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Hello Readers,
Finally! We had a mild reprieve from our drought as we were able to close a position.
METRON TECHNOLOGY (7/5/04). Closed position 8/17/04 at $4.39 for a 80% GAIN.
About once every thousand years we get very lucky and have a major company acquire one of our open positions for an eye-popping amount. Such was the case when Applied Materials announced it had agreed to buy Metron Technology for about $85 million in cash, and, with an 80% gain, it made sense to us.
Despite being stuck in our worst stretch in nearly 18 months, we still think that most of our Current Positions are way oversold. Of course, the sluggish market of the last three months has not helped us one bit. But, if the price of crude can keep dropping, and if the terrorists leave us alone, and if Bush gets traction in the polls, then maybe a nice rally will begin in early September.
Here are the headlines since the last Newsletter about companies in our Current Portfolio. Dates in parentheses are when we first recommended them.
DOR BioPharma (DOR) (9/20/00). Announces stock repurchase program that doesn’t help share price. On “Endangered List”.
Genetronics (GEB) (10/5/00). Awarded grant by National Institutes of Health (N.I.H.) to conduct research for vascular gene delivery.
Digital Power (DPW) (2/20/01). Second quarter results so-so; so is balance sheet.
Arotech (ARTX) (6/5/01). Receives $1 million order for Armored Land Rover Defenders.
VASCO Security (VDSI) (2/5/02). Launches Digipass Host Authentication to tackle rapidly growing phishing problem.
Generex (GNBT) (8/5/02). All sorts of news here. Submits Oralin dossier to the Ecuador Ministry of Public Health as it expands the joint venture with PharmaBrand. Receives $1 million non-refundable deposit under letter of intent with Sejong. Expands HIV vaccine efforts with leading MGH maker.
Art Technology (ARTG) (8/5/03). FranklinCovey’s commerce initiative reaches new heights using ATG software.
Active Power (ACPW) (11/20/03). Achieves 2-hour runtime milestone. Settles Magnex lawsuit for about $5 million.
Actuate (ACTU) (1/5/04). Running on Sun Solaris operating system supports 1.5 million users. ACTU and Capgemini bring real-time budget management to market.
Peerless Systems (PRLS) (1/20/04). Second quarter results not great; balance sheet weakens.
NexMed (NEXM) (4/5/04). Selected for poster presentation during the Int’l Society for the study of Women’s Sexual Health.
AVI BioPharma (AVII) (4/20/04). Initiates acute West Nile Virus clinical study. Announces Dengue Virus collaboration with CDC.
Glenayre (GEMS) (5/5/04). Company’s Versera intelligent communications environment approved for interoperability with Nortel’s GSM/GPRS wireless infrastructure. Expands senior management team.
GlowPoint (GLOW) (5/20/04). Global Nomads Group picks GLOW to link U.S. students with Sudan refugees.
Network Engines (NENG) (6/5/04). Named one of New England’s fastest growing technology companies in Deloitte Technology Fast 50 program. Provides appliance services for Computer Associates eTrust Vulnerability Manager R8.
BindView (BVEW) (6/5/04). Company’s compliance center earns industry’s first advanced certification from the Center for Internet Security. Announces support for Microsoft Operations Manager 2005.
Altair Nanotechnologies (ALTI) (6//20/04). Begins work on nano-structured electrode materials with grant from the U.S. National Science Foundation.
IONA Technologies (IONA) (8/5/04). 3 Italy selects IONA’s Artix to support rollout of new services. IONA extends use of Sleepycat Software’s Berkeley DB for high availability persistence.
TriPath (TRPH) (8/5/04). To present at SG Cowen’s fall technology conference on September 10.
Management Network Group (TMNG) (4/20/04). Settles lawsuit with WilTel and will receive $2 million settlement.
Our picks for this Newsletter are a couple of software providers, both listed on the NASDAQ.
VITRIA TECHNOLOGY, INC. (NASDAQ: VITR) – $2.85. Twelve-month hi-low has been $8.41 – $1.90. Headquartered in Sunnyvale, CA, with about 350 employees, this business software provider has 32.9 million shares outstanding, $97.4 million in total current assets, $99.9 million in total assets, little debt, and $40.4 million in total liabilities, of which $10 million is ‘other liabilities’. Institutional ownership is around 24%. http://www.vitria.com
Time again to pick up another beaten down small tech, especially one like Vitria Technology, Inc. that has a good-looking balance sheet and a varied customer base.
