Must read - both pros and cons. At this price, 10 bagger with financing, without you lose 4 1/4 points.
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Thursday February 15, 4:51 pm Eastern Time
Press Release
SOURCE: Ameri-First Securities
Ameri-First Securities Reiterates Metricom, Inc. (MCOM) as an Aggressive Buy With a 12 Month Price Target of $60
DALLAS, Feb. 15 /PRNewswire/ -- The following report is being issued by Billy C. Bowden of Ameri-First Securities:
Light Up or Lights Out for Metricom / Ricochet
On February 8, 2001, Metricom (Nasdaq: MCOM - news) announced its year ending quarter, and the quarter was a disappointment at best. First, Metricom suffered a greater than expected loss of $3.71 (a share) vs. a loss of $2.51 (a share), and the new subscription adds were light, 34,000 as of December 21, 2000 ... signaling a slower adoption rate of Ricochet 2 than perhaps anticipated. On the morning of February 8, 2001, after numbers release, pre- conference call, Metricom traded down pre-open, and bled lower in two consecutive sessions. On Thursday, that same day, scrolling headlines continued a steady litany of more bad news, as the majority of analysts downgraded Metricom significantly. One noted analyst stated Metricom might soon don a zero shoe size, a small foot indeed. The irony here is that Metricom's footprint has been materially enhanced by the announced light up of Los Angeles, California, whose metropolitan population now tops 12 to 14 million people, encompassing an area that stretches from southern Orange County to Ventura County. This was in fact, much anticipated big news, lost in the shuffle of a bad market, low sub adds, and a draconian warning that Metricom needed future funding to continue as a going concern.
During the conference call, Metricom management offered no forward guidance. The analysts at the major wirehouses that covered Metricom, ran for the hills; abandoning Metricom like a ``buck toothed country cousin at a county fair.'' This was courageous indeed!? Metricom traded at $10.00 per share, give or take, before the announced year ending quarter results. So, at $6.00- $7.00 per share, the known analysts at the wire-houses cut their ratings on Metricom to neutrals and sells. In February 1999, these same analysts managed and participated in a secondary offering of 5 million shares at a trade- offering price of $87.00 per share. When banking opportunities abound, it is interesting how the ``country cousin'', then a hero ends up a zero. The point, beauty and value reside in the eye of the beholder, subjective. Opinions and ratings are often influenced by self interest, and of course fees. Nevertheless, the light up of Los Angeles is, in fact, significant and the value of that new city lit up will ultimately be reflected in the stock price of Metricom. Certainly, no one disagrees that Rico 2 modem sales have rolled out at a snail's pace. But, there are two huge challenges occurring simultaneously. A). The deployment and rollout of Ricochet. B). Creating effective marketing resulting in modem sales. First, Metricom has launched its network to date in 15 cities with a network population between 45 and 48 million. More importantly, the data delivery speeds have met or exceeded 128KBPS on a blended basis. Furthermore, no one has launched a network of this magnitude, this quickly, for less dollars, ever. More bang for less buck! Despite the disappointing modem sales, this network is coming together, and more importantly, the network is not buggy. To replicate a network with these numbers of pops, in a competing technology, would carry an aggregate cost north of 100 billion dollars. Therefore, Metricom/Ricochet has significant futuristic value as a wireless mobile internet access provider. The cost of spectrum and the hardware needed to create a new network will only escalate in the future. Therefore, an abandonment of Metricom/Ricochet due to unresolved forward funding seems most unlikely and extremely shortsighted. The two significant owners in Metricom/Ricochet, Vulcan Ventures and Worldcom, know the futuristic value of an operating wireless data network perhaps better than anyone. And it must be further noted, Metricom/Ricochet is the only wireless theme offering that Worldcom has in its arsenal.
The second challenge occurring at present is creating an effective marketing strategy. The network rollout has been handled in a most efficient and timely manner, considering the challenges. The marketing and building of brand awareness have been mishandled badly. Unfortunately however, Metricom/Ricochet is simply not in the mainstream or sub-conscious mind of the consumer. The marketing misfires are the real drag on modem sales, by no means is it the Ricochet's service or the lack of a real market for wireless mobile data. This market is real but unrealized. The consumer simply must be told, shown, Ricochet through intelligent marketing for Ricochet to become the standard and ubiquitous. Metricom/Ricochet's model is still by far the most ideal ... all you can use ... on a flat monthly rate of $79.00 per month, less than the on the go consumer might spend per month at Starbucks ... a value. How then does Metricom/Ricochet become the standard in its niche? Answer: Just fix the marketing!!! The service is superb.
