CAI Wireless Leads Downward March Of Wireless Cable Stocks
By Shawn Young
NEW YORK (Dow Jones)--CAI Wireless Systems Inc. (CAWS) lost more than 43% of its market capitalization and led a general downturn in cable wireless companies' stocks after reports that three Baby Bells are backing away from an interactive-television venture for which CAI was to provide video programming.
Down along with CAI were Wireless One Inc. (WIRL), which dropped 10% and hit a 52-week low; American Telecasting Inc. (ATEL), down 1.6%; and Heartland Wireless Communications Inc. (HART), which fell 3%.
''These stocks tend to move as a group for no fair reason,'' said Arthur Newman, analyst at Gerard Klauer Mattison & Co.
He attributed the drop to CAI's troubles and to critical remarks about wireless cable technology reported in today's New York Times, but said the companies actually serve different markets and probably should not move in such a tight pack. Other analysts agreed.
''It's not really apples to apples,'' said James Boyle of Alex. Brown & Sons Inc.
Analysts said Heartland Wireless and Wireless One serve areas that are not densely populated and not subject to interference problems that CAI has encountered in the Northeast.
Wireless cable operates by transmitting signals in a 20- to 30-mile radius of a transmission tower to a receiver on a customer's home. It offers more customer service than conventional satellite, and offers local channels. Customers generally do not have to buy the receiver, said Mark McFadden, analyst at Bankers Trust New York Corp.
In Northeast trials, CAI's transmissions reportedly were blocked by trees, hills and buildings.
CAI Wireless shares hit a 52-week low of 1 3/16 on news that Nynex Corp. (NYN), Bell Atlantic Corp. (BEL) and Pacific Telesis Group (PAC) are retreating from the Tele-TV venture in which they have invested roughly half a billion dollars since 1994. The previous low of 2 1/2 was set Monday.
Arthur Newman at Gerard Klauer Mattison said it is not clear what the Baby Bells will do with Tele-TV, and many investors are worried they will withdraw entirely.
However, he said Tele-TV still plans to launch service in Virginia Beach, Va., and Boston, indicating that the project is not dead.
CAI issued a statement earlier defending its technology and saying the problems it encountered can be solved.
In exceptionally heavy trading, the company's stock fell 1 3/16, or 43.2%, to close at 1 9/16. Volume was 10.3 million. Average daily volume is 610,000.
The next biggest loser in the group, Wireless One, hit a 52-week low of 7 1/4, passing the low of 7 3/4 set Nov. 18. It ended the session off 7/8 to close at 8 on volume of 188,600. Average daily volume is 25,000. Analysts said the stock is so thinly traded that its movements tend to be magnified.
The company is meeting its growth goals and performing well, said Peter Ricchiuti, director of research at Freeman Reports.
''I really don't see enough to drive it this far down,'' Ricchiuti said. Individuals seeking year-end tax write-offs might have cashed out along with institutional investors seeking to clear out their portfolios for the end of the year, Ricchiuti said.
Peoples Choice TV Corp. (PCTV) was the only member of the group that went up today, rising 1/8, or 2%, to 6 1/2 in very heavy trading.
An analyst who covers Peoples Choice said it was relatively immune from the drop because it is not affiliated with any of the Baby Bells. It also is operating successfully in Phoenix. Unlike its peers, Peoples Choice was being valued more on performance than potential, the analyst said.
Despite widespread reports that three Baby Bells plan to shut down Tele-TV, Bell Atlantic spokesman Eric Rabe said the company is not closing the venture outright.
''We are planning for 1997,'' said Rabe. He said the company is in talks with CAI about the role of its technology in Tele-TV. |
