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.

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.

my holding is barely 30% of my norm, so shall just sit and wait ...... as i said, i would be very interested to learn at leat some more background surrounding the sudden departure of Mr T and whether or not there is any link between that and the Cisco deal signed during his tenure of office

you seriously expect the real low-down on the departure of Mr T?
surely with a handle like Cynic you should know better
these matters are kept private and whatever , if anything, gets released is just what both parties have agreed to.
Anyway, it has no bearing on VIY's dealing with CSCO, on that you can be assured, or, if not, try speaking to the Company-you won't get the answers of a BB!

try speaking to mr shah would be more informative i suspect, what if he gets his old job back with cisco, now that would be interesting.

no i do not expect what you call the lowdown ..... however, companies that are unnecessarily secretive see their sp suffer ..... MPH is quite a good example for they failed to give any current trading update with their figures and have seen sp slip from 200 to 150 .... why? ..... because peeps draw the conclusion, probably correctly, that in MPH's case, trading is pretty horrid; similarly MPH have not explained why their FD has also resigned in the the last week or so.

so, since you purport at least to have contacted the company, what reason if any did they give for the sudden departure of their CEO? ..... it sure wasn't because he did not like the way the made his coffee in the morning!

perhaps not so much the way his coffee was made but who made it!
I'm afraid I ain't going to do your work for you, make your own enquiries!

re secrecy,I think VIY have released more information this year than 90% of LSE companies!

notlob stop making up lies that you know why mr shah was sacked,

was found shagging the secretary over the boardroom table!

maybe they wanted him to put a more positive spin on viy than he was prepared to do so they ditched him, perhaps they will find some yes man now so he can help them pump up the share price, pure speculation of course,

echo's of the first dot com bubble with this one

hardly! .... it's still only a penny stock