re: New Pick - OBAS NasdaqNM: $2.35 (Optibase)
OBAS (Optibase) is a competitor of SIGM, TRID, ESST, OAKT and some others in the fields of Video/MPEG decoding/encoding. It covers streaming video as well as non-realtime (DVD, HDTV, studio production equipment) applications.. I was watching its competitor SIGM rise from the $1 to $7+ area. This made me look into other laggards in this space - in this way I found OBAS..
unlike SIGM, OBAS focused more on the professional end of the market which is reflected in higher gross margins (> 50% vs. 20%+) and more stable revenue for OBAS core product lines.. If you look at financials you will see that R&D was raised considerably. The small losses of recent quarters is indicative of that..
Business description:
Optibase Ltd. provides cost-effective products that enable the preparation and delivery of MPEG-based digital video over Internet protocol (IP) and other packet-based networks. The Company has created a breadth of product offerings used in applications such as delivery of video over broadband networks, digital video archiving, distance learning and business television. Since 1996, the Company has combined its networking and MPEG expertise to introduce a series of video networking products. The Company is currently developing new technologies and products to enable networks to automatically manage the delivery of video and rich media content over packet-based networks at different data rates to different devices, such as PCs, personal digital assistants (PDAs) and mobile phones, using various popular formats such as RealNetworks, G2, Microsoft Windows Media Technology (WMT) and MPEG-4.
Optibase Ltd., founded in 1990, provides cost-effective products that enable the preparation and delivery of MPEG-based digital video over Internet protocol (IP) and other packet-based networks. (MPEG is the Motion Picture Expert Group that makes standards for video compression.) The Company has created a breadth of product offerings used in applications such as delivery of video over broadband networks, digital video archiving, distance learning and business television.
In 1992, the Company introduced its first decoder, PCMotion, which allowed viewing of MPEG-1 streams on standalone personal computers (PCs). In 1993, Optibase became one of the first companies to offer a real-time MPEG-1 encoder, MPEG Lab Pro. Since 1996, the Company has combined its networking and MPEG expertise to introduce a series of video networking products. In the fourth quarter of 1999, the Company released a beta version of its latest-generation networking product, MPEG ComMotion Pro, which is a scalable, Web-based networking software application enabling the transmission of MPEG-1 and MPEG-2 digital video and MP3 digital audio over private broadband networks. The commercial release of the MPEG ComMotion Pro took place in the first quarter of 2000.
The Company is currently developing new technologies and products to enable networks to automatically manage the delivery of video and rich media content over packet-based networks at different data rates to different devices, such as PCs, personal digital assistants (PDAs) and mobile phones, using various popular formats such as RealNetworks, G2, Microsoft Windows Media Technology (WMT) and MPEG-4. The Company is developing a prototype of its initial product to address this market, and expects to release this product for beta testing in late 2000.
The Company sells its products through a combination of a direct sales force, system integrators, independent distributors and value-added resellers (VARs). A key element of the Company's sales and marketing strategy is to cultivate strategic relationships, similar to its relationships with Cisco Systems Inc., Harmonic Inc. and Oracle Corp., to promote reference sales with the potential for significant revenue impact. The Company's networking and content creation products are used by a diverse group of system integrators and end users including Cisco, Gilat Satellite Networks, Hughes Olivetti Telecom, IBM Corporation and SeaChange International Inc.
Optibase has two wholly owned subsidiaries, Optibase Inc. in the United States and Optibase Europe Ltd. in United Kingdom. Incorporated in 1993 and currently located in San Jose, California, Optibase Inc. manages the Company's North American sales, marketing and customer support activities. From its offices in Chippenhan, England, Optibase Europe coordinates the efforts of its network of independent distributors in certain Western European countries and services Western European original equipment manufacturers (OEMs) and system integrators. In 1999, the Company established an office in Japan to cultivate closer relationships with its Japanese sales force and potential system integrators and to expand its business development activities in the local market. In the second quarter of 2000, the Company opened an office in China for the same purposes.
The Company faces actual and potential competition from Darim Vision Ltd., FutureTel Inc., Minerva Inc., Optivision Inc., PixStream Inc., Sigma Designs Inc., Vela Research Inc. and Viewcast Inc.
Valuation wise OBAS seems to shine out over its peers:
Trading at $2.35, shares out: 12.3m, Marketcap: $28.3, Sales (ttm): $29.5m, Price/Book: 0.45, Company is virtually debt free, Gross MArgin > 50%, Historically it has been trading as high as $40. Applying SIGM (Sigma) valuation on OBAS would yield a target price in the low teens..
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