Will Cicso be looking at UBS and not WI-Lan?
UBS on the TSE $2.67 Canadian
December 2, 1999
StockHouse News Desk
By Chaya Cooperberg (ccooperberg@stockhouse.com)
UBS To Join Wi-LAN At California OFDM Symposium
Toronto, ONT, December 2/ SHfn/ -- For a month now, Unique Broadband Systems [V.UBS] has been flying-charting
exponential gains, trading on seven-figure volume and attracting more media interest than its seen in ten years of business. In a
matter of days, it went from a mere penny stock to well above $3 at one point.
The momentum may continue as Canadian high-tech plays, especially those in wireless, feel the heat of the limelight. Also, CEO
Alex Dolgonos and CFO Stephen Rosen have been invited by suddenly scorching Wi-LAN [T.WIN] to attend its symposium on
OFDM on December 2 in Santa Clara, Calif. With this great networking opportunity, and chance to discuss its MMDS technology
with industry high-flyers, UBS' day in the sun shows no signs of fading into the horizon.
In a previous interview with StockHouse at the height of the company's heavy trading volume, Stephen Rosen said, "This company
is not a short term thing, and I don't think the run is a short-term run either." His words, so far, have proved prophetic.
At the time, he attributed the sudden momentum to the market waking up and noticing "the
technology UBS has in-house." While he believes that's still true, he also notes that UBS is benefiting
significantly from the love-in investors have been holding recently for wireless plays in Canada.
Rosen cites a recent Cisco [CSCO] development that will see the network equipment manufacturer
enter the world of wireless leveraging MMDS technology, as proof that UBS is in the right place at the
right time. MMDS (multichannel multipoint distribution service) is a method of sending two-way data
signals over airwaves, and Cisco has developed a new technology, called VOFDM (vector orthogonal
frequency division multiplexing), that sends voice, data and video across a low-frequency signal that
doesn't require direct line of sight transmission. (Calgary-based Wi-LAN has also been heating up the
sector with its patented Wide-band OFDM technology to increase the capacity and speed of wireless
networks.) MMDS is a specialty of UBS, who has been selling related equipment for at least five or
six years, according to Rosen. "We're the only company that I know of that has digital broadband
outdoor MMDS equipment," he says. "We always knew that MMDS opportunities were popping up but with a giant like Cisco
jumping in and saying this is the way they want to go…."
While UBS is known for its digital audio broadcast (DAB) technology, Rosen points out, it has many other technologies and related
products to offer. "I don't think the market realizes the extent of the technology here yet," he muses. "It's just, unfortunately, when
companies like a Cisco or a Lucent or somebody that big in the industry, turns around and says, 'Hey, this is great,' that people start
looking around and saying, 'Who knows about this, who has this?'"
For years UBS has been developing the technology that the high-tech leaders are now embracing, Rosen says. "Where we've poured
money into our research and development programs over the past five years, the giants don't have to. They wait to see a market
emerge and then they go after it."
UBS isn't yet in the MMDS for high-speed Internet space, though, that Cisco is pursuing. In November 1998, UBS entered a
collaborative development partnership with Lucent Digital Video, a venture of Lucent Technologies, using MMDS to create digital
video solutions. "I think in view of where Cisco wants to go, it definitely opens up an opportunity for ideally us and Lucent to look at
competing technology," says Rosen. He explains that the basic premise for UBS' association with Lucent is based on the finalization
of a complete end-to-end digital MMDS solution, and Internet is definitely a part of that. "With companies like Cisco saying we want
to use MMDS, 'forget video, we'll use it for high-speed data, bi-directional Internet,' I have a feeling our partners at Lucent are going to
wake up to what we had talked about before, with regard to Internet."
In Rosen's opinion this would be a natural progression for the alliance, although the two companies are not in current discussions.
Neither is UBS in contact with Cisco on the subject of MMDS, although Rosen stresses the fact that UBS is not bound by any
exclusive agreements. "Would we talk to Cisco? Absolutely," he says. "The whole point of our being here is to increase shareholder
value. I'm not tied in to Lucent. They don't have equity in this company. So, if we could do business with Cisco as well, I would love
to."
The resurgence of MMDS, a retro technology hyped in the early '90s as "wireless cable", is gaining UBS market attention, as
evidenced by Wi-LAN's extended invitation. But it won't overshadow UBS' digital audio broadcast operations any time soon. "The two
technologies are so totally different, the applications are so totally different," says Rosen. "Companies in Canada like CBC and all
the private broadcasters who are in radio, MMDS means nothing to them. Obviously, those transitions from analog to digital are going
forward--the CD Radios and XM Radios of the world are moving forward, but you're talking two totally different services."
On the DAB side, UBS recently signed a teaming agreement with Hughes Network Systems to develop, manufacture, market and
sell products to the emerging digital radio market. By joining with Hughes, UBS has the opportunity to bid on large contracts it
wouldn't have the capacity to undertake on its own. "We have great technology, but there's no way UBS can go in today and bid on a
$100 million, or $50 million, or $200 million contract that involves a rollout in multiple cities," Rosen says candidly. "We don't have
the experience, we don't have the staffing. That's not where we want to go-that will take us years to develop, and a lot of money. It
would take away our focus on what has got us here, our R&D strengths." One such high-profile contract that the team is bidding on
involves providing ground repeater stations for XM Satellite Radio's [XMSR] broadcast network.
"Obviously, we're at the point where we're involved in negotiations on a specific application, a specific
contract, and hopefully, in the near term, both companies are going to come away with a good
contract," Rosen says carefully. But he refuses to comment on whether there will be any contract
news coming soon, or news on any portion of the company's business. "I can't answer that. I don't
know," he says. "We're always negotiating. We're not a one-product company. We're not a one
strategic partner company. So, we've got things out there on various fronts, lots of irons in the fire.
Who knows?"
One example of UBS' many initiatives underway, is its efforts to branch into China. "We have two of
our sales guys and engineers overseas right now in China looking at some opportunities," he says.
"There are numerous different markets that we can attack-there is DAB in China, there's definitely a
need for some of our cable TV products, our digital stuff, our QAM modulators, things like that."
Based on its current operations and signed deals, does Rosen believe UBS' escalating valuation (now
around $175 million) is deserved? Rosen answers with the question, "Do you think a company like
Wi-LAN is worth $800 million?
"Wi-LAN is worth $800 million with trailing revenues of $4 million, and albeit a very strong patent. Our trailing revenues are higher, our
immediate future revenues will probably be higher," he argues. "We have much more developed technology. If companies like Wi-LAN
are trading like crazy, and capped at such high value…I think it's just the furor of the whole wireless industry."
Does the CFO who believes his technology company will grow to be among the top five in the world, believe UBS is undervalued at
these levels? "I would think so, absolutely," he says convincingly. "As far as valuation goes, on a comparative basis around North
America and who's doing what, I absolutely think we're undervalued."
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