The surge this afternoon was probably due to a plug by Briefing.com:
14:25 ET ******
ELCOM INTERNATIONAL (ELCO) 1 19/32 -3/32 One of the mistakes investors make
in judging the Internet landscape is assuming that everyone who will be in the game is
already in the game, or is visible. As the internet matures, there will undoubtedly be new
entrants, some large, some small, who will change the parameters of the game. With so
many internet stocks priced as if they have already won the game, it is a point worth
considering. Today's announcement by Elcom International is an example. Elcom, whom
we had never heard of before, said their wholly owned subsidiary, elcom.com, signed a
deal with an unnamed European client for intranet procurement of computers, using
elcom.com's new browser-based product PECOS.pm. Elcom has been selling PC
products to corporate environments using a propriatary network version of PECOS since
1993. But because revenue growth stalled out two years ago, the stock has been
hammered down to about $2 for the past year, from $13 two years ago. The company
hired Smith Barney to find a buyer last year, but then dropped the idea. Now they appear
to be looking at the internet. Today's announcement shows the new direction of becoming a
business-to-business provider of PC equipment, using an internet based ordering and
payment system. Cyberian Outpost (COOL) is working on the same area, and DELL
(DELL) is already very prominent in corporate Internet sales. But Elco has revenues of
over $800 million, is profitable, and with a market cap of just $46 million, sells for a
Price/Sales of only 0.06. COOL carries a P/S of 4 on revenues of just $60 million TTM.
Will the internet based PECOS system allow Elcom to acquire more corporate customers?
We haven't done enough research on Elcom yet to give a full analysis of their chances. Our
point today is that, in the Internet revolution, it is a mistake to assume that all the eventual
players are already on the field. You've probably never heard of Elco, although everyone
knows about COOL. But a player ten times the size of Cyberian Outpost just walked on
the field, yet volume in ELCO is just 51,000 shares so far today. Full rollout of the internet
based PECOS system is expected in March. |
