Friday October 13, 12:55 pm Eastern Time
MotleyFool.com - Fool News
Echelon Posts First Profit
By Tom Jacobs
Networking device leader Echelon Corp. (Nasdaq: ELON - news) announced its first profitable quarter after
market close yesterday. Though the $128,000 third quarter profit couldn't nudge per share earnings over $0.00, this shines compared with a year-ago loss of
$743,000 or $0.02 a diluted share.
Before the news, Echelon's stock closed at $20, down 16.45% for the day, but inched back up 5% in after hours. No doubt about it, it's been a rough year for
the share price: It may be three times its 52-week low, but that's still down 82% from the March peak of $113.
But the business is solid and growing, as Fool community member howardroark highlighted in this post of the day last quarter, where he reminded Fools not to
focus on a penny of earnings here, or a penny there. Especially when those figures are nudged down by one-time charges (second quarter) or up by interest
income (third quarter).
Echelon on the move
Readers of the Danny Dunn 1960s kids' series will remember Danny Dunn and the Automatic House (sadly out of print). Echelon wants that young boy's
science fiction fantasy to live. According to the Echelon discussion board FAQ (also by howardroark), Echelon's vision of an all-Internet connected world of
devices is coming in four target markets: building (office building automation), industrial (plant, assembly, or system automation), transportation (train, car) and
home automation.
LonWorks devices can include a dishwasher, semiconductor wafer-processing machine, a central heating systems, or the brakes on a subway train. I hope the
grown-up Danny is paying attention.
Echelon reaches these markets by selling to intermediates -- original equipment manufacturers (OEMs) and systems integrators. In the last whirlwind month,
Echelon has sealed two big deals with Italy's Enel (NYSE: EN - news) SpA. and AT&T (NYSE: T - news).
Last month Echelon closed the $130.9 million sale of 3 million shares to Enel. Through this partnership, Enel will integrate Echelon's LonWorks system into
its remote metering management project. Over the next three years, Enel will equip over 27 million Italian homes with digital electricity meters suitable for
complete home networking infrastructure integration.
This week, AT&T and Echelon announced a joint project agreement with the goal of allowing local phone call access to monitor and control LonWorks
networked devices from almost anywhere in the world. Manufacturers, for example, will interface with their LonWorks controlled devices through AT&T's
global remote access network. This allows for remote diagnostics, product updates, device management, status monitoring, and control for LonWorks devices
worldwide.
Into the upper -- gulp -- Echelon?
With Echelon's $150 million in cash, no debt, and operations close to cash flow positive, it's worth noting that the company took 10 years to get here. Ten years
of chipping away at traditional control companies -- Siemens (OTC: SMAWY - news), Honeywell (NYSE: HON - news), Allen-Bradley, Groupe Schneider --
that want centralized networks. As opposed to Echelon, whose goal is for distributed, interoperable networks. It licenses its technology freely and makes
money selling hardware and software, which as the FAQ states, allow "devices from any manufacturer [to be] seamlessly added to the network."
This battle is not over, though, with cash and partners AT&T and Enel, and product development partners Cisco (Nasdaq: CSCO - news) and Sun
Microsystems (Nasdaq: SUNW - news), Echelon is poised to realize its vision. But it clearly needs more deals with big players. Do you agree with this share
holder? Sound off on the Echelon discussion board. |
