from w-w-bb:

19.01.2007 - Total Rocketscience

The third and final company making up our Risk / Reward trilogy on shares for 2007 has so many investment negatives that most observers might not even give it more than a cursory glance. Although quoted on the London AIM market, it is based on the other side of the World, has reported revenues and cash flow of diddly squat and, more importantly, operates in an area of expertise so deep in boffinland that you need to be at least a 5 star techie to venture anywhere near it.

What originally persuaded us to give it a second look was the fact that legendary Stockmarket investor, Jim Slater, was pouring money into it via several successive rounds of financing. As we all know, Mr. Slater is a qualified accountant and hugely experienced corporate financier but clearly he is more at home in leafy Surrey than in the technologically rarified atmosphere of Southern California. However, he must have gleaned enough about what the company actually did to get extremely excited about it. In fact, by last Autumn, he had grown to like it so much that, to paraphrase the immortal Victor Kiam, he bought the remaining 51 % of the company that his vehicle, Original Investments, didn't already own.

The company in question was VIALOGY and, ever since it was fully reversed into Original just before Christmas, Slater's loyal band of followers have seen their highly speculative penny punt move on to the calculated risk category and been duly rewarded with a 50% shareprice improvement. We first latched on to this situation last April when we wrote a piece entitled The Cisco Kid ( see news archive ). To recap briefly, the company was set up by some brainboxes who had earlier worked together on supercomputing projects for NASA. Led by Dr. Sandip Gulati, the team appeared to have perfected software to detect and enhance extremely weak signals previously obscured by background noise. This may not seem particularly earthshattering to the layman but, apparently, the applications for this technology are not only revolutionary but almost limitless which suggests that an exponential rise in licensing income could well lie ahead.

Big news clearly travels fast on the Eastern seaboard because global behemoths Cisco and Boeing have already enlisted Vialogy to work on 2 major government inspired projects and these are just the ones that the company have been allowed to talk about publicly. As we reported in April, Cisco has contracted Vialogy to help with its IPICS programme which seeks to make sure that all emergency services and government agencies can communicate with each other quickly via computers and phones. The need to address this obvious requirement was highlighted by 9 / 11 when communications between different departments with different systems proved chaotic.

For its part, Boeing has recently confirmed that Vialogy has delivered a tenfold improvement in the accuracy and efficiency of the types of gyroscopes it uses in spacecraft and missile navigational systems. It is also known that both Cisco and Boeing see a major role for the technology in such areas as border controls and missile defence systems. Elsewhere a much smaller Texan company, Evolution Petroleum, is applying the technology to improving seismic evaluation of oil and gas deposits.

This initial clutch of applications is almost certainly just the tip of a very large iceberg that is going to float into view over the next few years and all that is required is a little patience. At todays price of 5.5p, Vialogy is valued at a mere 22m. To justify this valuation, the company would have to be earning say 2 million pretax. With cash reserves of 3 million and its heavyweight partners funding the projects it is involved in, Vialogy should be able to get through to breakeven without further recourse to shareholders. We would expect this stage to be reached sometime over the next 12 months. Thereafter, profits could / should escalate very dramatically as new applications and licensing income start to snowball.

On a two year view, shareholders could be rewarded extremely handsomely indeed. Vialogy is in so many ways akin to last weeks selection, CORAC. Both are now moving from the development stage to commercialization with the scales tipping away from blue sky risk towards the reality of cash flow. Both have mindblowing upside potential yet both have current shareprice action that makes drying paint look positively orgasmic. Although this presents an opportunity for latecomers, it is a frustrating byproduct of both companies involvement with highly sensitive technology and powerful, publicity shy partners. Moreover, the present lack of any meaningful numbers together with the sheer scale of future potential makes any serious stockbroker research well nigh impossible. All this will resolve itself in due course but, as they say in the Grolsch advert, all good things come to those who wait.

Cynic you are absolutely right. When VIY parted company with the President and CEO of their US business after only 3 months having resigned from his senior position with Cisco Systems you would expect some explanation. As usual shareholders are being treated like mushrooms!

in that case, perhaps a Q to their Investor Relationships might not go amiss .... doesa anyone have a contact address there?

cynic

it because of tossers like you this place is so quiet these days

they should ban you and a few others like you and watch some new blood come in and enjoy posting.

its like a musky old attic this site


regards

D

maybe thats why original investments wanted to buy an american company, california is too far away for the dumb AIM british investors to be able to keep an eye on.

