Nice plug for the stock. Don't know anything about the company that issued the report but always nice to get publicity about a company in which you own stock.
" he SmallCap Investor
Stock of the Month
April 1999
FVC.COM
Nasdaq National Market: FVCX
PICTURE LOOKS SHARP FOR NASCENT NGI DEVELOPER
Imagine a student participating in a classroom 1,000 miles away. Or a
patient in one hospital receiving a real-time consultation from a
specialist on the other side of the globe that can also view the
patient's medical images. Or viewing a live, interactive product
demonstration from a company located across the country. And all
without leaving your hometown.
This amazing technology should become more and more commonplace over
the next few years, thanks to the buildout of the Next Generation
Internet (NGI). The current Internet is certainly adequate for sending
information in one direction -- e-mail, text documents, even one-way
video -- but if you want real-time, two-way high-quality video and
audio, bandwidth and lag problems create considerable difficulties. The
capabilities of the Next Generation Internet, however, seem astounding:
a powerhouse 100 to 1000 times faster than today's Internet that
provides for reliable, interactive theater-quality video, audio and
data communications with almost no lag. Even as you read this report,
the infrastructure that allows this to happen is under construction by
such household names as Bell Atlantic, EDS, NEC, Nortel, Qwest,
Lucent... and little-known FVC.COM.
FVC.COM provides high-quality, cost-effective video networking
solutions for the Next Generation Internet that integrate video with
voice and data while leveraging existing network infrastructures. The
company's products enable end-to-end video in a wide range of room and
desktop environments for video applications from distance meetings to
distance medicine. Additionally, FVC.COM boasts a line of broadcast
solutions for today's Internet that brings video streaming to
web-enabled PCs worldwide. This technology, compatible with streaming
media technologies from Microsoft and Real Networks, allows companies
to broadcast employee briefings directly to workers at their desks,
lectures to students at their homes, and many other uses for one-way
video streaming.
FVC.COM sells its products worldwide through original equipment
manufacturer (OEM) partners, distributors and resellers. The company
has established important strategic relationships with leading
telecommunication and networking companies throughout the world, such
as Ascend Communications, Bell Atlantic Network Integration, British
Telecom, EDS, IBM, Lucent Technologies, NEC and Nortel.
Technology pioneer Ralph Ungermann, co-founder of Zilog, an early
microprocessor industry leader, and Ungermann-Bass, developer of the
first commercial network interface card which allowed personal
computers to connect to local area networks, launched FVC.COM.
Ungermann is striving to build FVC.COM into the supplier of
infrastructure for the next networking evolution, the Next Generation
Internet.
Analysts predict that the high-quality videoconferencing of the Next
Generation Internet will cause its use to explode, similar to the rise
of fax machines in the mid-1980s. A Hambrecht & Quist analyst estimates
that the market for the kind of video networking components offered by
FVC.COM will surge from less than $100 million in 1998 to $1.4 billion
in 2001.
Next Generation Internet projects using FVC.COM equipment are now
underway worldwide:
* San Antonio has launched its "Smart City" project, designed to
provide collaborative two-way interactive voice, video and data
communication between educational, medical, governmental and research
facilities.
* New York City is building an NGI video network for its Human
Resources Administration that should reduce travel time and costs of
executives and managers by enabling them to participate in video
conferences and receive multimedia broadcasts at their PCs. Employees
and clients can also take advantage of distance learning programs by
accessing both live and archived video course materials.
* VA Healthcare System of Ohio, an integrated healthcare network of the
United States Department of Veterans Affairs (VA), is constructing an
advanced interactive video network for telemedicine and administrative
conferencing. The network is designed to help improve the delivery of
health care to increasing numbers of the nation's veterans in a
cost-efficient manner. The VA estimates that using the new video
network will save over $800,000 per year in staff time alone.
* British Airways is building advanced, fully-integrated video-enabled
networks to allow it to utilize live interactive videoconferencing and
video broadcast for strategic business applications throughout its
organization.
* Two California school districts are creating a real-time video
learning network to enable faculty and students to access a broad range
of course materials, content-rich multimedia and distance learning
applications.
* The U.S. Army National Guard is deploying a distance training video
network that will eventually connect over 700 classrooms in 53 states
and territories.
