October 04, 1999 05:14
Stockreporter.de Announces Investment Opinion on Virtual
Technology Corp.
NEW YORK--(BUSINESS WIRE)--Oct. 4, 1999--
-- Stockreporter.de Begins Coverage of Virtual Technology Corp. (VTCO) With a Strong Buy Recommendation and a Conservative 12-Month Price Target of $10 Per Share --
Virtual Technology Corporation (OTC BB: VTCO) today received a strong buy recommendation from Stockreporter, a leading European financial Internet publication located at www.stockreporter.de. Stockreporter specializes in the coverage of micro-cap stocks and undervalued OTC and BB companies. The successful Stockreporter team is one of the first independent analysts to begin coverage of Virtual Technology and release an investment opinion.
Stockreporter began coverage with a conservative 12-month share price target of $10 per share, at a current share price of just over $2.00 offering tremendous potential in the short, medium, and long terms.
"Virtual Technology had a tremendous year during fiscal 1999 - growing from a development stage business with under $200,000 in revenues to an exciting e-commerce firm with several industry firsts and more than $69 million in annual combined proforma revenues," said Dennis Hass from Stockreporter. "VTCO is rapidly creating brand identity among consumers and increasing visibility among institutional investors. Leveraging on relationships with the largest wholesalers to offer scale and logistical support/distribution, the Company will profit from
strategic advertising, cross-marketing alliances, and distribution through digital and cable channels."
"While industry margins continue to be squeezed, Virtual Technology's integrated approach, established infrastructure, and financial management should survive margin deterioration and justify a substantially higher valuation," Hass continued. "We believe the stock is extremely attractive and is currently trading at a steep discount to its full potential when considering its
huge potential in the emerging and high-growth e-commerce industry. Virtual Technology clearly represents an exciting ground floor opportunity to get in before the institutional investors and fund managers, who will surely be looking to invest in VTCO as the Company's sales explode and the stock is listed on NASDAQ - which we expect by the end of this year."
The VTCO report issued by Stockreporter includes the following information:
COMPANY OVERVIEW
Founded in 1996, Virtual Technology Corporation is a rapidly growing company that is emerging as a leading international e-commerce distributor of technology related products. The Company specializes in computer hardware, software, and services with its primary operations being an e-commerce site www.virtual-world.com, a Virtual Technology auction site www.vtcoauctions.com, and the recently acquired Graphics Technologies, Inc. (GTI), located at www.graphicstech.com, which specializes in wholesale distribution of technology products.
Virtual Technology provides turnkey e-commerce product stores with approximately 60,000 hardware products (from over 1,000 different vendors and manufacturers), more than 100,000 software titles, and over 25,000 office products. The Company's business strategy is based upon profiting from the dynamic e-commerce opportunities by merging the powerful mediums of the Internet and television with a direct selling effort. This provides VTCO strong revenue streams while the Company develops web-based e-commerce businesses to:
-- Provide mass market access to quality merchandise
-- Allow clients to interact through auctions
-- Lead the telephony convergence by simultaneously selling through the mediums of the PC, webTV, and VTV
-- Wholesale distribution of technology products through its GTI subsidiary
-- Consumer and business-to-business sales
VTCO has aggressive plans to become a leader in the emerging e-commerce industry. Numerous key factors mark the Company as an outstanding investment opportunity:
-- Enormous potential of significant revenue and earnings growth
-- Capitalization of strategic partnerships with major industry establishments
-- Ability to compete and win in a fierce industry environment
-- Extensive new product pipeline
-- Key management team comprised of seasoned industry experts
BUSINESS OUTLOOK
Fiscal 1999 was an important and successful year at Virtual Technology during which the Company achieved many milestones, including achieving revenue levels that were 28 times greater than the previous years. The fiscal 1999 year also saw the Company's stock increase appreciably in value with its market value growing over 13 times from $10 million to $130 million.
Sales for the year also rose significantly, reaching $4.9 million as compared to $175,000 in fiscal 1998 sales. One of VTCO's most exciting fiscal 1999 developments was its completed acquisition of GTI, which resulted in the Company posting impressive combined proforma fiscal 1999 revenues of $69.2 million.
The Company began fiscal 1999 with a focus on its new e-commerce strategy, and VTCO's conviction certainly paid off. Powered by a core web-based business model and key advertising properties, Virtual Technology's e-commerce initiative was a tremendous success. It enabled the
Company to achieve a dramatic transformation during fiscal 1999 - changing from a software development company trying to get a piece of the market ruled by companies such as Microsoft to the top business in the e-commerce industry.