The monies Metricom/Ricochet has spent on marketing so far have neither informed the public nor resulted in aggressive modem sales. There is a disconnect then, between the technology ... very sound ... and proper product placement. The Rico and Chet ads are too cute when you consider Ricochet is a new company, in a new sphere, with a new product offering. Metricom is not Intel and cannot risk cute ads like the Pentium III ads, when the world at large has no real idea what business Metricom is in, period. The public is further confused by the unclear relationship between Metricom, the company, the trading ticker MCOM, and Ricochet the product offering. Therefore, a clear, more straightforward marketing campaign will lead to greater numbers of subscribers. Further Metricom/Ricochet must educate the public to the advantages and disadvantages of Ricochet, vis-a-vis 3G, 2.5G, or the Bee Gees ... Does, ``Staying Alive'' come to mind? This accomplished, modem and subscription sales should kick in to overdrive and put Ricochet back on track to that all important break even and eventual profitability.
In the future, Metricom management must break free of its think tank mentality and move into a more real world, sales, and results mode. For too long Metricom has had the luxury and privilege to sell Ricochet at a rather casual pace. This too must change. Metricom must now manage the deployment and rollout of Ricochet and manage the price of the stock. Management must understand that the price of your stock is your report card.
Metricom/Ricochet Report Card to Date
Spring 2001
A- Roll out and deployment of the network. (Dreisbach and company).
Comments: Can't underestimate the navigational skills, and tediousness needed to acquire the necessary right of ways. Never easy to overcome City Hall. Can't underestimate the artful skills required coordinating all of the moving parts required to achieve confluence between the suppliers, the contractors, and the network. At the end of the day the network was a resounding success. Metricom/Ricochet is here today delivering data in 15 markets with a total pop of between 45 and 48 million at blended speeds of 128kbps.
A- Installations of the transceivers, waps, and the network operating centers.
Comments: Building out each city is a super-human challenge. Then when the network is debugged, offering reliable and consistent speeds, the engineers and managers that oversaw this effort must be recognized as competent and capable.
A- The continued build out of the launched cities, filling in the blanks, skips, and holes.
Comments: This is an ongoing act of good faith. In order to ensure that the subscriber gets his data as advertised, Metricom continues to build out its coverage in an already announced lightup. The road warrior then, can replicate his desktop in the field. Metricom has upheld its promise to deliver data at 128kbps in each market with minimal disconnects.
A+ The sale of secondary stock and bonds with the help of the wirehouses that paid for further deployment of the network.
Comments: Metricom raised needed monies that further helped pay for the network with little dilution to the shareholder.
D- The management of the stock after the offering.
Comments: Management focused on the deployment of the network, totally at the expense of the stock price. Now that chicken has come home to roost (there is no opportunity to raise capital in the debt equity markets with a weakened stock price). Metricom allowed the stock price to drift, and at times developed a non-responsive attitude toward its critics, short-sellers, and bad journalists. When Metricom/Ricochet has been assailed by uninformed third parties, management has not been properly offended or proactive about setting the record straight as is its duty to shareholders. Rest assured that Gates, Jobs, or Case feel paternal enough about their businesses, their children, their pride and joy to defend its accomplishments and good name. Public relations is a painful and exasperating side of the business, but nevertheless, cannot and should never be viewed as anything but a priority.
A+ The technology (modem) ... the reliability of the network and the size of the footprint to date.
Comments: Hats off to Metricom's management for being good engineers in all phases. Hats on to management for being weak salesmen. The network is an unqualified success. The modem is astonishing (figuring a way to use unlicensed spectrum). This is the greatest accomplishment of Metricom, the patents using the unlicensed spectrum are the crown jewels.
D- The Public relations and managed communiques between the shareholders and public.
Comments: Management has at times been cavalier about its shareholders despite proclamations to the contrary. Can't talk the talk, and not walk the walk. Metricom shareholders are the life-blood of the company and deserve respect, consideration, and cooperation at all times. Must not hide behind Fair Disclosure. You do yourselves and your constituents a real disservice. Fair Disclosure was never intended to chill information between a company and its constituents. Rather, it was intended to stop institutions from raining shares on an unsuspecting public because of material evidence disclosed to an institution and not to others in a way that allows that institution to benefit from a sale, or a buy of an equity because they enjoy the benefit of information not in the public domain. Fair Disclosure is not to be misused so a company can deny access to its shareholders because overzealous attorneys don't understand the essence of Fair Disclosure. Fair Disclosure is a shield, not a sword.
