Highway Master is Dying!
All the players in the AVL services business are having a tough time (except Qualcomm). The AVL business of Rockwell, Motorola, and AMSC has been consolidated in AMSC. Geotek is nearing bankruptcy.
Here is an S&P commentary on Highway Master:
NEW YORK--(BUSINESS WIRE)--Aug. 19, 1998--Standard & Poor's today lowered its senior unsecured debt and corporate credit ratings on HighwayMaster Communications Inc. to triple-'C' plus from single-'B'-minus, affecting $125 million in original maturity debt. Standard & Poor's revised its outlook to negative from stable.
The ratings reflect this fleet tracking company's relatively limited ability to penetrate the long haul trucking market, with new contract adds totaling only 3,500 for the second quarter 1998. HighwayMaster Communications Inc. provides integrated voice, data, and position location services primarily to the long-haul trucking market utilizing global positioning satellites in conjunction with cellular carrier airtime agreements. HighwayMaster provides a proprietary communications service for improved fleet management. The company has service agreements with about 70 cellular carriers for use of their wireless networks. These services, in combination with links to a satellite-based global positioning satellite (GPS) network, provide the basis for HighwayMaster's provisioning of mobile voice and locational services for fleet communications and monitoring.
Limited customer growth in the company's comprehensive series 5000 product offering, coupled with disappointing market acceptance of the company's recently released series 3000, have resulted in stressed financial measures, and the company continues to incur operating cash flow deficits in the area of $3 million per month. The series 3000 is a less comprehensive, lower cost voice only offering introduced by the company earlier this year to enhance its growth prospects in the trucking sector. Cash balances of about $39 million therefore provide only a limited degree of financial flexibility. The company does not have any bank facilities currently available and has not yet identified its financing plans to cover cash shortfalls in the medium term.
HighwayMaster has announced a restructuring of its operations and is reassessing its overall business plans and evaluating all its product lines, including its AutoLink consumer auto security system, which has not yet been introduced. The negative outlook reflects substantial uncertainty regarding prospects for large-scale adoption of the company's services, which are subject to the vagaries of market demand by the long haul trucking industry, a sector that is expected to exhibit fairly weak performance measures. This industry group will continue to have numerous competitive communications options, including services offered by the much larger, better capitalized Qualcomm Inc.'s OmniTRACS business, which holds the lion's share of the long haul vehicle location sector, including a substantial share of the larger account segment. Other mobile communications alternatives include cellular, PCS, ESMR, and paging services, all of which offer some of HighwayMaster's capabilities. Moreover, the more vulnerable players in the long haul trucking market may defer or discontinue communications expenditures.
OUTLOOK: NEGATIVE
Maintenance of ratings is predicated on the company's ability to significantly expand its customer base over the next six to 12 months, while maintaining rational pricing policies. -- CreditWire |