Founded in 1994, and public since 1999 – stock hit nearly $375 in early 2000 – Vitria claims to be the leading provider of business process integration (BPI) solutions primarily for companies in healthcare, telecommunications, finance, and manufacturing, along with other markets. The company’s software automates business processes across multiple existing systems, people and trading partners in order to reduce costs, enhance revenues, and improve customer service. These pre-built and custom software solutions are based on the Vitria:BusinessWare BPI platform.
Here’s a sampling of VITR’s software at work:
In healthcare, Vitria:SmartClaims rejuvenates and extends the life of existing claims systems resulting in reduced costs and improved flexibility, while Vitria:SmartResponse reduces costs with automated intake and determinations. Vitria:OrderAccelerator, tailored for the telecom industry, can reduce cross application processes by up to 80%. SWIFTComplete allows banks and brokerages to automatically convert between formats and repair failed trades. For manufacturers, CleanOrder intelligently manages orders across multiple existing systems.
With 23 offices worldwide, some of Vitria’s customers include numerous Blue Cross and Blue Shields, Aventis, PacificCare, AT&T, Bell Canada, Comcast, Sprint, BT, AG Edwards, Lend Lease, Deutsche Bank, Daimler Chrysler Bank, Apple, Coca Cola, and Nissan N.A. Last month, Southern California Edison selected Vitria:BusinessWare to integrate enterprise applications. Also, in August, Brasil Telecom announced that Vitria:BusinessWare had cut its delivery cycle by 90%. In June, UFJ Tsubasa Securities, of Japan, selected VITR to deliver STP integration and real-time trade management.
For FY2003, ending 12/31/03, revenue was $80.7 million with $30.88 million in losses. During the first six months of this FY, ending 6/30/04, revenue was $27.95 million with $13.3 million in losses.
The last six to nine months have not been good ones for Vitria, but maybe, just maybe, better days could be ahead.
Our 24-month target for the stock is $5.50 to $6.50.
For more information, contact Jane Underwood at 408-212-2608; junderwood@vitria.com
CONVERA CORPORATION (NASDAQ: CNVR) – $2.63. Twelve-month hi-low has been $5.72 – $2.16. Based in Vienna, VA with about 200 employees, this software developer has 34.1 million shares outstanding, $27.26 million in total current assets, $33.9 million in total assets, and $13.5 million in total liabilities, of which $1.2 million is long-term. Institutional ownership is around 44%. One analyst has the stock as a “hold”. http://www.convera.com
Periodically, we go after companies taking on what may be a Herculean task, but the payoff for their efforts could be substantial. Convera Corporation is one such outfit, with a good-looking balance sheet to boot.
Public for about a dozen years, Convera bills itself as a leading provider of mission-critical enterprise search, retrieval, and categorization solutions within businesses and government agencies. The company’s platform is its RetrievalWare 8 software that contains technologies for categorizing and classifying unstructured content. Convera claims this software maximizes return on investment in vast stores of unstructured information by providing highly scalable, fast, accurate, and secure search across more than 200 forms of text, video, image and audio information in more than 45 languages. More than 800 customers in 33 countries rely on CNVR’s solutions to power such applications as enterprise portals, knowledge management, intelligence gathering, profiling, corporate policy compliance, regulatory compliance and customer service.
Convera is presently embarking on an effort that could really boosts its visibility. It is developing a software prototype aimed at fully indexing the Web. In concert with this undertaking, the company is in the process of executing an enterprise hosting agreement with AT&T to host this offering. Upon successful completion of the prototype, currently set for late October, Convera will announce a time frame for commercial availability. CNVR may elect to seek funding assistance to offset capital outlays for this project.
Early last month, The Institute of Financial Services launched ifs KnowledgeBank, its e-learning portal that is powered by Convera’s RetrievalWare software. This allows the Institute’s 37,000 members the ability to attain financial qualification details online. At the end of June, Convera and The Associated Press struck a strategic pact whereby RetrievalWare will power delivery of AP’s eAP interactive network of multimedia content.
For FY2004, ending 1/31/04, revenues were $29.25 million with $18.1 million in net losses. During the first six months of FY2005, ending 7/31/04, revenues were $13.23 million with $11.9 million in losses.
Would we like to see some growth here? Sure. But, for now, we’re keying in on how receptive customers, and investors, will be to the Web indexing efforts.
Our 24-month target for the stock is $4.50 to $5.50.
For more information, contact CNVR at 703-761-3700; invest@convera.com
Look for the September 20, 2004 Newsletter to be posted on 9/16 or 9/17.
Thank you,
George