Article from upside today:
Waverider set to crash wireless-access party
Due North
May 04, 2000
by Bob Beaty
I often wonder how companies decide on a name. Take Waverider Communications (WAVC), for
instance. Don't let the name fool you -- the company has nothing to do with water sports.
From its head office in Toronto, Waverider develops, manufactures and integrates fixed-wireless
Internet/intranet access systems, providing high-speed access to businesses, organizations and
consumers. Waverider offers lower access costs than its competitors by connecting directly to an
Internet service provider (ISP) and bypassing local infrastructure carriers.
The market for this type of solution is huge and explosive: The Yankee Group projects that the wireless
access market will exceed US$6.6 billion by 2004. The battle lines have already been drawn between
ISDN and the more popular DSL. Throw cable modems into the mix and you have the three
combatants.
Great potential
Wireless seems to have the greatest sustainable growth potential and has captured the attention of
companies looking for the most cutting-edge solution and investors wishing to profit from the brawl.
Waverider is still small. It presently has about 80 employees in Canada, the U.S. and Beijing, China,
with plans to double that number in 2000.
1999 revenues were only US$2 million, but that represented a tenfold increase over the previous year.
In a recent report by hardware analysts Chris Bonnet and Clarence Rebiero of Groome Capital in
Toronto, revenues for 2000 are expected to jump by the same multiple -- to US$20 million.
By 2004, the report projects the company will throw off revenues of nearly US$630 million. With 50
million shares outstanding, Waverider has a current market cap of US$311 million at a share price of
US$6.
Competitors such as Metricom (MCOM) and P-Com (PCMS) have larger market caps, granted --
Metricom's is US$775 million, P-Com's is US$850 million -- but they are not without shortcomings.
Both produce systems that run at slower speeds than Waverider's, and they lack local area network
(LAN) and residential connectivity products, respectively.
Waverider is set apart by its "Last Mile Solution (LMS)," which delivers data at DSL speeds. The
LMS targets the more than 5000 ISPs in North America and the attendant small office/home office and
residential market by offering Internet access and voice-over-Internet protocol (VOIP). Waverider
appears to have this market in its crosshairs, hoping to grab a 10 percent share.
Experience at the helm
The folks running Waverider aren't some loose cadre of geeks who think they simply have a better
wireless mousetrap. President Bruce Sinclair, CFO Scott Worthington and VP customer service Bruce
Kay are senior management from Dell (DELL).
Startup? Perhaps. Risky? Definitely. But with this kind of experienced management, the gamble may
pay off big time.
Waverider could provide entry into the huge wireless access market at a relatively cheap price. A
purchase represents a significant, albeit calculated, leap of faith. And since the company has applied for
a full Nasdaq listing, more analysts and investors will soon be kicking the company's tires.
Bonnet and Rebeiro see the stock as a speculative "buy" and have set a one-year price target of
US$13, although they believe the shares could go higher should their forecasts play out.
As investors have become more discerning about tech stocks lately -- especially where small-cap high
tech firms are concerned -- Waverider has little choice but to deliver exceptional numbers. This market
will not tolerate anything less.
Bob Beaty worked in the investment industry for 20 years in Canada and the UK. Since 1995,
he has been writing and producing content for some of the best financial sites on the Internet.
He lives with his wife and three children on an island off the coast of British Columbia. His
column, Due North, will appear every Thursday.
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