Dyna has clearly got a severe bout of PMT or hot flushes + several bad calls still running ..... silly girl can't understand that if she sticks her neck out, every so often someone will whack it .... as most children learn, but clearly not Her Magnificence, if you can't take it, don't dish it!

no bad calls here cynic..

I cut my losses at the end of each day..lol.. what do you do with yours?

by and large, as my records show, i rarely hold stocks for more than about 6 months ..... generally, a couple of months looks the norm ...... will often take profits if the markets or the particular stock looks to have got ahead of itself or hit a certain potential resistance ..... will cut losses if certain barriers are also crossed .....

and since you are getting so girly and uppity about these things, i did indeed take a sensible and reasonable profit on the Dow this evening having taken a position only late this afternoon, but the quantum was almost more fortuitous than expected ...... money in the bank never went amiss.

going very nicely today

not that much to get excited about, but would sure like to have better detail about the arrival and demise of Mr T + any link that might have with the deal struck with Cisco during his tenure of office.

well, please yourself then,you miserable sod!

I can assure you that ST arrival and departure will have absolutely no bearing on VIY's deal with CSCO whilst he was there.
VIY had been dealing with CSCO for a long time before he came on the scene.

and, if you know anything about companies, you should know that the detail of his arrival and departure will not be made public!
they will releae only want both sides agree.

Still, all that is history now.

Onwards and upwards!

fyi, for my sins i hold these shares, but why must you think everything should be viewed through rose-tinted glasses? ...... and if nothing is being made public about Mr T's departure, how can you draw the conclusion that it "will have absolutely no bearing on VIY's deal with CSCO whilst he was there"? ...... one should always look for what is NOT said rather than what is! ..... if something is not disclosed, it is more likely to be at VIY's instigation than Mr T's ...... there was no comment of any kind and that just cannot portend anything good or even neutral

rose tinted specs, eh?
yes, and you are the 'glass is half empty' type
each to their own, but I happen to be optimistic about this company, based on seeing this co grow over the last five years-not to mention Cisco, Boeing, US dept of defense.

re ST, its called dyor + not spending all day on a BB!
try getting out in the real world a bit!

real world is making money, not dreaming about it!
am i a pessimist? ...... actually not, much as it may surprise you ...... if i was, i would be much more inclined to short stocks (not this one)
as for VIY, i have a feeling that it will be at least 18 months before there is any semblance of a profit, which will make sp very vulnerable in the meantime.

so are you going to cut your losses then o-b-one-kenobi

Tried to sell this morning, trade routed to dealer so I withdrew. What is the reason for dealer involvement with so few trades about and a steady rise in SP today. I have a sneaky feeling that whatever the reason, there is about to be a sudden jump in price. I am holding on a few days to see.

there are indeed some strange prioces etc this morning .... TMC indicate a ridiculously wide spread - currently 237/257 ...... first thing this morning it was 220/235 .... tried to buy at 225 but was unable to ...... for some reason, it seems MMs don't really want to trade at all in either direction

It's like watching Hinge and Bracket on here.

just going up with the market today, be back down again tomorrow, if those deals everybody is expecting dont get done this year this will plummet, lot of short term money in this share that will exit very quickly if it becomes apparent any deals and profitability is still years away,

yukio ..... i don't entirely agree with your logic, though as already stated, i think sp is certainly vulnerable until such a time as the company makes a profit .... it is also true to say that VIY highs have really only been achieved on hype rather than hard cash on the bootom line

the bottom line is do viy have a technology that will be as profit generating as people think, or indeed does the technology work as good as people think, and thats the problem with most tech stocks, you get the odd one like autonomy that really does have something special but mostly they are hyped above what they can actually do, viy had to raise money by offering shares at 8p when the sp was 15p, thats sounds a bit desperate, i just cant believe a company with the kind of technology viy looks to have would need to wait to be taken over by a small british investment company, something does not smell right.