As I mentioned on Friday, one of my associates checked in with ODSI
for an update and I will pass that on this morning. First, you might
want to check my earlier posts #141 and #147 where I recapped the
restructuring CC and the earnings report for 1998. From what I know
nothing I posted earlier has changed. The following info is either a
recap or an update and in no particular order of importance:
1. The switching products are doing well. Earlier I had mentioned a
potential deal with who I thought to be SGI. This appears to have
closed this quarter for several million dollars and ODSI has already
shipped three systems as part of the deal with more scheduled for the
second quarter. This switch is rated at six times gigabit ethernet
which is extremely fast. It connects nodes (processors) in a highly
parallel RISC architecture. As a comparison, this would be the IBM
SP2 "deep blue" machine that won the chess competition a couple of
years ago and these processor architectures are considered to be
today's supercomputers. SGI is a major player in this sector. Other
applications are in the entertainment field for complex graphics and
simulations, automotive industry for crash simulation, Govt. DOE
nuclear simulation, seismic applications, and so on. So this is heavy
duty technical hardware, microcode and software.
2. Intrusion software (security software). As I mentioned in an
earlier post ODSI has approval now to export this software to 42
countries which is significant since the Govt. is tough on anything
with Crypto capability. This type of software is critical for any
on-line E@Commerce applications or for Internet applications. Their
offerings are being well received at the trade shows they have
attended so far and ODSI will attend a few more. These shows were
listed in an earlier post. What is a real positive is the fact that
their new partner SAIC has been introducing ODSI into all of the
accounts that SAIC covers. As a person who has sold technology
products in the past (70s and 80s) I can tell you that being pulled
into an account with an endorsement is ten times better than having
to knock the door down to get in. A much more productive venue and
it is starting to pay dividends. As I mentioned in a previous post
SAIC owns a large block of ODSI and has rights to buy more at 8 and
change and another large block at 10 and change so SAIC has a
financial stake in ODSI's success. SAIC is private but I believe it
is a mult-billion dollar company.
3. Wall street perceptions. When asked why the analysts that follow
ODSI have not responded to the very positive restructuring actions
and the new tactical and strategic thinking the response was that
they want to see several quarters of beating estimates to generate
confidence before they change their ratings or earnings projections.
This "show me" attitude is understandable considering the past but we
would rather buy this where we did (TIA - bought between 2 1/2 and 4)
than wait and maybe have to chase it later this year. Of course,
this entire year is going to be a challenge with Y2K concerns,
interest rates, and so on for the technology industry so I would
rather own an undiscovered stock that is turning the corner than one
which has run to the moon and also has no earnings. Currently, as
best as we can determine, analysts have the following concensus: 1999
loss with a range of minus one cent to minus twenty five cents.
First quarter 1999: minus four cents to minus thirteen cents with a
concensus of minus nine cents. So the analysts will probably not
move off of their current opinions for a while.
4. When asked about the above opinions ODSI was far more optimistic.
They reiterated their strong balance sheet with a book of around 2.60
per share, a cash position of around 20 million, and no debt. The
restructuring is behind them, they continue to cut costs and
outsource certain functions and are targeting a breakeven performance
by the second quarter. Though the first quarter is off the a very
good start, most technology companies require a very strong third
month to have good quarter and since March has just begun and it will
require shipments of both their hardware and software products as you
might expect they were very cautious about projecting how this
quarter will end. They were quite bullish though on the second and
third quarters since their government sales are usually very good
during this period. As was stated on the restructuring CC, ODSI
intends to return to profitability in 1999 and there was every
indication during this update review that they are on plan to do just
that.
The above is a best efforts to objectively state what was discussed.
There was no deviation from previous ODSI statements and the update
of their progress so far in 1999 is consistent with their
objectives and projections. We continue to hold here and have been
adding to our positions periodically. Hope this helps. Any input
from others on the thread always appreciated. |
