Rande
Also are you familiar with ELCO?
Here are 2 Briefing.com articles that caught my eye:
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.
Briefing.com article on ELCOM.....
15:35 ET ******
ELCOM INTERNATIONAL (ELCO) 2 7/8 -3/32 Elcom reports Q4 revenues of
$186.8 million, just slightly under Q4 97's $186.8 million, and 1998 revenues of $763.6
million, just slightly higher than 1997's $760.1 million.. In other words, no growth in
sales. But 1998 shows big losses compared to 1997, with 1998 losses at more than
$25 million, compared to 1997's profit of over $14 million. The press release attributes
the "majority" of the losses to "restructuring" and non-cash charges, but $10.7 million is
a "reduction in reported gross profit." Overall, it reads like a company that got stuck
with inventory, slow demand, and collapsing prices. Ordinarily, it would look horrible,
and it certainly explains why Wall Street has ignored Elcom. But Elcom's price certainly
reflects this story as it carries an extremely small Price/Sales ratio of 0.10. However,
ELCO is now a play on a turnaround into an internet company, as it created an internet
subsidiary called elcom.com, for direct sales over the internet, and is converting its
proprietary PECOS ordering system into an intranet system. In addition, it is reducing
inventory as it transitions towards a "virtual inventory and delivery model." The company
also stated that it will open its elcom.com auction site in April. Today's release isn't
really news, as most of this was preannounced earlier. However, the company also
stated that they expect Q1 to show a loss of between $1 and $2 million. What they
really need to do is show revenue growth through the internet direct channel and intranet
business sales. When that happens, Elcom's stock has a chance to get valued more like
an internet company, which would put it at much higher levels than it is now. But Q1
reports, three months from now, probably won't show much of that, and Q2 reports are
six months away. Briefing.com previously wrote about Elcom on our Story Stocks page
on February 19, and also on our Stock Brief page on March 12.
Note that it has a big float of about 17M. Just wondering what you thought.
Thanks
TW
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