TRIIBoy initiates "Run for The Hills The Cattle Are Dying" on ZICA.
check out this juicy article, while an even-handed article, one must realize that a company rarely changes its spots:
Zi Corp ZIC
Shares issued 30,733,817 Nov 9 close $17.35
Wed 10 Nov 99 Street Wire
CHINA MOVES ADVANCE ZI CORP
by Will Purcell
Zi Corporation continues to generate promotable news as it takes a new
approach to marketing its language technology in China, and around the
world. The company has entered into a licensing and royalty agreement for
its eZiText language processing technology, with China's Legend Computer
Systems Ltd. The technology will be integrated into a range of Legend
products, including set-top boxes and personal computers. The agreement is
the latest in a series of deals as the company looks forward once again to
making headway on its China venture.
Zi began life in 1987 as Cancom Ventures Inc., a junior capital pool
corporation listed on the Alberta Stock Exchange. The company completed the
requirement for a major transaction the following year, with the ho-hum
purchase of the Edmonton Secretarial College for $90,000. Another deal
quickly followed, which saw the company acquire all of the shares of United
Industrial Equipment Rentals Ltd., for just over $900,000. Cancom was now
training secretaries and renting industrial equipment, and changed its name
to the more appropriate Multi-Corp Inc. in the summer of 1990.
Multi-Corp soon tired of teaching secretaries to type, and unloaded the
College during the summer of 1991, to concentrate on its rental concern.
The company was less than successful at either venture, and its loss of
$70,000 in 1991 ballooned to $230,000 the following year, and increased to
$243,000 during 1993. Changes were called for, and Cancom Management took
over the day-to-day management of the rental business during 1993, but
bigger changes and greater takeovers were to quickly follow.
Late in 1993, Multi-Corp experienced a change of control, when Michael
Lobsinger took the helm of the lackluster company. With a June, 1990, high
of 28 cents, Multi-Corp shares had never been much of a market performer,
and they were going for 15 cents in early October of 1993. Market interest
suddenly picked up in Multi-Corp with the arrival of Mr.Lobsinger, and the
shares suddenly began to trade for well over $1 in late November. The
change of control was accompanied by a private placement for two million
units, completed at 10 cents a unit. It was a wonderful deal, with
Multi-Corp suddenly worth 10 times that amount, and Mr. Lobsinger purchased
90 per cent of the units.
The early share purchases also attracted some unwanted attention of a
political nature. Alberta premier, Ralph Klein, found himself temporarily
in hot water over charges he was in a conflict of interest situation by
promoting Multi-Corp at a time when his wife and relatives were
shareholders. The province's ethics commissioner cleared Mr. Klein of the
promotional charges, but the matter lingered for almost two years, until he
was ultimately cleared yet again, late in 1996.
The takeover by Mr. Lobsinger was accompanied by news of a new venture. In
three separate deals, Multi-Corp acquired the worldwide rights to computer
software and language technology relating to the translation of the
character based Chinese, Japanese and Korean languages into other character
languages and natural languages such as English. In order to acquire the
rights, Multi-Corp agreed to issue five million shares at 10 cents, make
payment of $400,000 (U.S.), and further annual licence fees.
Before 1993 drew to a close, Multi-Corp moved into the communications
sector. The company acquired TelPoint International, a private
telecommunications corporation in Texas, for $25,000, just over one million
shares, and 400,000 share purchase warrants. The move was followed by a
foray into South America, when the company laid out $4.2-million in stock
to acquire UTN do Brasil Consultoria Ltda., a telecommunications consulting
company. At the same time, Multi-Corp added Miami International Gateway
Inc. to its telecommunications portfolio for $1.77-million in cash and
shares.
The commitment to the telecommunications sector was solidified early in
1995, when United Industrial Equipment Rentals was sold to Liquidation
World for $2.16-million, and Multi-Corp's telecommunications holdings were
consolidated into one subsidiary, Miami International. The remainder of the
year was spent acquiring customer contracts for Miami. In July, the company
acquired the clients of two competing South American companies, and a month
later Multi-Corp added additional clients through another purchase. As 1995
drew to a close, Multi-Corp struck the biggest deal yet, acquiring the
customer contracts of NetXchange Telecom for an estimated $4-million. Other
acquisitions followed, but it appeared to have little positive impact on
Multi-Corp's bottom line. The company reported revenues of $4.26-million in
1994, just over $10-million in 1995, and well over $15-million on 1996,
most of it attributable to the telecommunications line. Unfortunately, net
losses grew at an even faster pace, climbing from $3.35-million in 1994 to
nearly $9-million in 1995, and the losses reached a staggering
$20.7-million in 1996.
