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Technology Stocks : WAVX Anyone? -- Ignore unavailable to you. Want to Upgrade?

To: Wooly who wrote (7676)	7/3/1999 12:24:00 PM
From: Mammon	Read Replies (1) \| Respond to of 11417

Hi all! I found out why the shorters are here. (temporarily!) Barron's this week, which I subscribe to online also, has an article about a guy who runs a hedge fund in atlanta that's "net short" for Atlanta-based GMT Capital. He previously spent 17 years as a manager of chemicals and plastics businesses, preparing and executing business plans. He's long energy stocks. In the article, he mentions shorting Amazon, etoys and WAVX. He just doesn't seem to think the boxmakers will put the meters in the boxes, doesn't seem familiar with intelecast, etc. He mentions that the company's been around since 1988, says that companies like cybercash haven't had much success with microtransactions, doesn't think consumers will be willing to send money to an unknown company like wave systems, and concludes "if the microtransaction market ultimately becomes an attractive one, we think the big players like Visa will dominate it, not some company with neat-o encrytion technology like Wave Systems." Well! Is that all this was about? The article, for someone who is familiar with the roadshow information, is nothing to worry about. have a happy fourth, all!

To: Wooly who wrote (7676)	7/3/1999 12:27:00 PM
From: genejockey	Read Replies (2) \| Respond to of 11417

Nice Barron's Slam Job article on WAVX this weekend. Look at the: Reluctantly Short A fund chief finds shares to like and some (not solely 'Net issues) to scorn An Interview With Thomas E. Claugus Best lines "Shares issued in recent private placements have just been registered for sale and could hit the market shortly" & "We think the stock will go back to the low single-digit level" LOL Was curious why this stock sucked, now I know why... it's using the failed CYCH business model... uh oh. CUST is a fav. short of mine that's going for the tankaroo soon using the same hopeless business model. Only third party that me or Joe Blow is going to hand their money over to as a depository better have the name VISA or MasterCard or have FDIC stamped on the door. Send money to CYCH, CUST or WAVX... don't think so. Interesting that on Friday, 10% of the total volume traded went off at the close/after hours at the Ask with the last trade being at 17 and a block trade of 10K and several 5K blocks at 3/8... seems like some people wanted to unload quickly before next week. Weird to be unloading on such a bullish day. What do they know?--- gj interactive.wsj.com Some excerpts: An Interview With Thomas E. Claugus -- Before turning to portfolio management in 1990, Tom spent 17 years in the manufacturing trenches as a manager of chemicals and plastics businesses, preparing and executing business plans. This experience has served him well. In running the Bay Resources hedge fund for Atlanta-based GMT Capital, he outperformed the Standard & Poor's 500 in five of the past six years while remaining net short. He says he'd rather not be short, but his asset allocation approach still dictates it. Q: Why unfortunately? Being net short, you've handily outperformed the S&P 500 in five of the past six years. The exception was 1995. A: I really don't like shorting. Your downside gain is limited to zero in any stock, and your upside loss is limitless if you're forced to cover. Our asset-allocation approach has kept us net short in one of the biggest bull markets in history. We have made excellent returns over that time because that same buoyant market has provided extraordinarily overvalued short targets. However, I still wish we had been net long. Q: Are there any other factors in your ability to pick good shorts? A: There are two important things to note from my background in respect to how our fund's management is different from most. First, I have managed large manufacturers of chemicals and plastics and executed business plans under very difficult and varied environments. This has given me very deep respect for good management and just how difficult it is to add value in an enterprise. Secondly, I learned to manage money with my very own money, not on Wall Street. This means I never had any limitations and very early on had to deal with asset allocation and risk management. Learning to invest with your own money is more expensive than graduate business school, but ingrains the importance of discipline and in-depth due diligence. Partly because of my background I think we are better qualified than most to judge whether or not a business plan is a good one and whether the existing management team can execute it. We like to say that we look for two classes of shorts. The first is, translating a Mexican saying: The skinny dog gets more fleas. The second is an "Evel Knievel short." A skinny-dog short is a company with lots of competition, a small market share, and hopefully weak finances. An Evel Knievel is a company with a new product or service that will fail to meet expectations -- i.e., won't make it across the canyon. Of course, our favorite short is the Combo Dog, which is a skinny dog that tries, and hopefully fails, to jump the canyon. It combines the best characteristics of both types Q: Okay, tell us some stories. A: One company that we have been shorting recently is Wave Systems. Wave's business is providing a hardware/software solution for e-commerce to allow all sizes of transactions, especially micro-transactions. The company has been around since 1988 and has total revenues over that 12-year period of less than $25,000. The stock languished for years in the $1-$4 range until recently. A series of private stock placements coupled with optimistic press releases and overall Internet hype pushed the stock as high as $29 in March. It now stands at 18 1/4 . Wave Systems in the past tried to sell their technology, with little success. Their current business model is to give away their technology for free, and to be a middleman in each transaction. Their EMBASSY system will be embedded in I/O chips used in PCs. A customer will contact Wave and buy credit to be stored securely on his PC. That customer can then buy small items, like MP3 files or computer games on a pay-per-view basis. Wave envisions keeping 40% of the price of the transaction. The computer manufacturer will get 10% as his incentive to install the technology in the first place, and the content provider will get 50%. Contrast that with Visa, which keeps only 2%-3% of each transaction. We think the company has a very limited chance of success. Computer manufacturers must first accept this e-commerce solution and install it on a sufficiently large customer base. Content providers must view this as a viable way to be paid and modify their product offerings. Content providers must also be willing to give up 50% of the revenues of the transaction just to transact. Finally, consumers must be willing to send money to an unknown company like Wave Systems to deposit in the "cash register" on his PC and must be willing to keep that money there until he transacts. All of these steps seem highly unlikely to us. Several competitors, including CyberCash, offer e-commerce solutions for micro-transactions. None has had much success so far. If the micro-transaction market ultimately becomes an attractive one, we think the big players like Visa will dominate it, not some company with neat-o encryption technology like Wave Systems. Q: So what's it worth? A: After the completion of a recently announced acquisition, the company will have 34.5 million shares outstanding, giving it a hefty market capitalization of $630 million. Wave has $21 million in cash and is losing $3.7 million per quarter. Shares issued in recent private placements have just been registered for sale and could hit the market shortly. We think the stock will go back to the low single-digit level.