VTCO began last year as a "penny" stock with very low trading volumes. The Company ended fiscal 1999 with a stock price of $7 per share, average daily volume of over 200,000 shares, and two days with more than one million shares traded. During the year, Virtual Technology went from a development stage business with under $200,000 in revenues to a going concern with more than $69 million in annual combined proforma revenues.
To support and accelerate its explosive growth rate, VTCO positioned an effective management team with great depth and experience. This team provides the Company the leadership and necessary intellectual strengths to build a growing, thriving, and profitable business.
E-COMMERCE SITES Virtual-world.com
Virtual-world.com provides products to the end user by purchasing products directly from manufacturers and distribution partners. GTI offers manufacturers an extensive distribution channel through which to sell products to dealers, resellers, value-added resellers, and integrators that in turn market the products to the end user. VTCO's management directs the overall business and provides integration and leadership to the two business units.
The Virtual-world.com division offers an online specialized store that is intended to provide one-stop shopping for its targeted domestic and international customers 24/7. The division's online store features a fun and easy to navigate interface, competitive pricing, extensive product
information, and powerful search capabilities. Most major brands are showcased, including IBM, Compaq, Hewlett-Packard, Max, Diamond Multimedia, 3Com, Cisco, Sony, Hitachi, Acer, Iomega, and Canon.
Virtual-world.com serves over 10,000,000 page views from its website, which equates to over 250,000 unique visitors per month. Sales have been explosive in the past two quarters, up 1,600% over the previous year. Sales are made to a mixture of groups, including businesses, educational institutions, and retail clients.
The division also operates a UK-based shopping site at www.virtual-world.co.uk that was launched earlier this month. With over 30,000 hardware products and more than 100,000 software products available, virtual-world.co.uk is positioned to be the largest electronic retailer in the
European Community offering the region's largest online selection of technology products. The Company began selling in Europe during the second quarter of fiscal 1999 and is already generating rapid global expansion through its new UK site. This website provides VTCO valuable European presence, which brings the Company tremendous opportunities for additional sales and new customers. Orders from Europe are already increasing dramatically.
VTAuctions.com
In fiscal 1999, VTCO launched its www.vtauctions.com site - marking the Company's entry into the online auction industry. Virtual Technology partnered with Auction Universe, a Times Mirror Company, to provide a comprehensive auction shopping site. The initial results are encouraging,
and the Company recently launched a new auction partnership with CNET. VTCO will continue to increase these offerings with exclusive deals from leading international manufacturers.
Virtual ServiceNet
VTCO was the first e-commerce company with on-site service for most of its products during the warranty period (the Company also offers customers the option to extend the warranty period for up to four years). Within 24 hours, VTCO guarantees on-site service almost anywhere in the
domestic U.S. to customers with products under warranty. Along with its free shipping campaign, Virtual Technology's e-commerce on-site support program has been an overwhelming success.
VTV
The Company's new VTV initiative comprises direct response e-commerce TV infomercials that are designed to integrate with the Internet - another industry precedent. The consumer may view the "live" product demonstrations on television, webTV, or personal computer with Internet access. Then, the customer simply clicks to purchase items and get instant credit authorization via any of the online access methods. This new product offering merges the power of the
traditional television medium with the new power of e-commerce and the Internet to provide an easy-to-use and pervasive interface that caters to a vast audience of proven catalog consumers.
Community Techmart
VTCO's Community Techmart service offers comprehensive, private label e-commerce website solutions to companies that want an e-commerce presence on the Internet but do not have the time or funds to implement and develop the necessary operations and product resources required to support such an e-commerce offering. This service encompasses the participation of manufacturers, suppliers, inventory systems, delivery, and fulfillment systems as well as
merchant banking and transaction processing. VTCO provides a turnkey storefront for any company's website with a shopping cart and expansive product offering as well as inventory,
delivery, and credit card transaction processing services. The Company also provides its Community Techmarts for schools, government organizations, and other associations. VTCO Community Techmart customers receive a percentage of each sale that is generated from their online store.
THE MARKET
The Internet has emerged as a mass communications and commerce medium enabling hundreds
of millions of people around the world to share information, create communities among individuals
with similar interests, and conduct business electronically. The number of global Internet users is
projected to grow from 100 million in 1998 to 320 million in 2002. In the U.S. alone, this number
could grow from 35 million in 1998 to 100 million in 2002.
