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Featured in the WSJ today...
Wireless Facilities' Stock
Sags
As Investors Debate Its
Future
By AARON ELSTEIN
THE WALL STREET JOURNAL INTERACTIVE EDITION
Shares of Wireless Facilities seem to have lost a little dazzle
since quadrupling on their first trading day, sparking debate
among investors on Internet message boards about whether they
should get rid of the stock or expect a bounce.
Shares of the San Diego company,
which builds the networks used by
wireless-communications providers,
have gradually sagged from their
first-day close of 62 on Nov. 5 to 51
1/2 Wednesday on the Nasdaq Stock Market. The stock was
offered at 15 and has traded as high as 74.
Wireless Facilities is receiving lots of attention from investors
because it is a rare exception among emerging public
companies in the technology field: It was already profitable when
it made its initial public offering. Moreover, the
wireless-communications business is exploding, and analysts
expect companies that build the infrastructure to reap tremendous
benefits.
But even with such encouraging signals, Wireless Facilities' stock
hasn't been able to build on its early post-offering euphoria.
Some investors are nervous, especially since other tech IPOs
have kept on soaring. "Someone out there please convince me to
still hold," one poster wrote on a Silicon Investor message board
(www.techstocks.com).
Adding to investors' anxiety: Shares of wireless-network builders
that compete with Wireless Facilities also have been red hot
recently. For example, shares of LCC International, McLean, Va.,
traded at 15 1/2 on Nasdaq on Wednesday, an 82% jump since
Nov. 1.
For investors who are feeling some jitters about the gradual slide
in Wireless Facilities' stock and its inability to make a convincing
break above the first-day close, however, some posters have
answered, "Wait until the quiet period ends."
Securities regulations require
companies selling new stock to observe
a quiet period. The companies are
barred from disclosing any information
beyond what is contained in their
prospectuses from the time they register
the shares until about 25 days after the
stock starts trading. Wireless Facilities'
quiet period ends next Tuesday.
When that happens, the company "will begin to release a steady
flow of announcements about its newest deals and partnerships,
internationally," wrote an anonymous poster on a Yahoo! Finance
message board (finance.yahoo.com). Additionally, the writer
said, the company "will make a play toward establishing
themselves in China."
There has been a lot of excitement recently about China-related
stocks after that country agreed last week to join the World Trade
Organization, allowing foreign companies more access to its
potentially huge market. Announcing a deal in China could help
"this coiled spring blow its top," the poster on Yahoo wrote.
Speculation that Wireless Facilities is headed for China isn't
unreasonable, some analysts say. But they say it's questionable
whether the company is sitting on news about its business
because of quiet-period restrictions. Those restrictions, they say,
don't prevent companies from issuing announcements about their
normal business dealings -- as long as they don't make
forward-looking statements.
Indeed, Wireless Facilities has issued at least three press
releases since it filed with the Securities and Exchange
Commission to go public on Aug. 18, announcing that it was
acquiring the rights to new technology for building wireless
networks and that it had received two new contracts.
"Companies can discuss things relating to the ordinary course of
their business during quiet periods," said Randall Roth, an
analyst with Renaissance Capital's IPO+Aftermarket Fund.
"There's nothing that says you can't put out press releases."
However, Alex Lynch, co-head of the public offering group at the
law firm of Brobeck, Phleger & Harrison in New York, said while
companies are free to make news announcements, he generally
advises them to cut back on publicity.
Officials at Wireless Facilities declined to comment, citing the
quiet period. Analyst at two of the three investment banks that
underwrote Wireless Facilities' IPO -- Credit Suisse First Boston,
Hambrecht & Quist, and Thomas Weisel Partners -- also declined
to comment, citing the quiet- period restrictions.
The third, who asked that his name not be used, said entering the
Chinese market could be "problematic" for Wireless Facilities
right now. "Even without China, they've got more work than they
can handle," he said. Moreover, he said, the company would have
to wait until wireless- communications businesses that need its
services move into that market.
Wireless Facilities boasts a solid list of clients, such as AT&T
Corp., which are hiring the company to build their
wireless-communications networks. The company, which has
about 500 employees, posted a profit of $2.8 million on revenue
of $33.1 million in the first six months of this year. For the same
period in 1998, it earned $6.2 million on revenue of $21.6 million.
For some investors, the company's financial performance
overshadows any sag in its stock. "Buy the business not stock,"
advises a poster on Silicon Investor. "There is a natural tendency
to think that any company whose stock is going down must suck,
and any company whose stock is going up is great. Fight this
perception."
Riyad Said, an analyst at Friedman, Billings, Ramsey & Co., said
he expects revenue at Wireless Facilities and its rivals will
increase 15% to 20% annually over the next five years. "Now that
Asia is getting back on its feet economically, it's a good growth
opportunity for the entire wireless industry," he said.
Wireless Facilities started expanding internationally soon after it
opened for business in 1995. In the past two years, according to
its prospectus, the company has completed projects in 26
countries and has 13 more underway abroad. According to the
prospectus, the company opened offices in India and the United
Kingdom this year, and in Mexico City and Sao Paolo, Brazil last
year.
Wireless telecom is one of the most rapidly growing areas of the
telecommunications market. That growth has been spurred by
increasing world-wide demand for cellular telephones and
wireless Internet access. According to International Data Corp.,
the U.S. wireless subscriber base will grow to over 185 million by
2003 from 111 million in 1998, generating revenue in excess of
$68 billion. |
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