AETH sitting on $27 per share in cash:
redherring.com
AETHER BINGE
Aether Systems, which makes wireless data software, is the perfect example of a company that was way ahead of
itself last year but now seems to have been beaten down too far. Aether went public in October 1999 at $16 a share
and closed on its first day at $51. By March of last year, the stock hit an all-time high of $345 a share. That's not a
misprint. It surged more than 20,500 percent in just five months. Time to send in the Valuation Police. Aether tumbled
to a 52-week low of $28.50 in December and currently trades at $43.44.
Despite $1.04 billion in cash on its balance sheet, which translates to $26.96 a share, the company has a market value
of just $1.7 billion. Aether has been using some of its cash, as well as stock, to acquire companies aggressively in
order to expand beyond its core business of providing wireless data to financial services companies.
Aether, which has created wireless trading services for Morgan Stanley Dean Witter and is developing similar
products for Charles Schwab and Deutsche Bank's National Discount Brokers, has gained customers in the health
care and transportation industries as well as through its various acquisitions. Aether also has taken a page from the
likes of Intel (Nasdaq: INTC) and Cisco Systems (Nasdaq: CSCO) in planning its strategy, and has been investing in
wireless startups that will help to further sales of its wireless software. Two companies that Aether has a stake in
went public last year: Omnisky (Nasdaq: OMNY), a provider of wireless email and Internet access, and Novatel
Wireless (Nasdaq: NVTL), a manufacturer of wireless modems.
Aether's sales have grown dramatically since its IPO, with revenue in the third quarter increasing 11-fold over the
year before, from $1.5 million to $16.2 million. And although the company is still unprofitable, gross margins have
improved, from 47 percent in the third quarter of 1999 to 51 percent in the third quarter of last year. And with $1
billion in cash still remaining from its initial public offering, look for the company to continue investing in or purchasing
other wireless data providers. |
