Dow Jones Newswires -- January 18, 2000
Profit Taking Sends Telepanel Systems Down 16%
By STUART WEINBERG
TORONTO -- Telepanel Systems Inc.'s (TLSXF) shares are down 16% Tuesday, despite the
announcement of an important agreement with IBM Corp. (IBM), and the company attributes the decline to
profit-taking by some investors.
"I'm not surprised at Telepanel doing large volume without a major upward move on the first day of the
announcement," Telepanel president and chief executive, Christopher Skillen, told Dow Jones. "My guess
is in the coming days we'll perform very well."
In Toronto trading Tuesday, the stock is off 0.59 to 3.16 on about 406,000 shares.
Skillen said the company recently emerged from a difficult period during which the stock hit a 52-week low
of 0.51 in Toronto. A failed merger with Electronic Retailing Systems International (ERSI) in 1998, and
doubts about the viability of the company's electronic shelf-pricing system were the main reasons for the
decline, he said.
However, the company turned things around and the share price recovered to the 3.00-4.00 range in the
past month, Skillen said. That recovery, capped by the announcement of the agreement with IBM, gave
those investors who had been through the low period a chance to cash out, Skillen said. At the same time,
Tuesday's heavy trading volume indicates that the agreement has sparked the interest of a new crop of
investors, he said.
Philip Benson, analyst at First Associates, said the bulk of the selling pressure is coming from people who
are short-term traders, taking advantage of the volume created by this announcement to take profits. Those
in for the long haul recognize the significance of the agreement, he said. "The reality is that this agreement
is a watershed development for this company," he said. "They already have quotes out for business that
would total between $50 million and $100 million."
The four-year product agreement gives IBM the exclusive worldwide rights to remarket Telepanels
electronic shelf label systems. The system uses radio frequency controlled electronic price labels that are
attached to shelve edges in supermarkets, Skillen said. When an item's price is changed on a front-end
scanner, its price is changed on the shelves automatically, he said.
Each label costs $5 to $7, and a typical supermarket has 15,000 labels, he said. The worldwide market for
the labels is estimated at about $8 billion, he said. IBM is the largest vendor in the grocery-scanning
market, with a 60% market share, while NCR Corp. (NCR) is next with about 20% of the market, he said.
NCR is the only major competitive threat in the electronic shelf-label market, he said.
Skillen declined to offer any income or revenue projections for the company, but he did say that the impact
of the agreement would be major. "This is a company-defining transaction," he said.
In the nine months ended Oct. 31, the company had a loss of C$3 million or 16 Canadian cents a share on
revenues of C$2.2 million.
-Stuart Weinberg, Dow Jones Newswires; 416-306-2032 |
