hi pat, looks like our AIRN gizzard pick from a few days ago, got some attention from Individual Investor...
Here is the article...
Airspan Networks: Dirt Cheap?
Tell us what you think in AIRN's Board
individualinvestor.com
By Alexander Yakirevich (5/31/01)
This week's Insider Edge column features Airspan Networks (Nasdaq: AIRN - Quotes, News, Boards) , a supplier of broadband fixed wireless access (BFWA) equipment for communications service providers and equipment vendors.
The stock attracted our attention, as it came under insider accumulation in recent weeks. Specifically, two of the company's highest-ranking officers, CEO Eric D. Stonestrom and CFO Peter Aronstam, purchased 30,000 shares in May at average prices ranging from $2.57 to $3.02 for a cumulative investment of more than $84,000. On Wednesday, the stock closed at $2.94.
Here's why we think shares of Airspan are worthy of investors' consideration at this time.
First, Airspan's fixed wireless technology offers a compelling value proposition to carriers, which will be difficult to ignore for long. The BFWA equipment is competing with systems based on alternative high-speed communications access technologies, such as xDSL (Digital Subscriber Line), cable modem, and fiber optics. These are the systems for the so-called "last-mile" market, which facilitates access by businesses and consumers to broadband Internet and other high-speed data services.
The advantages of the BFWA technology include ease of installation, rapid deployment, smaller upfront capital investments, and lower cost of maintenance.
Even though xDSL and cable modem technologies emerged as clear leaders in the local-access space, a substantial segment of this market is still underserved.
For example, according to statistics cited by Brian T. Modoff, and analyst with Deutsche Banc Alex. Brown, anywhere from 40% to 50% of the total base of local telephone lines in the U.S. are still not capable of handling DSL technology. "… [The] cost to upgrade these lines could be prohibitive," wrote the analyst in his recent report.
With respect to fiber, U.S. Bancorp. Piper Jaffray's analyst, Samuel S. May, estimates that out of 750,000 commercial buildings in the U.S. only 12,000 to 15,000 are fiber ready.
This presents an opportunity for the likes of Airspan to gain ground on makers of xDSL and other alternative technologies.
From more of a short-term perspective, we like the fact that Airspan, which generated only 11% of first-quarter revenues in the U.S., is exposed to emerging markets in Europe and Asia, where the fixed wireless technology is the only means of delivering communications services to local businesses and consumers. Most of Airspan's customers in these markets are established, well-financed carriers.
In some respect, its limited exposure to the U.S. telecommunications market makes Airspan less vulnerable to the recent downturn in the capital spending cycle in this market.
This point is supported by the fact that during the time, when most telecom equipment makers were issuing March-quarter revenue and profit warnings, Airspan was able to meet and even exceed expectations. It generated sales of $10.1 million, a 12% sequential advance and almost 78% above the results posted last year. Revenues came in slightly ahead of the consensus sales forecast of $10 million (based on data compiled by I/B/E/S).
Airspan was able to exceed projections on the bottom line as well. The company posted a loss of $0.17 per share (excluding an extraordinary gain, intangible amortization expense, and the impact from a tax credit), which compared with I/B/E/S' consensus loss estimate of $0.19 per share. Airspan delivered a loss of $0.25 per share in the same quarter last year and $0.16 per share loss in the fourth quarter of 2000.
Having laid out these positives that favor investment in the stock, we believe investors should be aware of risks involved. The company is still a money-losing operation, and profitability remains a promise of the distant future. Based on data compiled by First Call/Thomson Financial, the company is expected to generate a loss of $0.58 per share this year followed by a loss of $0.24 per share in 2002.
While the balance sheet remained quite strong, boasting almost $92 million in cash and securities (net of $7.2 million restricted cash and $6.2 million in long term debt) at the end of the March quarter, operating cash flows were negative $9.9 million. Management anticipates that the current burn rate will remain at these levels for the rest of 2001 and throughout 2002.
Having said that, under management's assumption, the current reserve should be sufficient to enable Airspan to operate for roughly nine quarters without the need for additional financing.
Meanwhile, the company should be able to reach cash flow breakeven levels around the third quarter of 2002, according to CFO Aronstam.
At Wednesday's close of $2.94, the stock has fairly limited downside exposure, in our view, considering the fact that it is trading at a level slightly higher than the end-of-March cash balance and below tangible book value of $124.7 million, or $3.60 per share.
Bottom Line:
Recent insider buying at Airspan suggests management's rising confidence regarding the company's prospects. Growth-oriented investors with tolerance for risk may want to consider establishing a small position in the stock.
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