Growth in Internet usage and web commerce continues to be fueled by a number of factors,
including:
-- A large and growing installed base of personal computers in the
workplace and home
-- Advances in the performance and speed of personal computers and
modems
-- Improvements in network infrastructure
-- Easier and less expensive access to the Internet
-- Increased consumer and corporate awareness of the Internet and
its potential benefits
In addition to the Internet's emergence as a mass communication medium, the medium offers
features and functions that are unavailable in traditional media. These unique advantages enable
online merchants to communicate effectively with customers and advertisers to target users with
specific needs and interests. As a result, the Internet has emerged as an attractive medium for
advertising and e-commerce.
Forrester Research estimates e-commerce sales in VTCO's target markets will grow from $48
billion in 1998 to $1.3 trillion by 2003 or 9% of all U.S. sales. Online 1998 sales for computer
related products reached $4.6 billion on total sales of $8.2 billion, and Forrester estimates this
sector will grow to $18 billion in 1999.
Virtual Technology's existing operations should benefit from the explosion in e-commerce
activity, which is projected to continue moving forward for decades to come. The Company's
e-commerce approach targets computer retail buyers with household income over $50,000.
These consumers accounted for 74% of the $8 billion in 1998 online sales - a figure that is
estimated to reach $1.3 trillion by 2003. VTCO has reciprocal links with many online affiliates
and uses banner advertising and participation in both newsgroups and price engines to
continuously enhance its Internet visibility.
COMPETITIVE POSITIONING
After the GTI acquisition, Stockreporter believes that VTCO has positioned itself to compete in
the marketplace against other major companies, including:
-- Internet - Cyberian Outpost, Buy.com, and Egghead.com
-- Direct Sellers - Compaq, Dell, and Gateway
-- Traditional Retailers - CompUSA, MicroCenter, and Best Buy
-- Mail Order: PC Connection, CDW, and Micro Warehouse
Our thorough analysis of Virtual Technology's competitive positioning illustrates that the
Company will be one of the major industry winners. In addition to superior management and an
impeccable industry reputation, VTCO is focused on forming strategic alliances with established
Internet companies and thereby penetrating the market, releasing new products, and launching
new services.
Virtual Technology's recent partnerships illustrate the Company's rapid growth momentum.
Partners include: CNET, ZDNet, PCWorld, Amazon.com, Warzone.com, dbusiness.com, Digital
River, GameCave.com, Cosmoz.com, United Stationers Supply Co., the University of Minnesota,
the Southwest Regional Service Cooperative, ibuyer.net, Juno Online Services, Microsoft, IBM,
the Central Indiana Education Service Center, and Auction Universe (a Times-Mirror Company).
SUCCESSFUL FOCUS
VTCO has demonstrated, through its government and education initiatives, that e-commerce is
truly more than just a website. The University of Minnesota uses the Company's e-commerce
solution to bring over 40,000 products to more than 60,000 students and faculty. The Minnesota
Service Cooperative uses Virtual Technology's e-commerce solution to bring technology to over
400 school districts and more than 600 local and county agencies. The States of New Mexico
and Indiana have also implemented a similar program with VTCO.
The Company's government and education e-commerce solutions offer a comprehensive and
turnkey approach that is designed to integrate with the clients' current Internet or Intranet
networks. This same approach is applied in VTCO's business-to-business model - whereby
Virtual Technology can provide the product, inventory, and fulfillment via its GTI division as well as
the online interface or shopping application of its web-based Virtual-World unit.
The Company also has partnership with IBM that exemplifies VTCO's e-commerce alliance
strategy. IBM provides Virtual Technology with special products and pricing for the education
market. Through its www.vtcibm.com site, consumers may purchase from the Company with IBM
providing the transaction processing and direct fulfillment.
E-COMMERCE STRATEGY
Virtual Technology's e-commerce strategy focuses on:
-- Identifying products and services in great demand within the
buying segment
-- Quickly supplying those high-demand products at competitive price
levels
-- Standing behind its products with quality service, support, and
warranties
-- Providing unique added value to distinguish VTCO from the
competition
In meeting these objectives, the Company found its web-based
business migrating to a vertical portal that enables Virtual
Technology's shoppers to have instant access to technology, books,
music, and the latest multimedia and office supplies with just one
click. VTCO's virtual portal, located at www.virtual-world.com, is
rapidly emerging as one of the leading vertical portals on the
Internet.
