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Technology Stocks : Racom Systems (RCOM) -- Ignore unavailable to you. Want to Upgrade?

To: Gutterball who wrote (194)	7/31/1998 9:13:00 AM
From: kbert	Respond to of 468

Dan, I have been following RCOM for a while. Never been able to invest for different reasons. Actually, this is not %100 true as I did buy some shares but I had to sell a while ago. Anyway, just wanted to say that you are great! This thread has always been interesting to read because of your posts and your last theory makes sense. You have done a lot of work on this company and your last posts are really of outstanding quality. Thanks for help. Archie.

To: Gutterball who wrote (194)	7/31/1998 9:41:00 AM
From: Pat Pending	Read Replies (1) \| Respond to of 468

My Hat is off to you, Dan. Pat

To: Gutterball who wrote (194)	7/31/1998 2:46:00 PM
From: E'Lane	Respond to of 468

Dan BRAVO!! Excellent finished product you have here! Took me awhile to get thru , what with my slow "assimilater" and all, but it was well worth the time. You put it on the line here for us, Dan. I hope it pays off in spades for you. (Bragging rights and all!) Now...back to those covenants!!! <g> Smile Dan...ya done good! E'Lane

To: Gutterball who wrote (194)	7/31/1998 6:28:00 PM
From: Marty Lee	Respond to of 468

Dear Dan, Doing my DD on the smart card industry and particularly RCOM (got the "tip" from Pat Pending). I had a nice talk with Marty Cohen. He explained RCOM's potential, its highlights, drawbacks, etc. in terms of its technologies, business objectives, strategy and so on. I should receive my investor's information package and prospectus on RCOM soon. I'll read through the posts on this message board to further help my understanding of the company's status within its industry (when investing in stocks, ignorance is not bliss). Before I invest, I like to get a good feel for the company's management and how directly responsive they are to me and other investors. May I ask what your feelings are concerning Racom's management? Are they capable, focused, how large is their liquor tab. etc <g>? Racom's advantage is in its patented FRAM tech. Its barrier to entry has been the cost of it. Now it's getting some help overcoming this. Obviously, Racom would love to be THE major player in the smart card solutions business. Things look promising. (The company's price to cash flow and price to sales ratios suggest that it is currently undervalued) Licensing agreements have been Racom's main meat. Racom is looking forward to supplementing its revenues by getting a percentage chunk of e-commerce transactions. I suggested to Marty that the company's management look into the business of Wave Systems Corporation, [WAVX] wave.com as this company has patented technologies suited to helping smart cards made with Racom's technologies become the Smartest of all Smart Cards - with a little imagination from management. IMHO.. Amities, Marty

To: Gutterball who wrote (194)	8/1/1998 5:02:00 AM
From: NightOwl	Read Replies (1) \| Respond to of 468

