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Technology Stocks : Vertel (VRTL) 10xbagger in the making -- Ignore unavailable to you. Want to Upgrade?

To: Adam Smith who wrote (295)	1/22/2000 5:08:00 AM
From: Brian K. Winchell	Read Replies (1) \| Respond to of 465

Vertel Fiber Optics and Network Mediation January 21, 2000 - The vast majority of small-cap stocks continue to languish in obscurity, but the few that are moving up have really shown some pop lately. One company hinting at such a pop is Vertel (Nasdaq:VRTL), a maker of network management software that facilitates the interconnection of different kinds of telecom networks and systems. The stock spent much of last year in the $1 to $3 range, but it jumped as high as $14 last month after the rollout of a new product with blockbuster potential. After drifting back a bit, Vertel is on the move again in fairly heavy volume, gaining 1-7/8 to 11-13/16 on 5.3 million shares Thursday. Vertel is clearly positioned in front of a very hot market opportunity. Demand for network management solutions is soaring in general, and Vertel's target market seems especially ripe to explode. Vertel's products are aimed at the telecom industry, where carriers are faced with a myriad of management and performance issues related to the interconnection of different generations and layers of networks. Vertel's software is designed to facilitate the mediation process, for example, managing the exchange of voice, data or video from a fiber optic backbone to a DSL loop. Demand for this type of product is driven by the massive buildout of telecom and Internet infrastructure with next generation networking technology to meet demands for bandwidth and advanced capability. This buildout is happening not only in the US, but internationally where Vertel is well established with telecom carriers. The company has already sold its Telecommunications Managed Network (TMN) products to many major carriers, giving Vertel an advantage in marketing its newest platform called eORB. ORB stands for Object Request Broker. This is the product that could make or break Vertel's emergence from small-cap obscurity. The advantages of the eORB software package are speed and size. Mediation in telecom networks is notoriously slow, so the convergence of voice, data and video traffic is forcing the need for advancement. eORB is designed to perform significantly faster by eliminating the reformatting of information. eORB also works across different operating systems such as NT, Unix and Linux. Furthermore, the software is extremely small so embedding it in devices such as wireless products is possible. One of Vertel's first customers for eORB is Tellium, which last month announced that it plans to embed the software in its optical switches. If Vertel can exploit its existing customer base, including big name players such as Lucent, IBM, Deutsche Telecom and Korea Telecom, the company has a chance to grab a leading position in this potentially massive market for telecom networking middleware. It's too soon to tell whether eORB will perform as promised when customers implement it, so the next few months will be critical in gauging Vertel's prospects as an investment. And because Vertel is currently so small, with $18 million in sales and a market cap of $300 million, this may be its one big shot at rising from small-cap obscurity. The company is not yet profitable but that should change this year if the eORB launch succeeds. There are no major brokerage firms covering the stock, though, so there's no consensus earnings estimate as a reference. Investors can look at the lack of analyst coverage in one of two ways. Vertel may be relegated to the shadows for a very long time if it stays under the radar of Wall Street, but if it does execute well and pick up analyst coverage that could provide additional catalysts for the stock. All in all, this is a classic case of a very high-risk/high-reward type of investment. If Vertel's newest product lives up to its billing, then the company should experience explosive growth. If eORB instead stumbles out of the gate, then the sharp run-up in Vertel's stock price could be reversed in a heartbeat. There's no question Vertel is in an enviable position at the crossroads of fiber optic networks and network management solutions, it all comes down to executing on the opportunity.