CUSTOMER SERVICE
Virtual Technology continues to distinguish itself from the
competition by providing the best customer service and response in the
industry.
State-of-the-art Systems
This year, VTCO designed and implemented proprietary integrated
front and back office systems. This means that the Company's web-based
business is fully integrated with its order fulfillment, merchant
authorization, warehousing, and financial operations. This system will
also accommodate Virtual Technology's distribution business and is the
core product behind its government and education e-commerce solution.
The Company's Virtual World Integrated Network Systems (VWINS) was
custom designed by some of today's leading engineers (on contract from
Apple Computer) and is designed in compliance with Y2K guidelines.
One-click Processing
The VWINS system is the core of VTCO's one-click purchasing
functionality. With one-click purchasing, a web consumer only needs to
click on a product and the transaction is then automatically verified,
authorized, posted to the general ledger with a confirmation sent -
all within seconds. This leading edge approach is yet another industry
setting milestone for the Company.
RECENT DEVELOPMENTS
September has been yet another very exciting month for Virtual
Technology with a string of announcements that further confirm VTCO's
accelerating growth momentum and focus on increasing shareholder
value. This month the Company further strengthened its senior
management team by appointing as Vice President of Marketing Mr. Craig
Levinsohn, an experienced Internet executive with expertise in
strategic marketing, positioning and innovation, new product launches,
web advertising, and the development of integrated marketing
campaigns.
Also in September Virtual Technology announced that it was
joining the FairMarket Auction Network, a network of e-commerce
Internet sites, and that it retained exclusive relationships with
several computer hardware and software manufacturers that allow VTCO
to auction a large assortment of both new and refurbished products.
With investments announced this month from Microsoft, ExciteAtHome,
and Ticketmaster Online-CitySearch, FairMarket is truly a very
exciting partner for Virtual Technology.
Earlier in the month VTCO also announced the addition of high-end
consumer electronics products to complement its already large
selection of computer hardware and software products offered at its
e-commerce website www.virtual-world.com. The site will now offer over
14 categories of popular consumer electronics products from leading
manufacturers such as Hitachi, Aiwa, Kodak, Sony, Samsung, 3-Com,
Phillips, Denon, and Jenson. Products will include big screen TVs,
DVDs, camcorders, VCRs, MP3 Players, home and car audio equipment, and
much more.
September also included the Company's report that Cosmoz.com
launched its new shopping mall, www.CosmozMall.com, with VTCO's
private label Community Techmart as the backbone for the new
technology store. Virtual Technology provides over 40,000 hardware and
software products to Cosmoz.com's new online technology store.
EVALUATION AND OUTLOOK
Stockreporter expects Virtual Technology to report significant
financial growth through fiscal 2001. Given the GTI acquisition, we
are projecting revenues for the fiscal year ending January 2000 at
approximately $100 million. For the fiscal year ending January 2001,
we are projecting revenues to jump to between $145 million and $200
million, with positive earnings per share of between $0.02 and $0.05.
Both internal growth and acquisitions should equally account for this
dynamic top and bottom line growth.
Following these projections and calculations, Stockreporter
conservatively expects between $0.02 and $0.05 earnings per share in
the fiscal year ending January 2001. We set our 12-month share price
target to $10, or 1.5x to 2.0x sales, based on 29 million shares
outstanding. Given VTCO's tremendous growth history and potential,
this 12-month $10 share price target appears to be more than
justified. Hence, the share is clearly undervalued at a current price
of just over $2.00 per share.
Share Price Targets
Year 2000: $10
Year 2001: $15
Stockreporter concludes that VTCO has all of the necessary components to succeed in its
lucrative target markets.
The Competitive Edge: Although Virtual Technology's target market is highly competitive and
technological advances are causing constant changes for commercial products while rendering
other products obsolete, Stockreporter believes that VTCO enjoys solid brand name recognition
for its websites - which are highly respected in the e-commerce industry.
The NASDAQ Potential: On February 19th, VTCO applied for a listing on the NASDAQ National
Market System. Stockreporter is confident that Virtual Technology should be approved for the
NASDAQ listing by the end of this year. Such a listing will significantly improve the Company's
recognition in the investment community and should result in considerable upside pressure on
VTCO stock, which we consider to be greatly undervalued, as a growing number of Wall Street
analysts and brokerage firms begin covering the Company.
