
Over the last few years, Telular had seen shrinking revenues and mounting losses; however, it now appears that is has made a nice turnaround on the revenue side, and, hopefully, the company can start paring its losses.
Our 24-month target for the stock is $3.50 to $4.00.
For more information, contact WRLS at 847-247-9400; investor@telular.com
THE SCO GROUP, INC. (NASDAQ: SCOX) – $2.45. Twelve-month hi-low has $5.23 – $2.20. Located in Lindon, UT, with about 165 employees, this Internet software provider has 21.1 million shares outstanding, $28.8 million in total current assets, $31.46 million in total assets, little debt, and $17.37 million in total liabilities. Institutional ownership is around 56%. www.thescogroup.com
Maybe it’s time to try and catch another falling, though our luck on these has been mixed over the years. Back in 2000, or so, the stock price of The SCO Group, Inc. went to over $100. Since then, the company has had its share of hits and stumbles, but it still has a pretty good balance sheet, owns what many perceive to be a high-value intellectual property, and is launching new products into a new territory.
Founded in 1979 and formerly known as Caldera International, The SCO Group owns the core UNIX operating system, originally developed by ATT/Bell Labs, and provides the OpenServer and UnixWare products; it is the exclusive licensor to UNIX-based system software providers. The company’s OpenServer supports multi-user, transaction and business applications, communication gateways, and mail and messaging servers in both the host and client/server environments. Its UnixWare is a deployment platform for industry standard Intel processor systems. SCO Group’s other services include software development and programming, migration tools and services, and assisting customers with modernizing and integrating legacy applications with Web services. It assists end-user customers and solution providers in planning, creating, implementing, and deploying business application solutions.
Perhaps a major drag on the stock has been a lawsuit against IBM over alleged violations regarding distribution of the UNIX code. Recently, a federal judge dismissed the majority of SCO’s claims. Some think that the company should drop the suit and turn back to its core business, which may be a good idea, and something that SCO seems to be trying.
Earlier this year, the company introduced its EdgeClick mobile development platform as well as Me Inc. mobile services. EdgeClcik allows SCO solution partners to create and customize mobile services for their customers. Some signs that these new offerings are gaining some momentum came a few weeks ago when SCO made a flurry of announcements that included a strategic partnership with Day-Timers, Inc. to develop and market a suite of DT branded mobile automation solutions; announced new Hipcheck mobile service for remote control and monitoring of Windows and UNIX; brought mobile services to Palm Treo 700 smartphones; and joined the Microsoft Visual Studio Industry Partner (VSIP) program to integrate and distribute Microsoft Visual Studio 2005 with the new EdgeBuilder tool kit.
For the FY ending 10/31/05, revenue was $36 million with $10.72 million in losses. During the first six months of the current FY, ending 4/30/06, revenue was $11.7 million with $9.3 million in losses.
Obviously, SCO has its work cut out for it and a lot is riding on its new product launches.
Our 24-month target for the stock is $4.00 to $4.50.
For more information, contact SCOX’ Blake Stowell at 801-765-4999; investorrelations@sco.com
Look for the September 5, 2006 Newsletter to be posted on 8/31 or 9/1.
Thank you,
George