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Technology Stocks : SCC Communications (SCCX)

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To: Trader Harvey who wrote (60)	2/8/1999 10:04:00 AM
From: Robert DeHaven	Read Replies (1) of 69

Harvey and others: SCCX Earnings and CC—My Take: The earnings reported by SCC this quarter were in line with all expectations of the street. There were few surprises in the report and the conference call. SCC is in the embryonic stage in its business and is being held captive from earning “real” profits. SCC has had extraordinary success signing customers. With 15 CLEC's and 11 Wireless customers under contract SCC is the man for 911 services. Clearly they are the only pure play in the 911 DBMS industry and their competition Xypoint is faltering as stated in the conference call. So SCC is the only game in town. Telephone numbers under management is now at 77.9 million. So where's the money? The stock price at 4 5/8 down from a high of 16 set last July. Well we are in that dreaded period for IPO's called the post lock-up period. This by my calculations started at the end of Dec since they went public in June '98 and will continue to negatively affect the price short term. It appears that the underwriters Robbie Stephens and H&Q are clearly afraid of getting hit with locked up stock. Thus there is little resistance for the price to go lower. Wireless deployment to PSAP requests of over 2500 is destined to be only around 600 or so. This is disappointing and frustrating. But as mentioned in the conference call if all PSAPS were deployed SCC would bring in $2.0 mill per month. That's big potential! Deployment of PSAPS is clearly SCC's biggest problem and it's obvious they cannot do much about it. The unwillingness of ILEC's and some governmental issues continue to hamper deployment. Even in the CC, SCC said they were establishing a team to speed PSAP deployment but then admitted they did not think more than 10% of the remaining 1900 or so requests could be deployed over the next Q or two. If the deployment of PSAP's can be accelerated SCC will benefit extraordinarily because the cost's of deployment for all 2500+ PSAPS has already been incurred. Other CC notes: The company is focusing its efforts on increasing recurring revenues and will invest $2 mill in EWE and subscriber ALI. This will affect the next two Q's earnings. State of Texas contract is being implemented so far successfully. Some resistance from SBC has been encountered but the company is working with the ACSEC to overcome these “expected” challenges from SBC. Additional Contracts awarded 2 new CLEC's yet to be announced and 1 new wireless. Financially Strong: $1.77 cash held per share nearly $20 mill. No negative burn. Clearly SCC would benefit from any increased effort to accommodate or improve 911 services by the FCC/Government. They have hired a specialist to represent the company at governmental hearings. A lobbyist if you will. MY Opinion: I continue to believe if you are a long term investor (12-24 months) this stock will be a 12-15 equity. good luck, bob

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