The Financial Growth: We expect Virtual Technology to report significant financial growth through
fiscal 2001. Given the GTI acquisition, we are projecting revenues for the fiscal year ending
January 2000 at approximately $100 million and a slight loss on earnings per share of ($0.13).
For the fiscal year ending January 2001, we are projecting revenues to jump to between $145
million and $200 million, with positive earnings per share of between $0.02 and $0.05. Both
internal growth and acquisitions should equally account for this dynamic top and bottom line
growth.
Above Average Returns for Investors
In our opinion, based upon current stock price levels, we believe investors interested in above
average returns from successful Internet stocks should buy VTCO shares. Online resellers
typically trade at a market valuation of 1.5x to 3.0x projected sales. Therefore, Virtual
Technology's present share price of just over $2.00 demonstrates the steep discount at which
VTCO stock is trading relative to the Company' peer group.
Over the next 12 months, we are projecting a target price of $10, or 1.5x to 2.0x sales, based on
29 million shares outstanding. We view VTCO as an excellent growth company with exceptional
potential for capital appreciation over both the immediate and long-term. As industry and investor
awareness of Virtual Technology, increase and contracts and alliances are signed and
announced, the Company's shares should appreciate dramatically in the coming months. The
stock has been severely beaten down over the past nine months after trading at $10 a share last
January. Given this tremendous oversold and severely undervalued situation, we see substantial
appreciation potential for the stock price both from revenue growth and increased Wall Street
recognition.
Furthermore, we expect this upside pressure to be multiplied with heightened investor awareness
regarding the Company's competitive advantages in the extremely high-growth industry of online
retailing. Bearing in mind that significant developments have recently occurred and are expected
to continue throughout the year, coupled with explosive industry projections, Stockreporter
concludes that VTCO represents an excellent investment opportunity for investors over both the
near- and long-terms.
Trading activity during the past month suggests that an accumulation is occurring and the stock
price is slowly moving up as a result. We believe this accumulation and consolidation phase of
development indicates that a dramatic upward movement in price is about to occur. We don't see
much downside for the stock and believe it is an outstanding investment opportunity at an
excellent buying price considering the Company's short- and long-term potential. Our
three-month target price is between $4 and $5 per share and our 12-month target price is $10 per
share.
NOTICE
All Stockreporter recommendations are made on an unsolicited basis. The complete
recommendation and additional information (e.g. forthcoming interviews with the CEO and the
President) can be accessed on Stockreporter's website at www.stockreporter.de, which is going
to be the No. 1 micro-cap and OTC BB site in Europe; especially in Germany. The site is
completely available in both the German and English languages. Stockreporter meticulously and
independently selects the companies that are candidates for a buy recommendation and which
are featured on the Stockreporter website. Stockreporter does not receive a fee for any of its buy
recommendations and does not charge a fee for its buy recommendations to the companies
concerned. In certain cases, Stockreporter will only accept a basic reimbursement of costs (e.g.
American-English Translation Services, Business Wire fees, administrative expenses, etc.) to
cover in these cases the higher costs.
Any Stockreporter micro-cap recommendation still includes a high degree of risk and is at the
investor's individual and own risk. Many Stockreporter recommendations contain forms of
"forward-looking statements" that are based on the company's beliefs as well as assumptions
made by information currently available to Stockreporter and to the general public. Such
statements are subject to certain risks, uncertainties, and assumptions. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual
results will vary materially from those anticipated, estimated, or projected and the variations may
be material. Therefore, no claim for any kind of warranty can and will be accepted by
Stockreporter. Moreover, the team of Stockreporter wants to stress once again that all our buy
recommendations are based on subjective assessments that have been made exclusively on the
basis of facts being known to the general public.
If you have any further questions regarding this buy recommendation or any other inquiry or
suggestion, please do not hesitate to contact Stockreporter at any time. We are very interested
in maintaining close contact with both institutional and private investors as well as OTC and BB
companies.
CONTACT: Stockreporter.de, Hamburg, Germany
Mr. Dennis C. Hass, +49-172-4062621
Mr. Torsten Prochnow, +49-172-4031383
Email: contact@stockreporter.de
Homepage: www.stockreporter.de
- VTCO
Price
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Net Change
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Volume (000)
32
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2.312
Day Low
2.281
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