Love that word "plunge":"Osicom Plunges as $90 Mln Contract Produces No Orders Santa Monica, California, April 21 (Bloomberg) -- Osicom
Technologies Inc. shares plunged as much as 49 percent after the
network equipment maker said a $90 million contract to make
wireless video phones produced no orders.
Osicom fell 8 3/8 to 10 1/2 at midday before a trading halt
requested by the company pending an announcement, the Nasdaq
Stock Market said. The shares fell as low as 9 1/4, the biggest
Nasdaq loser.
The shares had soared 20 percent on July 2 after the company
announced the contract to sell the phones to a Japanese company
it didn't identify. Yesterday, it issued a press release saying
no shipments of the devices are planned because no orders were
received.
Chief Executive Par Chadah said in an interview the contract
was for only $175,000 for engineering work to design the phones.
He said Osicom had received nothing more.
The July announcement said shipments of the devices, then in
prototype stage, were expected to begin in February. Chief
Financial Officer John Gorman said the agreement ''could double
the Far East division's current revenue base.'' Gorman left
Osicom two months later in September.
The announcement was good news for investors in the Santa
Monica-based company, which lost more than $30 million over the
prior four years. The contract's estimated value nearly equaled
the $94.9 million in revenue the company would report for fiscal
1999, which ended Jan. 31.
Viewed as Positive
''That's pretty significant for a company this size,'' said
Charles Elson, a professor of securities law at Stetson College
of Law in St. Petersburg, Florida. ''The market viewed it as an
extremely positive development.''
Chadah, in the interview last week, denied the press release
misled investors.
''We had a fairly good faith basis to convey what we
conveyed,'' he said. ''It's a deal, but it doesn't say it's an
agreement with a guaranteed value of $90 million.''
Osicom's July press release described the device as a
''wireless personal digital assistant'' or PDA, with a built-in
video screen and camera. It said the device would let callers see
still images of each other ''in addition to a conventional voice
conversation.''
Company literature, in English and Japanese, describes the
device, dubbed Palra. It weighs 1.1 pounds and is 3 1/4 inches
wide, 7 inches long and 1.5 inches thick. Its battery lasts for
1.5 hours, and it can be used to download games from the
Internet. It was developed by Uni Precision, Osicom's Hong Kong
manufacturing unit, which would have made the device at its plant
in China.
Strings Attached
While the press release described the device as
''wireless,'' it must be connected by wire to a wireless phone,
Chadah said. Although the release said the PDA allows users to
see and hear each other, it can't send or transmit on its own, he
said.
Chadah, who said he's never seen a demonstration of Palra,
said the contract didn't specify a number of units to be shipped.
He said he couldn't identify the Japanese customer because of a
confidentiality clause in the contract.
He said although he'd never heard of the customer before the
contract, Osicom didn't do a credit check on the company before
issuing the July press release.
Chadah said the unnamed customer was developing services to
be delivered on Palra with a Japanese wireless company, NTT
DoCoMo. NTT DoCoMo, when provided with Osicom's product-
description literature, said it had no knowledge of Palra.
''Our procurement department has no record of receiving a
proposal for equipment with specifications matching those of
Osicom's,'' said Masami Kawasaki, a spokeswoman for NTT DoCoMo.
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