And here's the full article (emphasis mine):
"Vertel
Rising from Obscurity
June 8, 2000 - A big challenge for small-cap companies is to not only grow their business but also get noticed by investors. Vertel (Nasdaq:VRTL) is doing both. Vertel has landed some major customers for its telecom network middleware and its stock is up 60% since we first wrote about it in January. Of course, it's also down 60% from its March highs. Such is the life of a small-cap tech stock these days.
Vertel was in the news again this week after the company announced that Eastern Communications, China's largest maker of mobile phones and mobile phone systems, will deploy Vertel's e*ORB software in its base stations. The company has landed several other big name customers this year including Alcatel, Nokia and Compaq. There's also been speculation that Vertel has already secured deals with Ericsson and Nortel Networks, and the CEO acknowledges that they do have some contracts in place that have not been announced pending permission from the customers. For a company with just $20 million in sales, such deals could have quite an impact.
Vertel makes network management software that facilitates the interconnection of different kinds of telecom networks and systems. Vertel is positioned in front of a very big opportunity, and the company estimates the market for this kind of software at $1 billion. Demand for network management solutions is soaring in general, and Vertel's target market seems especially ripe to explode. Vertel's products are aimed at the telecom industry, where carriers are faced with a myriad of management and performance issues related to the interconnection of different generations and layers of networks. Vertel's software is designed to facilitate the mediation process, for example, managing the exchange of voice, data or video from a fiber optic backbone to a DSL loop.
Demand for this type of product is driven by the massive buildout of telecom and Internet infrastructure with next generation networking technology to meet demands for bandwidth and advanced capability. This buildout is happening not only in the US, but internationally where Vertel is well established with telecom carriers. The company has already sold its Telecommunications Managed Network (TMN) products to many major carriers, giving Vertel an advantage in marketing its newest platform called e*ORB. ORB stands for Object Request Broker. This is the product that could make or break Vertel's emergence from small-cap obscurity.
The advantages of the e*ORB software package are speed and size. Mediation in telecom networks is notoriously slow, so the convergence of voice, data and video traffic is forcing the need for advancement. e*ORB is designed to perform significantly faster by eliminating the reformatting of information. e*ORB also works across different operating systems such as NT, Unix and Linux. Furthermore, the software is extremely small so embedding it in devices such as wireless products is possible.
One of Vertel's first customers for e*ORB was Tellium, which is embedding the software in its optical switches. If Vertel can exploit its existing customer base, including big name players such as Lucent, IBM, Deutsche Telecom and Korea Telecom, the company has a chance to grab a leading position in this potentially massive market for telecom networking middleware.
It's too soon to tell whether e*ORB will perform as promised when customers evaluate and implement it, so this year is critical in gauging Vertel's prospects as an investment. And because Vertel is currently so small, with a market cap of $520 million, this may be its one big shot at rising from small-cap obscurity.
The company is not yet profitable but that should change this year if the e*ORB product gains traction. There are no major brokerage firms covering the stock, though, so there's no consensus earnings estimate as a reference. Investors can look at the lack of analyst coverage in one of two ways. Vertel may be relegated to the shadows for a very long time if it stays under the radar of Wall Street, but if it does execute well and pick up analyst coverage, that could be additional catalysts for the stock.
"All in all, this is a classic case of a very high-risk/high-reward type of investment. If Vertel's newest product lives up to its billing, then the company should experience explosive growth. If e*ORB instead stumbles out of the gate, then the run-up in Vertel's stock price could be reversed in a heartbeat. There's no question Vertel is in an enviable position at the crossroads of two very hot investment themes -- network management solutions and fiber optics -- it all comes down to executing on the opportunity."
theonlineinvestor.com
Starowl |
