Another IDC?
Tiny Firm's Wireless Technology
Attracts Investors and Skeptics
By AARON ELSTEIN
THE WALL STREET JOURNAL INTERACTIVE EDITION
Getting cellular phones to use each other's networks seamlessly
world-wide is the holy grail of wireless telephony. Some of the industry's
biggest companies, including Motorola, L.M. Ericsson and Nokia, are
spending hundreds of millions of dollars trying.
But where these deep-pocketed titans have failed, a tiny Irvine, Calif.,
company with no revenue says it will succeed. In the process, the
company, Advanced Communications Technologies, is stirring as much
skepticism among industry watchers as enthusiasm among online investors.
The upstart company, whose shares are listed on the Nasdaq OTC Bulletin
Board under the symbol ADVC, has gained a wide following among online
investors. Some go so far as to proclaim it "the next Qualcomm," referring
to the red-hot wireless-telecom stock.
Investors boosted shares of Advanced Communications as high as 7 3/16
earlier this month from a low of 3/16 in May. The stock traded at 4 1/2
Monday.
Much of the excitement in the stock has been generated by a string of
press releases issued by the company, announcing various financing deals,
partnerships and other plans. However, the company has been reluctant to
provide details of its plans, even refusing to disclose the names of some
companies with whom it says it has made deals.
Chief Executive Roger May says the company
plans to test its technology, which is being
developed in Australia, in less than a year and
expects to generate $200 million in revenue in
2001. But Pete Peterson, an analyst at
Prudential Volpe Technology Group, says
technology for uniting wireless-communications standards is "several years
away" from being commercially viable. Brad Williams, an analyst at Legg
Mason, notes Advanced Communications is hitting the industry's "hot
buttons." But he says it's unclear whether the company has the financing
that would be needed.
Currently, there isn't a global standard for the technology behind wireless
communications. Cell-phone carriers around the world rely on competing
protocols from various tech companies that aren't interchangeable. The
different protocols mean cell phones from one carrier won't work on
another carrier's network unless the two use the same transmission
standard -- or, essentially, speak the same communications language.
The issue has long been a dilemma for the industry and a problem for
consumers, who often find they can't use their cell phones in different
countries -- or even across town lines. The industry has been unsuccessful
in pushing for the adoption of one of the various protocols as a global
standard.
Advanced Communications says it doesn't plan to create a new standard.
Instead, the company says it's developing technology that will enable
networks to process multiple protocols. Current systems handle a single
wireless standard. "What we're developing here is fairly revolutionary," Mr.
May says. He adds the system would be "future-proof," because it could
carry all "current and evolving" standards of wireless communications.
Callie Pottorf, an analyst at International Data Corp., a Framingham,
Mass., technology-research firm, estimates Advanced Communications
would need tens of millions of dollars for such a project.
What's more, while companies such as Nokia and Ericsson are run by
executives with hands-on operating experience in the wireless business,
Mr. May has limited experience in the field. Prior to starting up Advanced
Communications, he was chief executive of International Reservations
Services, a Brookfield, Conn., travel company that filed for protection
from creditors in August 1996 under Chapter 11 of the U.S. Bankruptcy
Act.
But Mr. May has recruited PricewaterhouseCoopers to help finance his
new venture. Peter Rayner, a partner at PricewaterhouseCoopers
Securities in Australia, says it has agreed to raise 20 million Australian
dollars for Advanced Communications to help the company develop its
technology and is in discussions with a number of prospective investors.
Mr. May says Advanced Communications also plans to make an initial
public offering in Australia and will sell new stock to U.S. investors in the
third quarter. It now has 7.5 million publicly traded shares and over 60
million in private hands.
Because of its failure to file financial statements with the Securities and
Exchange Commission, the National Association of Securities Dealers
plans to delist the company's stock from the OTC Bulletin Board on Feb.
9. But in a Dec. 14 announcement, Advanced Communications said it had
signed a letter of intent to merge with a Nasdaq-listed company. But it
didn't identify the company, and Mr. May still refuses to do so. He says he
fears doing so would trigger a sharp increase in the target's stock price.
John Heine, a spokesman for the Securities and Exchange Commission,
says it's permissible for a publicly traded company to issue a press release
about a deal without naming the other party if only a letter of intent to
merge has been signed. The company must identify the target, he says,
after a definitive merger agreement has been reached.
In its Dec. 14 announcement, Advanced Communications also reported an
agreement with a Newport Beach, Calif., merchant bank to raise $40
million, but it didn't name the bank. Mr. May says the bank wanted its
name withheld because it "didn't want to be flooded with calls from people
seeking financing."
Regardless of their lack of specifics, these announcements have stirred
excitement on online message boards. In late December, Advanced
Communications shares started to rise as posts about the company began
appearing on message boards, including Yahoo! Finance
(quote.yahoo.com) and Raging Bull (www.ragingbull.com).
William Peavey, an investor in Tryon, N.C., says he bought shares in
Advanced Communications after seeing the company mentioned favorably
on Yahoo. He confesses to doing little research before purchasing the
stock. "I pretty much went in and bought some stock after I saw the
posts," Mr. Peavey says. "I didn't really understand what they were
making, but it looked interesting." He says he has since sold the shares for
a profit.
In June, Mr. May hired a New York marketing firm called OHN Research
Group, whose job is "to get the word out for the company using all means
and mechanisms," according to its president, Jordan Ness, who says his
firm stands to collect up to $100,000 worth of Advanced Communications
stock in return for its services.
And in November, he hired a Hackensack, N.J., online promotion firm
called DDInvestor.com. Mr. May says he is paying DDInvestor.com
$1,000 and 5,000 restricted shares per month (www.ddinvestor.com) to
promote his company. DDInvestor.com has profiled the company on its
Web site, and its employees appear frequently on the Raging Bull message
board devoted to Advanced Communications to answer questions from
online investors. DDInvestor didn't return telephone calls for comment.
Some shareholders have gotten involved in spreading the word about the
stock as well. Ben Hutchins, a 19-year-old computer science student at El
Paso Community College in El Paso, Texas, created a Web page called
"Ben's High Tek Stock Research,"
(http://members.xoom.com/_XMCM/Ben4616/ADVC.htm) which
contains links to Advanced Communications' Web page
(www.adcomtech.net).
Mr. Hutchins says he owns 16,050 Advanced Communications shares and
says he's received no compensation for his work. His site features
interviews with and messages from Mr. May. Mr. Hutchins has posted
links to his page dozens of times in the past few months on many Raging
Bull messages boards.
Mr. May also has been a frequent participant on Internet stock-discussion
boards. In one message, he called the company's detractors "pathetic
parasites motivated by questionable motives."
Write to Aaron Elstein at aaron.elstein@wsj.com |
