 A Tech stock actually worth owning
Bob Moriarty
October 1, 2003
As 321gold
readers know, I virtually never mention any stocks other than
resource stocks. The sole exception may have been last October
when I saw a temporary bottom in the stock market and mentioned
that NT was cheap at $.50. For those who care, Nortel is now
$4.26 and not nearly as cheap as it was 11 months ago.
But a tech. company came to me recently and wanted to sign up
for advertising. It's a Canadian Wireless company, Wireless
Age Communications (WLSA, OTCBB $2.25 US) with an interesting
slant. The company head, John Simmonds, has been THE leader in
Canadian telecommunications for the last 20 years and he's about
to hit another home run. I found some interesting information
about Simmonds and Wireless Age.
John Simmonds began his first company, Midland Canada, in 1978.
In eight short years, he went to $20 million in annual revenue.
In 1981, he began a long career of buying low cost acquisitions
and building them up for later resale. He purchased Dynacharge
out of bankruptcy for $100,000 and sold it four years later for
$10 million. Without being negative, John Simmonds is a wheeler-dealer
and a very good one indeed.
In 1987, John took over Glenayre, a mid-level mobile communications
business doing $40 million in sales. Through a series of strategic
acquisitions, Simmonds increased revenue to over $400 million
in 18 months.
Mr Simmonds went on to spin the US subsidiary of Glenayre off
under its own IPO and the company reached a market cap of $3
billion US in less than five years. In 1992 and 1993, Glenayre
was the biggest gainer on the Nasdaq as the stock roared from
$14 a share to $700 (split-adjusted).
In 1994, Simmonds bought Intec at $.44 a share. When he sold
the company two years later, shareholders got $12, a gain of
2600%.
The wireless industry in Canada is essentially fragmented into
small and inefficient units. Simmonds intends to consolidate
these smaller companies into a much larger integrated company
providing high margin hardware solutions to wireless customers.
Wireless Age buys companies on the basis of high margins, a positive
cash flow and a strong base of residual payments from wireless
phone companies. They can be very selective in their purchases
so they can constantly be increasing efficiencies and profits
by "rolling up" a fragmented industry.
As a result of a US FCC change in frequency spacing in 2-way
radios, anyone using 2-way radio in the US and Canada will need
to upgrade their systems in the next three years. Wireless Age
intends to use the Midland brand name to sell a variety of proprietary
products which will comply with the new regulations. Manufacturing
and distribution agreements are already in place.
The company has 17 million shares outstanding and only 3 million
in the float. Volume on the stock is fair and increasing daily.
I rarely put a target price on a stock but since this is a tech
stock, which I would normally shun like sin, Wireless Age is
an easy 3-5 bagger in any market. It has a solid business plan,
top notch management and a high growth market regardless of economic
climate.
This is neither
a buy nor sell recommendation, we have not been paid to produce
this piece. We don't own the stock but we might buy some - and
they do advertise with us.
Bob Moriarty
October 1, 2003
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Email bob@321gold.com
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