|
|
|
This Feature |
|
Related Items |
|
Tuesday, February
10, 1998
ParkerVision, Inc.
<% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PRKR)") else Response.Write("(Nasdaq: PRKR)") end if %>
Phone: 904-737-1367
Website:
http://www.parkervision.com
Price (2/9/98): $18 1/2
HOW DID IT FIND TROUBLE?
From Big Blue to simply blue, ParkerVision has taken a trip to Mars and crash
landed back on earth all in the last six months.
Last summer, this maker of automated video camera systems was enjoying some
mega-media exposure. NASA's Pathfinder robot used ParkerVision's wireless
CameraMan Shot Director to control the cameras that captured the captivating
shots of Mars that had the Internet buzzing.
And on July 23, International Business Machines <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %> announced
it was teaming up with ParkerVision to develop and market wireless computer
peripherals. As fellow Fool Rick Aristotle Munarriz (TMF Edible) wrote in
a Daily Double
at the time, investors heard the news and sent ParkerVision shares into space.
This open-ended deal seemed like a potential bonanza that confirmed the value
of ParkerVision's technology.
Yet despite a fairly breathless December 10 announcement of "a major breakthrough
in wireless radio frequency (RF) technology that has the potential to
revolutionize wireless electronics," the stock has been descending from the
ether since August. It re-entered the earth's atmosphere on January 27 when
the company announced that IBM had terminated the earlier agreement.
BUSINESS DESCRIPTION
ParkerVision's principal business has been designing and producing CameraMan,
an automated video camera control system.
The basic system consists of a portable, computerized base unit with a one-chip
or three-chip camera with auto-focus and auto-image controls. Some versions
also include features such as a base that can automatically pan and tilt
the camera, tracking a moving speaker or shifting from one person to another
in the same room based on rings worn and activated by individual speakers.
The systems are sold for videoconferencing and distance education.
In working to improve the CameraMan, ParkerVision has conducted research
into wireless technologies. That research led to the recently announced Universal
Direct Conversion Receiver (code named "Eddie"). Incorporated on an integrated
circuit, ParkerVision says this technology can support transmitter communication
formats and transmitter frequencies from one megahertz to one gigahertz.
It receives RF transmissions and processes them to an optimized baseband
signal in a single step with little distortion.
The company believes this technology will have broad application in products
like cordless home and PCS/cellular phones, pagers, garage door openers,
toys, security systems, peripherals for consumer electronics and personal
computers, microphones, speakers, intercoms, local and wide area networks,
utility meter reading, smart cards, etc.
Insiders control about 46% of the stock, with most held by CEO Jeffrey Parker
and family.
FINANCIAL FACTS
Income Statement
12-month sales: $11.1 million
12-month income: ($2.4 million)
12-month EPS: ($0.23)
Profit Margin: N/A
Market Cap: $208.7 million
Balance Sheet
Cash & Securities: $20.1 million*
Current Assets: $23.7 million
Current Liabilities: $1.4 million
Long-term Debt: None
(*ParkerVision also has $13 million in long-term securities.)
Ratios
Price-to-earnings: N/A
Price-to-sales: 18.8
HOW COULD YOU HAVE SEEN IT COMING?
As Rick wrote
in August, it was difficult to quantify what the IBM agreement might mean
to ParkerVision's bottom line or whether there was really much of a market
for the products likely to come out of it. "Wireless mouse products are already
on the market. Is a keyboard cable such a nuisance? How far would one want
to be from the computer monitor anyway?"
With what Rick rightly characterized as a "ludicrous" price-to-sales ratio
of 23, this story stock seemed likely to be jerked around "more than the
Pathfinder over some coarse Martian terrain."
The fact is, investing in unprofitable companies with supposedly great technology
is dangerous. While the IBM deal sounded promising, many nebulous deals of
this nature simply lead nowhere.
The Fool Portfolio has generally done well picking consumer-oriented
technology companies. Even if the companies weren't profitable yet (America
Online, Iomega, Amazon.com), they at least had products on the market that
an individual investor could evaluate at a basic level. You know -- How does
it work? What does it cost? Does it fill an important need? An investor looking
past ParkerVision's ho-hum CameraMan biz to its presumably promising wireless
technology would have found all of these questions unanswerable.
Another red flag here was ParkerVision's penchant for
Regulation S stock
offerings, which offer a backdoor method for a firm to raise money from
overseas investors without filing a registration with the Securities and
Exchange Commission. In April 1996, the company sold 800,000 shares through
a Reg S deal. This past September, it raised another $19 million selling
900,000 shares through a Reg S sale.
While ParkerVision got a nice wad of cash, Reg S buyers are often fairly
unscrupulous, privately buying shares at a discount to market value while
quickly shorting against the position to lock in a guaranteed profit. Companies
that resort to such deals are often those unable to get financing through
more legitimate means. An investor expecting a big payout from the IBM deal
should have been aghast when ParkerVision floated the September Reg S package
at $22 1/2 per share, about 10% below the market price at the time.
WHERE TO FROM HERE?
No analysts follow ParkerVision, so individual investors are on their own.
Although ParkerVision enjoys 45% gross margins on current sales, those sales
are so puny that selling, general and administrative costs eat up all potential
profits even before considering the hefty research & development costs.
Though IBM is gone, CEO Jeffrey Parker has said the firm has received "a
tremendous amount of interest in our technology from many companies -- including
some of the most recognizable names in wireless communications and products.
The comment we have heard most frequently from these companies is that our
claims are unique and compelling and that upon independent validation they
believe there are numerous applications for our technology."
Boeing Microelectronics is now evaluating the technology, with a report due
"sometime in February."
An investor who lacks the competency to evaluate this technology and its
possible payoff for ParkerVision has no business touching this stock. I suspect
that includes nearly everyone reading this article. It wouldn't pain me at
all to see a story stock like ParkerVision rise by a 1000% from here -- because
I know I have no idea what it's worth.
-- Louis Corrigan
([email protected])
Check out the Daily Trouble Message Board!
|