D- Press Releases
Comments: Press releases to date have been too infrequent, poorly written and vague, without the steady tom-tom drumbeat ... the necessary tapping out of news and progress to a loyal and devout shareholder core group. Further, management has, at times, been remote and aloof to the cries and appeals of a shareholder group that has often seen problems arising earlier than management. It is not to management's credit to let an advantage slip away when it ultimately benefits the company and the share price. Management should understand that shareholders want information in a timely way, and should never blow an opportunity to create more goodwill.
F- Marketing of Ricochet 2
Comments: The bad Avenger theme of Rico and Chet ... Boris and Natasha ... missed the mark horribly in building brand and awareness. Metricom simply must learn to live in internet time. If your business is fundamentally about sending and receiving data at warp speed, then isn't it incumbent upon one in that business to respect and live by a code that requires rapid recognition and early resolution of a problem.
A The logo
Comments: At first misperceived, but really, rather remarkable and brilliant upon further inspection. The graphic interplay possibilities are endless and creative. Also, the logo is aesthetically pleasing, hip, cool, and thoroughly modern. Why then was the logo abandoned in the very first television spots? How does a simple and effective logo like one shoe in the office, one outside the office tie into our Avenger friends ... Rico, a snooty, effete, super agent ... and Chet ... a Cher wanna-be, and a seemingly loose woman? Rico is no Sean Connery, and Chet is no Ursula Andress. Therefore, the connection between our Avenger friends and Ricochet, a near miraculous technology, with all the capabilities of truly changing the way the world communicates is totally lost on the public, and the consumer. Ultimately, because the logo is not used correctly and branding is not maximized, subscription rates suffer, further damaging the price of Metricom's stock.
A- The cost and replication of a network using competing technology
Comments: Ricochet is the only wireless data internet access provider to date with a real service and a sustainable model. The network is here today and the data transfer speeds are reliable and eight times the perceived competition. The competition would need to buy spectrum at cost prohibitive terms and then resell that spectrum on a metered usage basis to preempt Metricom/Ricochet. The Metricom/Ricochet network is the only network with protected patents using unlicensed spectrum. Metricom is still the only low cost mobile wireless data provider and the public will be educated to the Metricom advantages once marketing equals the engineering accomplishments of Ricochet.
A- A belief in Management
Comments: Because management has so effectively built the network and forged many important relationships, it's likely this team can adapt and learn from the many mistakes of the past. No one has built a network like Ricochet in the record time including 48 million plus POPS for less dollars ever than has present management. The network is a feat not to be diminished or under- appreciated. These are smart, capable people. It is probable this team can regroup and finish this network and restore Metricom's good name. But it is imperative this team never repeat the marketing mistakes of the past ....
The Good News ... Worldcom ... the cavalry is on the way.
Ricochet's window of opportunity relative to its perceived competition widens daily as licensed spectrum auctions are delayed and become more cost prohibitive. Ricochet 2 is a digital Dracula ... a good and wonderful technology that cannot and will not be killed by weak marketing, cash burn, or future ineffective decision making. Worldcom is ready to launch a 2,000 man sales team at their corporate clientele to get Ricochet into prime time. So with Worldcom finally kicking in marketing might, Ricochet subscribership should ramp up considerably. Worldcom was slow to deploy Ricochet earlier due to their obvious distraction and attempted takeover of Sprint. This is all behind Worldcom now and the new focus is squarely on Ricochet, Worldcom's only wireless offering. Worldcom further, is on record stating that they will rollout Ricochet to thirty markets by year end of 2001. This represents a seachange in the visibility and successful marketing of Ricochet. Worldcom's active and aggressive participation will drive both subscription rates and the price of Metricom. Therefore, Ameri-First Securities reiterates Metricom as an aggressive buy with a twelve month price of sixty dollars per share. We believe Metricom will be funded in some eleventh hour private deal and Metricom's good name will be restored.
Contact: Billy C. Bowden of Ameri-First Securities, 214-599-9050.
Ameri-First Securities is a member of the National Association of Securities Dealers, CRD number 45289.
SOURCE: Ameri-First Securities |
