Dow Jones Newswires -- January 23, 1998
Modacad Down 18%; Co. Cites Intel Venture
Concerns
By Anthony Palazzo
PASADENA, Calif. (Dow Jones)--ModaCAD Inc.'s (MODA) stock fell as much as
23.5% on Friday, accelerating a downward trend that has persisted since the
beginning of the month.
Investors are growing increasingly anxious about ModaCAD's electronic commerce
joint venture with Intel Corp. (INTC), a company spokeswoman said.
In November, Intel and ModaCAD said they would co-develop an
interactive-shopping forum linking fashion retailers, manufacturers and customers
on-line.
Investors are awaiting details of the venture such as what Internet service providers
will host the site, and which individuals and companies will participate, said
ModaCAD spokeswoman Alison Barney.
"They are looking for all the other names that are part and parcel of this product.
They're looking for the scope and magnitude of what we're doing with Intel," Barney
said.
The development schedule for the product line "appears to be on track at this time,"
Barney said. However, the company doesn't want to trigger competition with
premature disclosures of its participants, she said.
"In the not-too-distant future we will be making disclosures of these various parties
and individuals involved," Barney said.
ModaCAD's stock recently was down 1 3/8, or 9.6%, to 13 after trading as low as 11
earlier. Nasdaq volume of 345,500 outstripped average daily volume of 74,800 for
shares of the Los Angeles company.
The on-line shopping venture with Intel is a huge gamble for ModaCAD.
If the new technology is accepted in the marketplace and becomes the standard for
3-D interactive shopping on the Internet, tiny ModaCAD will be in position to reap
huge licensing fees across a slew of retail markets.
But in order to go with Intel, ModaCAD had to give up some short-term earnings and
forgo a typical boxed-software distribution agreement for its fashion product. As a
result, the company reported a third-quarter loss of 9 cents a share, compared with
earnings of 15 cents for the third quarter of 1996. Minus a distribution deal, revenue
fell to $533,141 from $1.27 million.
While ModaCAD's stock initially held up well on the promise of the Intel venture,
short sellers have begun to circle. Short interest rose 155% to 236,612 shares
between mid-November, when the Intel deal was announced, and mid-December.
January short-interest hasn't yet been reported by Nasdaq.
The registration of 10,000 shares each by Chairman and Chief Executive Joyce
Freedman and President and Chief Operating Officer Maurizio Vecchione in late
December haven't helped the stock either.
ModaCAD's Barney acknowledged that short-selling and other external pressures
have hurt ModaCAD's stock lately. She noted that Freedman retains 1.6 million
shares, or a 27% stake in the company, and Vecchione and his wife, Andrea, hold
457,000 shares, or 8%. They sold for personal financial reasons, Barney said.
Barney declined to comment on fourth-quarter results, which she said should be out
in late February or early March. - By Anthony Palazzo; 626-798-7628;
tony.palazzo@cor.dowjones.com |
