Here's some info on a total undervalued stock at $0.65:
Presumably, everybody reading this is active in the stock market. If that's the case, it's going to be very easy for you to
see why I like Datalink Systems Corp., a small but rapidly growing company based in San Jose, California.
All of us in the market want to know how our stocks are doing, and nobody wants to find out after the fact that they missed a buying
or selling opportunity. However, we really only have three ways to get the information we want, and none of it is very timely. We can
look in the newspaper for day-old quotes; we can call a broker, which gets us current information, but you can't call your broker
every ten minutes; or, we can hook into an on-line quote system, and you will pay dearly for real-time quotes. (If 15-minute delayed
quotes are adequate, you can get them for free on the Internet.) None of these methods is ideal. Datalink has a different solution,
called QuoteXpress, and it's really a slick system. I'm using the system, and I suggest you give it a try for yourself. All you have to
have is an alphanumeric pager, and if you don't have one, Datalink will provide one at their cost.
Here's how it works. The basic concept is that we manage our portfolio by exception. In other words, I'm really only interested in
knowing certain things, such as if a stock moves up or down by more than a dollar--or half a dollar--or whatever amount is important
to me in terms of the action I might take. If it's not moving up or down more than my designated target, I don't need to know. Our
portfolio consists of 21 companies, and I am interested in significant price changes during the market day, and closing prices at the
end of the day. I gave Datalink the quote symbols and set the price change targets for each of them. When a stock moves beyond
my target, I am paged, and my pager gives me a readout on the latest trading price, current volume, and net change up or down.
Then, about an hour after the market closes, I am paged with the closing quotes, including daily high, low, and trading volume, on all
21 stocks. This isn't just big-board stocks, either. The system covers every exchange in North America, including the electronic
Bulletin Board and the Vancouver Stock Exchange. Major international exchanges are being added quickly. I'm telling you, this
beats the heck out of trying to get your broker to call you, or you calling your broker to keep track.
Obviously, this system is terrific for active stock traders. However, this concept, providing real-time information to customers by
remote, wireless access, has huge potential in a variety of other important applications.
For example, e-mail. I don't need to know about every piece of e-mail that comes in, but maybe I'm waiting for approval on an
important contract. I can alert the system to page me, wherever I happen to be, if I get an e-mail message from a certain person, or
on a certain subject. Then, if I'm near a fax machine, I can call Datalink and have them fax the actual e-mail message to me. If I'm
not near a fax machine, they will read it to me.
And how about airline information? I don't need to know if the plane I'm trying to catch is on time, but if it's going to be an hour late,
page me. Don't bother me if my route home is clear, but if there's an accident clogging traffic, page me. And page me with the final
score of the Super Bowl. All of these examples are "exceptions." Datalink calls them "filters." Setting the filters is the only thing a
user of the system has to do, and there are two ways to do that. The obvious way is to call Datalink on their 800 customer service
number. The easy way is to dial up their Internet web site (www.datalink.net) and enter your filter information all by yourself.
This all sounds very simple, but in reality, it is an extremely complex system of hardware and software, the software being the
critical component. Datalink was the first company to be admitted to Motorola's Advanced Radiodata Research Center, which
focuses on the development of two-way wireless applications using Motorola's DataTACS technology. The company is also a
member of Motorola's Developer Support Program for paging products, a Microsoft Developer Network Level III (top level), and has
extensive experience in the development of systems utilizing the Microsoft Windows NT and Windows operating systems. I was
particularly impressed with the fact that there are three levels of redundancy built into the system: 1) if a computer performing certain
tasks fails, another computer on the network takes over; 2) if a software component fails, another element of the software takes over
and recovers from the failure; and 3) if a database on a system is damaged from hardware, operating system or applications software
failures, processing can be resumed using a duplicate copy from another location on the network. The point is, this is a very
sophisticated system which can be utilized to provide the user with an infinite variety of time-sensitive, individualized information.
QuoteXpress and MailXpress are just the tip of the product iceberg Datalink can bring to the market.
Let's look at some number on the market, potential revenues and profits. We all know that the world is in the middle of an
information revolution, as evidenced by the rapid adoption of personal computers, cellular phones and pagers. The demand for
electronic communications and information is exploding. With over 42% of the work force mobile (roughly 48 million people), wireless
data communication is emerging as one of the most important strategic technologies of the 1990's. The Yankee Group, which
follows the wireless communications industry, has estimated that the wireless data user market "will quadruple over the next five
years." There are nearly 40 million pagers in service around the world, with the number in use in the U.S. expected to grow to over
35 million by the end of this year. The Canadian market for cellular paging and wireless date services is expected to grow from 3
million to 12 million users by the year 2000.
Datalink is certain to capture a nice piece of this exploding market, and the potential revenue and profit numbers are huge. The only
question in my mind is, how fast will the customer base grow? Right now, with very little in the way of advertising and promotion,
Datalink is signing up about 30 QuoteXpress customers per day. But this is the kind of product that could grow like wildfire. If you
have one and your neighbor sees it, he's going to want one--and so on and so on. I was sitting in my broker's office today, as a
matter of fact, and received a page. The message was that one of my stocks had gone up more than 50 cents. My broker was
dazzled. He wants one now. When he gets his, you can bet a bunch of his clients will also sign on. So, once Datalink gets a
modest core of users, all the advertising and promotion in the world might not be as effective as the word of mouth by their own
users.
The price of the QuoteXpress is $39.95 per month, including the pager. If you already have an alphanumeric pager, the cost is
$19.95 per month. The MailXpress service is $9.95 per month. These rates include an ample number of free pages. Over that
minimum, messages cost a quarter each, but if the information you're getting isn't worth a quarter, it's your own fault for telling the
system to notify you.
Well, you can see how the numbers are going to add up. This is as good as the razor blade business. Let's say, for the sake of
argument, that of the 35+ million pager users and 48 million in the mobile work force out there, 500,000 of them want the information
services of Datalink. And let's say that all of them already have pagers and thus pay only the minimum $19.95 per month, and let's
say that nobody gets more than the minimum number of free messages. That adds up to $119,700,000 million in revenue. All the
data transmission is done by computer, and most people enter their own "filters," so operating costs are low. My estimate is that
Datalink will earn net profits after tax of at least 25% of revenues. That's $29.9 million in net profit. On today's fully diluted share
base, that's $1.35 per share in earnings in the foreseeable future. Do you think the stock would be a good buy today at $0.65? I do,
and it's going into our portfolio right now. |