It was time for corrective action, and Multi-Corp chose another change of
direction, and of course a new name. There were changes in management, and
the first item on the agenda of the newly named Zi Corp. was unloading the
unprofitable Miami International. It came as a pleasant surprise to
shareholders, when the company announced it had found a buyer in a
Florida-based private telecommunications company, and revealed that the
purchase price would not be less than $30-million (U.S.). It seemed too
good to be true, and sure enough, it was. The deal fell through early in
1997, when it became apparent that the buyer could not come up with the
cash. A search for a new buyer began, and a month later one was found.
It was not much of a deal by comparison. A private Florida concern, headed
by then Multi-Corp director, Ian Barrett, agreed to purchase Miami and
assume its liabilities in exchange for a paltry $1.5-million (U.S.) spread
over four years. To add insult to injury, Mr. Barrett and Custom could
acquire Miami by paying as little as $150,000 (U.S.) immediately. In
addition, a payment of $1.0-million (U.S.) would be made if gross revenues
exceeded $24-million (U.S.) by the fall of 1998. The terms were academic
however, as no cash was ever received. The once promotable Miami apparently
ceased operation and is now insolvent.
With the telecommunications mistake behind them, Mr. Lobsinger chose to
concentrate on language technology. The company had been slowly expanding
its role in the sector, but potholes marked this road as well. Late in
1995, an agreement was reached with Gaozhou Dong Ling Electronics Company
granting Gaozhou the right to use the Ziran Input System technology to
manufacture and market any product approved by Zi. Gaozhou was to pay Zi a
licence fee of $3.5-million (U.S.) and royalty fees for each unit of
product sold. Unfortunately, Gaozhou did not place any orders with Zi
Corp., and no payment was ever received.
In September of 1994 the company had begun providing translation services,
based in Hong Kong, and earned modest revenues before the service was
terminated in 1998. Zi also offered consulting services in North America
for those seeking to use the Internet to market products and services, and
also provided internet Web development services. These functions were also
abandoned by early 1998. Throughout 1996 and 1997, the company struck a
number of deals with various companies, but most failed to live up to
expectations.
Zi Corp. chose a different tack in 1998, and as always, it finally appears
to be paying off. The company had been concentrating on attempting to
market its software directly, but recently has been signing licensing
agreements which would have its technology embedded in devices, such as
telephones, and set top boxes. Zi's main asset is the Zi input system,
which allows the user to write Chinese and other character languages using
just eight keys, and a list of key combinations required to create the
character. To type a character, the user presses the appropriate keys until
a match is found on the list. The system can also be used for other
languages, such as English, whereby only a certain number of letters would
need to be typed in order to key in a word or phrase. There is an average
of 14 strokes in a Chinese character, but the Zi system allows the user to
efficiently enter one with fewer than three strokes in most cases.
Early in 1998, Zi reached agreement with Ericsson Mobile Communications
whereby Ericsson would embed Zi technology into its cellular phones, and
would pay licensing and royalty fees as a result. Late last year, a deal
was signed with Network Computer Inc. to have Zi input software integrated
with Network's TV navigator software.
The trickle of deals became a torrent in July of 1999. Zi has signed a
number of deals licensing its input software for use in cellular phones.
Xiamen Overseas Chinese Electronic was first in line, but was quickly
followed by similar arrangements with Konka Group Ltd., Synchronization
Inc., and Hutel Co. Ltd., as the Zi input system seemed to gain greater
acceptance. The move to the Zi system took a major leap when the company
added agreements with Alcatel, of France, along with China's Capitel, and
Mobicom Corp. In particular, the Alcatel deal moves Zi into the European
market, and allows it to use its technology with European languages. Mr.
Lobsinger said that he expected the Zi technology would be incorporated
into a majority of the cellular phones sold in China next year, and added
that the Alcatel deal would begin to place the technology in phones around
the world.
