| An SI Board Since January 2000 |
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IWAV |
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This firm makes a compact and complete GSM wireless communication system. Marketed as a ?Network in a Box? it is positioned as an alternative to traditional telephone networks for companies with multiple locations. Because of it?s wireless nature, it is also effective for reaching employees ?in the field?. They?ve sold 1,000 units in 17 countries since 1997 and have a strategic alliance with Nortel Networks, which has a 24% stake in the company.
Despite the alliance with Nortel and another with Alcatel, revenue growth has been modest. After growing at a 33% rate between F?98 and F?99, growth declined to 19.8% between 3mF?99-F?00. Gross profit margins are positive but have also been declining, reaching 26% in 3mF?00. Competition is also intense and includes Ericsson, Lucent, Motorola, Nokia, and Siemens. The outlook for GSM protocol wireless communications is also cloudy. It has been widely adopted in Europe but is lagging in the US. Other protocols such as CDMA and TDMA are growing competitors.
Valuations in this sector are also cloudy. Recent IPO AirNet Communications provides some basis for comparison. Offered on 12/7 it opened at $14 and closed at $41.06 for a 193.3% first day. However, it recently traded at $33.94, down 17.3% in the aftermarket. Pre-offering demand is reported to be accelerating as the offering nears and is reported as strong. We believe this offering is a classic short term momentum play. It will benefit from the ?halo effect? of it?s Nortel affiliation and will probably have a warm first day reception (e.g., 80+% range). However, we also expect aftermarket erosion making it a weaker opportunity for aftermarket investors.
worldfinancenet.com
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