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Gold/Mining/Energy : Certicom Corporation (TSE:CIC, NASD:CERT)
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To: lamont smith who wrote ()12/9/1999 3:12:00 PM
From: whitephosphorus  Read Replies (1) of 4913
 
Update

EVENT: Certicom has announced that Extended Systems Inc (XTND, NASDAQ) has
licensed the Certicom Wireless Security Technology.

COMMENT: Extended systems provides mobile information management solution
that allows mobile users to acess, synchronize, collect, print and retrieve
information. Extended Systems will use Certicom's elliptic curve
cryptography (ECC) technology to secure transaction for handheld computing
application and corporate servers. The agreement is another in a long list
of recent wireless licensing announcements. The agreement is consistent
with the comments Certicom made at our lunch on December 7, 1999 where the
company indicated it would focus on OEM suppliers and the high growth
wireless market. Certicom's ECC technology has emerged to be the dominant
security solution for mobile device access. The company indicated that
competitor RSA Data Security (RSAS, NASDAQ) which has a competing
cryptography solution is rarely in the running when it comes to winning
contracts as the provider for wireless cryptography solutions.

Certicom's strategy for the wireless encryption market is to have the best
technology, stake a claim, develop a brand and own the space. We believe
that Certicom is well on the way to successfully executing this strategy.
The company has signed approximately 150 licensing agreements to date where
approximately 50 of the licensees have visible products that are in the
market or will soon be launched. A good portion of these licensing
agreements involve wireless devices and solutions. One of the best examples
of the Certicom brand developing is the Palm VII where the Certicom logo is
displayed both on the box and on the device. This is reminiscent of the
Intel inside campaign which clearly demonstrated that a technology provider
could add significant value through branding. Certicom will collect a
royalty for every Palm VII that is shipped. We expect to see the Certicom
name become increasingly prominent.

Certicom is currently pursuing a NASDAQ listing. We believe that Certicom
will complete a $50 million to $100 million U.S. financing sometime early in
the new year. Our best guess is that a financing will be completed mid to
late calendar Q1 2000 if all goes according to plan. We expect that some of
use of proceeds will be targeted at acquisitions.

CONCLUSION: We are maintaining our F2000 and F2001 revenue estimates of
C$16.9 million and C$41.9 million, respectively, which we view as
conservative. We are maintaining our F2000 operating earnings estimate of
C$(0.84) and note that this estimate is before the amortization of goodwill.
Under our current projections, we expect Certicom to become cash flow
positive in the first half of F2000. We are increasing our target as a
result of licensing success, revenue visibility and continued momentum in
the sector. We are maintaing our target of C$70 based on the belief that in
today's market environment the value of Certicom could be as high as 20
times our F2001 forecast revenue or $838 million. We remain convinced that
Certicom still possesses the world's leading implementation of
elliptic curve cryptography-based encryption technology. We continue to
believe that Certicom's technology will at some time be widely implemented
in a variety of small devices including pagers, cellular phones, personal
digital assistants (PDAs) and smart cards. We are maintaining our
Speculative Buy recommendation.
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