Hello everyone, I hope all had a wonderful fourth of July.
Elane, here is a little article <ggg> on Clarent (CLRN) and Niche markets.
The article says there is still plenty of room for niche players.
Something I have felt all along that DGIV is!
Clarent is a sleeper in a
turbulent market
By Gracian Mack
Redherring.com
July 3, 1999
In the frenzied trading days before the Fourth of July
long weekend, the offering of 4 million shares by
Clarent (Nasdaq: CLRN) may have slipped under the
radar of veteran stock watchers.
After closing up 70 percent on
Thursday, the day of its IPO, the
maker of Internet protocol (IP)
telephony systems tacked on
another 50 percent gain on Friday,
rising $13.19 to close at $38.69.
While investors were being
wowed by triple-digit increases in
other stocks, lead manager Credit
Suisse First Boston quietly priced Clarent shares at the
top of the $13-$15 filing range. Without much fanfare,
CS First Boston and comanagers BancBoston
Robertson Stephens (NYSE: BKB), Thomas Weisel
Partners, and U.S. Bancorp Piper Jaffray drummed up
enough buyer enthusiasm that by the end of Thursday,
shares of the Redwood, California-based company had
nearly doubled in price, up 70 percent to close at $25.50.
Clarent provides Internet protocol
telephony systems, which allow
the transmission of voice, fax, and
data via the Internet and similar
communications networks.
"Companies providing software
and technology related to the
Internet have seen strong gains
upon debut as the market
embraces firms in industries with
explosive growth potential," says
Tom Taulli, an analyst at Edgar Online (Nasdaq:
EDGR).
GROWING NICHE
Among Clarent's competitors are 3Com (Nasdaq:
COMS), Cisco Systems (Nasdaq: CSCO), and Lucent
Technologies (NYSE: LU). But despite the
heavyweight field of competition, Irv DeGraw, research
director at Stockstowatch.com, says, "We are looking at
an industry in its growth stage. It is still an area that is
wide open, and a niche player can come up."
According to a 1998 Frost & Sullivan report, the total
number of worldwide voice minutes running over
Internet protocol-based data networks is expected to
grow from 6.3 million in 1997 to 8.8 billion in 2002,
representing a compound annual growth rate of 325
percent for the period. Accordingly, spending on IP
telephony equipment is projected to grow from $47.3
million in 1997 to $3.2 billion in 2002, representing a
compound annual growth rate of 132 percent.
Mr. Taulli also notes that Clarent has Goldman Sachs
(NYSE: GS) as a minority investor. "That is stamp of
approval at any time," says Mr. Taulli. In fact, after the
offering Goldman holds an eight-percent stake in the
company. Also on board as an institutional investor is
Intel (Nasdaq: INTC), which now holds a stake of
approximately six percent. Clarent's largest shareholder
is WK Technology Funds of Taiwan, with a 19.22
percent stake.
EMERGING MARKETS
But it is Clarent's partners and customer base that may
provide the best clue as why U.S. investors let this
company sleep during this week's raucous trading.
Although AT&T (NYSE: T) accounted for 36 percent
of the company's 1998 net revenue and Technet
International accounted for 12 percent, the company's
traditional target market is entities throughout Belgium,
Germany, Japan, the People's Republic of China, South
Korea, Spain, Taiwan, and the United Kingdom.
Most of those regions are emerging markets
themselves, so Clarent may be buttressing its
developmental stage on those willing to accept newer
and cheaper technology companies, rather waiting to be
courted by worldwide giants such as Lucent and 3Com.
A patient investor environment is just what Clarent
needs while it gets a firmer handle on cash. At the end
of 1999's first quarter, the company posted an
accumulated deficit of $13.6 million. But management
appears to be addressing certain cost containment
issues. Net income losses declined slightly last year to
$5.4 million, or a loss of $1.00 per share, from $5.8
million, or a loss of $1.65 per share in the prior year.
The combination of institutional support, emerging
market customers, and a successful stock offering that
raised $60 million should bode well for Clarent when
analysts begin covering the company in a few weeks.
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