The entire WSJ Article
Dow Jones Newswires -- January 8, 1998
Osicom Up 34% On New Networking Chip, Low
Valuation
By Janet Morrissey
NEW YORK (Dow Jones)--Osicom Technologies Inc. (FIBR) shares were up 34% Thursday in
what analysts believe is renewed investor interest in the company following the introduction of
its NET+ARM networking chip.
Analyst Joe Gladue from Chapman Co. said the news catapulted the battered stock into the
investor spotlight following year-end tax selling. Gladue speculated Osicom's low valuation,
combined with the potential panoramic applications of the new technology, prompted investors to
snap up the shares.
"The stock was really beaten down over the past year" as hefty restructuring charges in the fiscal
second quarter ended July 31 and lower-than-expected revenue in the fiscal third quarter left the
company in the red, Gladue said. With year-end tax loss selling over, he said, some investors
likely are buying back the stock while others are capitalizing on its low valuation.
"(The shares) are trading at a really low valuation ... below the company's annual revenues," he
said.
Gladue also attributed the rally to Monday's product launch.
Following a 24.4% gain Wednesday, the Santa Monica, Calif., company's shares recently
changed hands at 4 9/32, up 1 3/32, or 34.3%, on volume of 2.3 million, compared with a daily
average of 358,000.
Osicom, which had traded as high as 12 on April 7, 1997, closed Friday at 2 7/32.
Osicom's NET+ARM technology combines hardware and software subsystems on a single chip
that allows printers and other noncomputer equipment to link up to networks such as the Internet.
The product is small and cost-effective, while current products that offer similar connectivity
require various hardware and software components that take up space and are more costly,
Chapman Co.'s Gladue said.
The analyst said the technology has the potential to bring thousands of new clients and markets to
the company. For example, he said, power companies could install the chips on meters, which
could then be read over the Internet rather than by a technician.
Soda vendors, such as Coca Cola Co. (KO), could install the chip in vending machines to
determine exactly when they need to be refilled. The device would save the time, expense and
trouble of sending out people to check the machines at random periods, Gladue said.
The number of companies that jump on the technology, and how quickly they respond, will
determine how accretive the technology is to Osicom's earnings in 1998, he noted.
Two other products launched by the company over the past year are also expected to add to its
bottom line in 1998: the GigaMux dense wavelength division multiplexer boosts the number of
video signals that can be transmitted across a single fiber optic cable, while the IQX-200 remote
access server combines scalability and features on a single platform.
Osicom President Xin Cheng said he knows of no other news that would account for the stock's
activity.
Another company spokesman, Constantine Theodoropulos, said he believes the NET+ARM
launch triggered the rally and "people are recognizing the potential for the company."
Gladue projects Osicom will be profitable in the fiscal fourth quarter ending Jan. 31, although he
anticipates a loss of 89 cents a share for the year due to the charges in the second quarter and a
loss of 28 cents a share in the third quarter.
The company posted net income of $1.4 million, or 11 cents a share, in the year-ago fourth
quarter and a net loss of $15.6 million, or $1.97 a share, including charges of $16.5 million, for
fiscal 1997.
-By Janet Morrissey; 201-938-5400 |