RISING REVENUES, PROFITS MAY OFFSET RISK FACTORS
FVC.COM, founded in October 1993, has displayed consistently impressive
revenue increases and turned the corner to profitability in the second
quarter of 1998. For fiscal 1998, which ended December 31, the company
reported revenues of $44.4 million, an increase of 136% over 1997
revenues of $18.8 million. Net income for the year totaled $1.1 million
(excluding a one-time charge), or $0.07 per share, compared with a net
loss of $4.3 million, or $1.44 per share, for 1997. Fourth-quarter
revenues totaled $12.3 million, a 61% increase over the $7.6 million
reported in the prior-year period. Net income was $1.2 million, or
$0.07 per share, compared with a net loss of $100,000, or $0.03 per
share, in the same quarter of the previous year.
------------------------------
REVENUE GROWTH
1995 $ 3,670,000
1996 $12,093,000
1997 $18,771,000
1998 $44,351,000
1999 (Est.) $70,000,000
------------------------------
Going forward, the average 1999 earnings estimate of the five analysts
covering FVC.COM equals $0.47 per share. Fiscal 2000 estimates range
from $0.80 to $1.03 per share. These estimates are fully-taxed figures,
even though FVC.COM still has available net operating loss
carryforwards which it will use to lower taxes. The company, in an
attempt to facilitate earnings comparisons, says it will also report
pro-forma fully-taxed earnings.
This January, FVC.COM appointed Richard M. Beyer President and Chief
Executive Officer. A former President and Chief Operating Officer of
VLSI Technology and Chief Operating Officer of National Semiconductor,
Beyer brings over 20 years' experience in the technology industry and
holds an MBA from Columbia University. According to Ralph Ungermann,
who left his CEO position to become Chairman of the Board with Beyer's
appointment, "This new management structure will allow me to focus my
full attention on the company's vision and critical industry issues
while Rich runs the company. Having someone of Rich's caliber join
FVC.COM is the next step in building on our leadership in deploying
video solutions for the broadband Next Generation Internet."
While FVC.COM appears to show enormous potential, investors should
understand the risk factors. FVC.COM is in its initial stages of
growth, for example, and fluctuations in quarterly financial
performance are likely. FVC.COM's market is relatively new and the
company's prospects are dependent on wide market acceptance of video
networking. While the company has worked to reduce its customer
concentration, it still derives a significant portion of revenues from
one source, Nortel. Finally, FVC.COM faces all other normal business
risks, such as increased competition and pricing pressures.
Another possible cause for concern is the large amount of insider sales
that occurred in February. According to the company, insiders agreed
not to sell their shares for a period of time after FVC.COM went public
in April 1998 (at $13 per share via underwriters BancAmerica Robertson
Stephens, Bear, Stearns & Co. Inc. and Hambrecht & Quist). In January
1999, these lock-up agreements expired and insiders were allowed to
sell. Since this was the first time company management was able to sell
shares of its newly public company, it's reasonable to see some
selling. While sales by the company's co-founders were only a small
percentage of their holdings, sales by Alan J. McMillan (Vice
President, Sales) and James M. Nielsen (Vice President, Marketing) have
been significant.
Despite these risks, FVC.COM offers tremendous potential and could see
explosive growth in sales and earnings over the next few years. FVC.COM
shares are currently trading at a low valuation and likely already take
into account the risks mentioned above. If the company comes though
with its earnings this year and the market awards the stock a
reasonable P/E ratio, shares could start moving back towards $20 per
share. And with FVC.COM's enormous opportunity in the emerging video
networking market, shares may ultimately trade at much higher levels.
FVC.COM deserves serious consideration from risk-tolerant smallcap
investors.
--The SmallCap Investor
Company Name: FVC.COM
Nasdaq National Market: FVCX
Stock price on date of report: $11.625 bid, $11.75 ask
52 Week Range: low $7.50, high $19.00
Diluted shares outstanding: 17,522,000
Market cap: $205 million
Book value: $2.26
Insider ownership: 30% (3-29-99)
Institutional ownership: 20% (12-31-98)
Website: fvc.com
(This report was written by The SmallCap Investor and has not been paid
for or approved by FVC.COM)
For more information on FVC.COM, please contact Elyse Phillips,
FVC.COM's Director of Corporate Communications at (408) 567-7230, or
Kristi Larson of Financial Relations Board at (415) 986-1591. You can
also request an investor relations packet by sending e-mail to Kristi
Larson at kxl@sf.frbd.com.
For a stock quote and links to additional information, please see:
quotecentral.com
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