Well Dan I have reread your thesis (twice) and have to say again that I agree with just about everything down to the last point, i.e., that H-P/Verifone would be prospective purchasers. I think an alliance makes more sense; but I believe you have convinced me that the most logical relationship would be H-P/Verifone rather than one of the large NV memory makers as I had been expecting. Perhaps it was just that this picture is too "big" for me to see. :-) But this is why I think you are right and why I think an alliance makes more sense than an acquisition of RCOM. As best I can tell, the smartcard market is made up of: 1. Chip and LSI Makers; 2. Card and Reader Makers; 3. PC/Large and Small Servers/Keyboard Makers; 4. ATM/Terminal Makers; 5. Data Warehouse Providers; 6. Software/OS/Security Providers; 7. End Users: a)Banking b)Transportation c)Retail Sales d)Coin/vending Operations e)Government/Health Care f)ID-Security (Private) g)Mabufacturing/Tracking As far as I know H-P and its subsidiaries have products in categories 2, 3, and 6 perhaps lead by Verifone's channel/sales in number 6. And it seems that most of the push to standardization and "open systems" has been in those product segments with the addition of number 4. This push to standardization seems to be coming from the folks in 7(a-d), and for obvious reasons. But as far as I am aware RMTR has the only non-standard chip/LSI products out there for RF/ID uses. At least as far as I know every other RF/ID smart card is based on ROM, EEPROM, etc. in some sort of battery backed system. At present there is FRAM production from only Rohm and possibly production early next year from Fujitsu. Both of these companies having plans to go 64 and 256k as you point out. But I have had a tough time seeing these two companies as ever producing enough FRAM for RMTR and RCOM to ever serve any of these end use segments without production from other (bigger) NV memory makers. This was a concern because if the Banks/Charge Card/Phone Companies/etc... will only use cards that operate across the largest range of readers ATMs, the number of cards and readers RCOM would need on the shelf and ready for distribution would be insurmountably huge. But I assume that this next generation card you mentioned with the larger density FRAM will be combo contact/contactless card, and most importantly that the contact function of the card could be made to operate with the currently installed base of ATM's, readers and terminals. CUB we know is using FRAM because of its contactless advantage and the ability to phase it in over time as more chips and cards become available. But I assume that Banks and Charge Card Co.'s, could do the same thing in reliance on compatibility with the retail/merchant installed base of readers. If this is true, then one can certainly argue that what RMTR and RCOM both need is an entre to the installed base which Verifone could at least help them penetrate as cards and readers become available. H-P and possibly Sun and Oracle would presumably like to sell PC/Cash register terminals with some sort of RF reader built in as well. Then there would be home pc keyboards and cable box controllers with readers built in for Internet transactions. As you point out there is a huge benefit from the VERTICLE INTEGRATION that could flow from such a relationship. But if RMTR's 64k and 256k chips are the killer bees that will drive this monster market out of the station. Why aren't the chip makers beating down RMTR and RCOM's door to get a license? We know that the Tripartite Agreement, currently anyway calls for only 5 companies to be selected for RCOM's RF/ID license. Why would Hitachi, STM, Samsung, NEC and MOT think it was acceptable to permit Rohm and Fujitsu to get a lead in market share? And where are Atmel, Macronix, Cypress, Microchip, Xicor? Do these companies want to be players in this market? I don't recall any mention of Hitachi on the conference call. It is difficult for me to believe that they are holding off on commercial production because of some glitch in manufacturing. But we did hear that margins on EEPROM was going through the floor, ala standard DRAM. You have made me think that it just may be that Hitachi was waiting to see if RMTR was going to give an interest in itself or RCOM to STM. If so they might be loath to lock themselves in to paying royalties to such a competitor. But whatever the reason, it appears that RMTR/RCOM will have to grow the chip production from smaller NV memory makers, at least for now. That would take time, which means that RCOM's ultimate value might be very hard to get in any '98 or '99 sale. At least I assume that RMTR would not be able to sell its interest cheaply in view of the interests of the Trustee and NEBF, not to mention its potential value. Moreover the terms of the Tripartite Agreement would seem to necessitate an additional expense by any acquirer because it restricts how RCOM's royalties are divided. And that would have to be undone some how. It seems to me that an easier way for a company that believes in FRAM's promise to get a share of the value would be to work out some deal to buy all, or a majority, of the Trustees stock and warrants which together amount to about 26% of the outstanding shares, lets say a nice round 10 million. Perhaps a company could persuade the Trustee to sell 5 million of its stake in a private placement for say $10/sh. and simultaneously take 5 million from NEBF for the same amount. And/or such an investor could also arrange to provide RMTR with the where-with-all to buy back the Preferred shares in exchange for a private placement of a block of the treasury stock or subrogation to the original rights of the Preferred Shareholders. RMTR has lost $140 million plus in developing its FRAM so $10-14/sh for 26% to 35% of the outstanding stock of the company could be justified for a buyer/company with a plan for the use of FRAM. It would leave the Trustee some participation in any market appreciation. Chopping the Trustees and NEBF's overhang by those amounts should have a positive effect on both RMTR and RCOM's stock price if the buyer were an H-P/Verifone or comparable player. But most of all it would get money into the hands of people who will other wise be selling shares at some point. But at this moment RMTR doesn't need cash (unless someone is going to pay them enough for their RCOM shares to build themselves a FRAM fab, which I kinda doubt). And there is no way for RMTR to dividend any sales proceeds up to NEBF of the Trustee without paying us as well. So I just don't see them selling RCOM, but I could easily see them accepting an H-P/Verifone type minority interest in RMTR. Such an affiliation would be a lot easier on the entire FRAM marketplace because it would not give any of the big semiconductor companies an ownership stake in RMTR's products which to the extent possible would leave all the competitor licensees on an equal footing. Anyway that's my spin on it and I am sticking to it. :-) Thanks again for all the hard work. It was a ton of fun for me to read this baby. I think I must like the "speculation" better than making money. I have no other explanation for sticking around this soap opera. :-) 0\|0 P.S. This view has been grossly colored of course by the fact that I own a little of BOTH companies. :-) P.P.S. Sorry about the typos 'cause I'm too tired to worry about them.