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SPECIAL UPDATE:
INSIDER REPORT
July 14, 1998
Featured Company: JETCOM INC.
CDN - JTCM
A TURNAROUND ON THE HORIZON?
Prior to 1997, Jetcom Inc. was one of Canada's leading satellite
hardware wholesalers. Jetcom grew quickly with 1996 revenues in excess of
$12.5 million. During a disastrous 1997, when Jetcom lost the Expressvu bid
to distribute Canadian DBS, both revenues and the share price quickly dove.
What had been expected to be a profitable year, turned out to be a
nightmare. The share price from mid-1997 through the first half of 1998
melted down from $1.20/share to under $0.15/share.
The company scrambled, slashing overhead and devising a strategy to
capitalize upon its well-entrenched retail distribution network. They
focused on their core businesses and continued generating revenues. On a
simplified balance sheet basis, JTCM runs at nearly breakeven, in its
currently depressed state. The company continues generating approximately
$400,000 revenues/monthly on a 20% gross operating margin, covering their
overhead costs and staying in business. A Jetcom subsidiary, SPS, supplies
satellite-programming services to Direct-to-Home satellite dish owners,
which provides around $300,000 monthly revenues. Value-added resales
through its 1000-member retail network, of hardware, amplifiers, and C-band
dishes, generate another $100,000 monthly revenues. Historically, third and
fourth quarter sales are higher than the first half of the year.
On this basis, JTCM shares should rise from summer time forward. That
optimistic scenario, though,may not be enough to hold the strong interest
of the speculator.
THE YEAR 2000 PROBLEM
Enter the Year 2000 problem and global distraction because of this
millenium bug. Over the past four months, Jetcom has quietly, but quickly,
assembled a simple, affordable strategy to capitalize upon this opportunity.
As has been endlessly repeated throughout the media, the Year 2000
problem is a computer date- recognition problem. When a specific computer
language, called COBOL, was invented, it failed to inform the computer the
difference between the year 1900 and the year 2000. The big fuss is about
converting the computer codes of all the mainframes, used throughout
government and industry, in such a way as that those computers will
actually function 16 to 17 months from now. There are numerous Y2K entrants
offering their services to major corporations and governments throughout
the world, to help them solve their millenium bug.
The most major problem is that there are not enough computer service
companies, offering Y2K services, to resolve this problem on a global
basis. Europe and Asia are just now waking up to this problem. Latin
America, Africa and elsewhere are only now glimpsing about the catastrophe
of not resolving this computer bug. Do you remember how badly shaken
computer-users were, a few years ago, when there were global media and
Internet alerts about viruses that would crash computers? Imagine a virus
that was 100,000 times worse than the most devastating one devised. Now,
visualize the complete cessation of modern civilization after a nuclear
war. The Year 2000 problem fits somewhere in between those.
As we enter the fourth quarter of 1998 and beyond, the chatter
about Y2K will increase. It may be possible that heightened media attention
will help address this potential armageddon. Because of sector rotation,
and the potential revenue stream the millenium bug will generate, we expect
that shares in many Y2K companies will soar. Imagine if you had bought seed
stock in Netscape or you were an early investor in Yahoo, Excite, Lycos or
America Online. That is the potential of a Y2K company at this time. JTCM
is most attractive because of its share price, which does not yet reflect
the weight of its Y2K entry.
JETCOM ADVANTAGES
The recently announced joint venture with Gruppo TCI provides with
a fantastic opportunity. JTCM's previous success lay in its capacity to
operate as a broker, generating sales through its retail network. It is not
a manufacturer. The company has connections through relationships it has
spent the past decade developing. Gruppo TCI brings a skilled labor force
to the table. Its strength lies in remedying a labor-intensive solution at
an affordable cost. This is the key to the potential success of JTCM as a
Y2K participant.
COBOL conversion for the Y2K problem is very time-consuming,
requiring patient programmers. Y2K companies offer their services and are
paid on the number of lines of code converted. The more lines converted,
the greater the paycheck. In this highly volatile growth industry, success
will lie with those who are able to provide Y2K conversions at the lowest
rates.
Therein we find the Jetcom Advantage. Through Gruppo TCI's offshore
facilities, Y2K conversion can be competitive with the leading companies in
the Y2K arena. Profit margins can be squeezed only so far with a North
American labor force. With an offshore labor force, it becomes an
affordable, and very profitable, story.
In a recent interview with Alan Moriyami, president of Jetcom, we
found him optimistic about the Gruppo TCI joint venture. Over the weekend,
Gruppo officials arrived in Toronto. This week and next, Jetcom and Gruppo
will be meeting with leading Canadian companies in Toronto and with
government officials in Ottawa, regarding their Y2K services. When asked at
what stage of discussions these were, Mr. Moriyami replied, "Stage Three."
Stage Four is the conclusion of a contract and the announcement of services
retained.
He explained to INSIDER REPORT that revenue projections on current
contract discussions range from a minimum of $60,000/monthly to more than
$350,000/monthly. Depending upon the size of the contracts and the speed
with which they will be implemented, it may be possible that Jetcom's
turnaround could occur this summer. A revenue boost as little as
$100,000/monthly would turnaround the company and begin to provide
speculators with a hot story throughout the rest of this year and into next.
Shares in Jetcom have been increasing, during July. They bottomed
in late spring and have since been on the rise. Trading volume has been
rising and at levels not seen for over a year. There are strong reasons for
optimism about JTCM's future. We heartily endorse JTCM's efforts for a
significant turnaround and return to their earlier trading levels above
$1.20/share.
INFORMATION ON THIS COMPANY CAN BE OBTAINED: 1-800-387-3517 or 905-660-0333.
An Internet website is being constructed and will soon premiere. INSIDER
REPORT anticipates ongoing coverage of material developments in JTCM's
turnaround. JTCM trades on the Canadian Dealing Network, also known as
Toronto's OTC market. Daily quotes and charts can be obtained at:
www.canada-stockwatch.com
www.stockmasters.com
Website: www.stockhouse.com/insider
E-mail: insider@stockhouse.com
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