Deals were also signed bringing Zi technology to set top boxes, devices
designed to allow consumers to use their television sets as computers. Zi
reached agreements with China's Ministry of Information Industries, Sichuan
New Tech Digital Equipment Co, and SVA Computer Co., allowing the companies
to incorporate Zi's language processing system in these boxes, as well as
other appliances, and computers. Mr. Lobsinger said that there were only 10
million computers in China, but almost 320 million television sets. He said
that existing technology required computer users to have a knowledge of
English, but set top boxes using his company's input system would allow all
to have access to the Internet.
Tuesday's deal with Legend appears to be another big step forward. Legend
is the largest producer of computer products in China, accounting for
nearly 17 per cent of the market. The company also produces set-top boxes,
servers, notebook computers, and motherboards. Legend is a major licensee
of the Microsoft Venus project, which was designed to put millions of
Chinese on the Internet, but used an input system that would require the
user to understand English input. Mr. Lobsinger said that the deal required
hard work on the part of Zi to prove that their system would work with the
Venus system. "Legend said that they didn't think we could do it, and
Microsoft said it was impossible," said Mr. Lobsinger, adding that "Zi went
ahead and did it." The Legend set-top box with Zi's technology will allow
users to surf the Internet, write E-mail and enter into e-commerce
transactions, all from the remote control of the television, and without
the need to understand English.
Eight years after abandoning the secretarial school, Zi moved back into
education in a major way. The company recently acquired all of the
outstanding shares of Beijing Oz Education Network System Co. Ltd., for
100,000 shares of Zi Corp. The deal moves Zi into Web-based education,
providing on-line postsecondary training, education services for school
children, and employment retraining. The Chinese government is apparently
an active participant, and several ministries have agreed to work with Zi
to develop and distribute the courseware. Mr. Lobsinger described this
development as an exciting opportunity for Zi, noting that there were just
under one million schools in China. He said that utilizing the Zi input
system for education would provide a far greater access to the Chinese
people, most of whom do not understand English.
The move to embedding its technology seems to have caught the market's
interest. The company's shares had reached a high of $11.87 in the spring
of 1996, but declined relentlessly as the telecommunications business
slowly failed. The decline continued into this year, and the stock hit a
low of $1.23 late in June. A sharp rally began in early July, as the new
deals began to roll in. A Zi share was trading for more than $10 by
mid-August, and reached $17.40 in late October. Zi traded as high as $17.75
Tuesday before closing at $17.35, up $1.85 on the day.
This appreciation in stock price has not yet been accompanied by an
improvement to the bottom line, however. The company recovered from its
$20-million loss in 1996, posting a loss of $12.6-million the following
year, and only $2.3-million in 1998. The company has since suffered a bit
of a relapse, reporting a six-month loss of $2.64-million, as revenues were
cut in half, and operating costs nearly doubled. Mr. Lobsinger said that
this was to be expected, as the company pursued its new course. He said
that the effects of the new deals would start to show up in the third
quarter financials, and to a much greater degree in the final quarter. Mr.
Lobsinger said he expected the company to show its first ever profit at
some point in 2000, perhaps as early as the first or second quarter of that
year, as the licensing fees and royalties begin to roll in.
Mr. Lobsinger said that Zi was now showing good success in the Chinese
market. "We picked a market that was pretty difficult to enter, one with
significant hurdles," he said, noting that the company had acquired a
number of really good partners along the way, including the government.
"The other thing we have done, we have based our research and development
in Beijing," he said, adding that the company was expanding the operation,
hiring software developers and programmers locally. He said that Zi had
never lost sight of its goal and had stuck to its plan, although the
conceded the company had "made a few mistakes" in earlier days.
Zi may not have been the only company making mistakes. "I was thrown out of
the offices of some pretty impressive computer manufacturers that said I
didn't know what I was doing," he stated, adding that the common belief was
that the Chinese computer user would learn English. As for what the future
might hold for Zi Corp and its technology, Mr. Lobsinger simply said, "stay
tuned." Investors will no doubt stay tuned, waiting for Zi's next few
quarterly reports to see if the hoped for revenues do indeed materialize.
(c) Copyright 1999 Canjex Publishing Ltd. canada-stockwatch.com |
