2/1/01 [OPNCF] Burners and wreck survivors
Thursday, February 1, 2001, 9:38
By ELI GREENBLAT, THE AGE
Only a handful of the nation's dotcoms have brought their cashburn rates under control and posted a profit, while etailers continue to encounter tough trading conditions, a survey of 54 tech stocks by The Age has revealed.
Despite the massive pullback in technology shares recently and the drying up of capital available to the volatile sector, many companies are still burning their cash reserves at a unsustainable rate.
Decemberquarter cashflow reports lodged with the Australian Stock Exchange this week have given a snapshot of the health of local technology and Internet companies and for some dotcoms the prognosis looks terminal.
But, for investors with a taste for risk, the latest round of quarterly reports has also thrown a spotlight on some of the betterplaced companies, as analysts begin to sort the wheat from the chaff.
The Age has compiled a list of 54 tech stocks that filed reports for the three months to December, comparing revenue and expenditure to the Septemberquarter result.
During the period, several tech plays were able to stop their cashburn and emerge cashflow positive at the end of the December quarter.
Michael Willoughby, emerging and technology companies analyst at J.P. Morgan, said businesses in the tech sector had polarised into two camps, with larger and more established businesses starting to gather momentum, while the weak were in slow decay.
"This is really a continuation of the trend we first saw emerge about 12 months ago, at the time of the first tech wreck," he said.
"There are two classes of stocks in the tech sector. There is the first class, which have market capitalisations of above $100 million, are profitable, or soon will be profitable, are understood by investors and, for these reasons, been supported in the market.
"Then there are the others, which generally have small market caps, are far from being profitable, are not understood by investors and whose business models aren't attractive either.
"The theme is that companies are decreasing costs and increasing revenue as fast as they can and they're very eager to point that out," he said, referring to the increased number of statements filed with explanatory paragraphs.
Within the sector, it is clear that size does matter. The larger dotcoms attract the interest of analysts, with several broking firms now beginning to pick some of the betterperforming stocks.
Willoughby has rated Open Telecommunications a "buy", while another telco software group, Clarity International, is "accumulate".
"Both companies experienced huge increases in cash receipts, equally dramatic growth in working capital requirements reflecting the growth in their respective order books," Willoughby said.
"Clarity (International) has proven its international relevance in the operational support systems (OSS) arena, with several large contract wins in Australia and Asia against worldclass competition.
"Investors should be now looking for the company to execute on existing contracts, develop a more scalable business model through alliances with systems integrators and deepen the capital market liquidity of its securities to attract institutional shareholders."
Willoughby said some hightech companies, such as E.Com Global, had actually cancelled advertising to lift cash levels.
However, he pointed out that while operating cashflow deficits had shrunk, the companies were still not cashflow positive.
"For some companies, it's a matter of how long they can bump along the bottom before being backdoored by someone else," he said.
with SMH
it.fairfax.com.au
Corporate Profile
Open Telecommunications is an expert provider of innovative and cost-effective solutions for the "New World" telecommunications industry. We have a fundamental commitment to providing quality solutions that deliver real value to our customers.
Open Telecommunications provides products and services that collectively deliver a new generation of telecommunications network infrastructure. This infrastructure is provided for network technologies such as fixed line and wireless, which are well established in telecom carriers today. But it will also cater for packet data technologies like IP and ATM, which will be the core of the "New World" telecom service providers' networks. The Open Telecommunications infrastructure includes switching products, content and services, and management systems.
Open Telecommunications successfully floated on the Australian Stock Exchange in December 1999. For further information see Investor Relations page.
Further Information
For further information about any of our products or services please explore the rest of our web site or contact us by email at solutions@opentelecommunications.com, by telephone on +61 2 8925 3000 or by Facsimile on +61 2 9929 8477.
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Open Telecommunications
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