Deconstructing Thomas E. Claugus...
Well, I took a long beach weekend only to return to well over 200 WAVX posts. I've read them all. Thanks especially to Steve, Marty, John, 24601, Weby, Wooly, Jess, and others whose posts have been dead-on.
I went out and bought Barron's and read the piece that features Claugus, whose fund, as the article pointed out, has been net short for SIX YEARS. I repeat, his firm has been net short for SIX YEARS.
Uhhh... think about that. During the most historic rise in the history of our markets, his firm has been, in the main, short.
Further, Claugus came to investment management from "chemicals and plastics businesses." That's certainly an interesting background.
I've been in e-commerce now for a few years as a consultant and professional service provider... and in the New Economy... plastics and chemicals companies are not exactly conspicuous for their thought leadership. (Some of them have yet to snap to the importance of creating customer/trading partner extranets much less online trading communities.)
Now, to his specific remarks about WAVX. Here are his own words, "Wave's business is providing a hardware/software solution for e-commerce to allow all sizes of transactions, especially micro-transactions." Well, he was close until he started to describe Wave's business.
He then pulls out the classic shorter chestnut re: lack of revenues. Here's his take, "The company has been around since 1988 and has total revenues over that 12-year period of less than $25,000." Oh, God, that's damning. C'mon, now, Tom, you can do better than that? We're sophisticated, Web-savvy investors... who understand that a development stage company CAN earn a billion-dollar market cap if it makes a compelling enough case and has a more than reasonable shot at success.
Here's what I gather is his best shot: "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." Oh, by the way, Tom, the OEM gets a cut from these microtransactions. It's not like it is today: where they sell a PC, earn a one-time laser-sharp margin, then wait for obsolescence to kick in. We're talking an ongoing revenue stream... spiked by nifty content offerings, etc.
Tom, have you heard of Dell? Well, they're in the process of actively considering giving away PCs in exchange for some sort of ISP subscription. Well, that model, oddly enough, sounds a lot like what a WAVX OEM, pcfreecomputers.com, is going to do. In fact, the whole free PC/ISP convergence is gaining tremendous momentum. Why there's even a company called AOL that is considering giving away free PCs in exchange for a long-term, premium-service commitment. Oh, and by the way, AOL has purchased WAVX shares on the open market.
They also were quoted in a Bloomberg article as saying that they only invest in companies with whom they see a strategic tie-in.
Then, Tom, you go on and talk about how content providers will be reluctant to embrace WAVX. I guess, the fact that WAVX has agreements with over 500 content providers is meaningless. Then, you cap off you're mis-information by speaking of consumer reluctance to do business with an "unknown company." However, Tom, they'll probably be willing to do business with Dell, right? And if Dell or Compaq or NEC or HP, in effect, endorses the "money chip" because it offers superior consumer protection against credit card fraud, do you REALLY think consumer reluctance is going to be an important issue?
Finally, Tom, you leave out the whole inTelicast connection. Why? I guess having to mention a proven innovator like Sarnoff would have been a little too difficult.
In sum, re: the Barron's piece... there is no there there.
Best Regards,
c m
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