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.

no news and stock has gone dull ..... prob peeps just taking money off the table (as i did yesterday) against the strong(ish) likelihood that the markets are starting their overdue correction from an o'bought position.

The MM will have this up and down before the AGM , after that we are going north .

While we're waiting for news here--anyone here into GNG? another great contract win announced today--check out all the recent announcements.

Level 2 is all blue again now - guess you're right, Fliper: it will be sliding about until the AGM. I'm sticking with it anyway.

Sometimes the MM move the sp up and down to pick up shares because they have a big buy order to fill . Sit tight every one , not long to wait .

8.7 to buy , may be the last chance of buying below 9p or more as we get nearer the AGM . I think i will get a few more .

L2 just moved up, only SEYP left on 8.75p now.

You're probably right Notlob - last chance to top up below 9p. Very tempting but I'd have to sell something else and so will stick with the 10k invested.

Toya .... 10k is prob quite sufficient for there is far from any certainty as to if let alone when VIY will come good

ah, the voice of reason again.....or is it Victor Meldrew?!!!!
what a happy chappy he is.......

so have you put your house on this one? ...... if you have, or even 4 windows worth, u have to be nuts ...... i happen to hold these but without great expectation of anything amazing - it's one of my handful of spivvy/crap stocks, one of which may come good

Cynic: I don't know why you haven't sold/bailed out of VIY if you think it's crap/spivvy - I thought you were so experienced! There have been plenty of opportunities to sell - not like some illiquid stocks that I hold, which sometimes have no activity at all (horrid things - don't know how I ever got into them; luckily only v small amounts of money involved!). Perhaps you do have a glimmer of hope for this one, after all.

my oh my you're expectations are so high, Mr Cynic
an apt moniker if there ever was one
for a crap stock, its returned me over 100% this year, not bad
as for 'spivvy', well, yes, with customers like Cisco and Boeing and partners like US dept of defense, clearly VIY should be raising their sights a little bit higher!

oh dear, mr cynic, you seem to have loused up.
If you have such a poor opinion of this 'crappy spivvy' stock, one wonders why you bought it in the first place, and why you haven't sold it since.

Never mind, perhaps you just had a year long 'blonde moment' or just love talking out your backside?

having allowed myself to be suckered into buying VIY, i also sometimes wonder why i still hold ...... however, we shall see what the immediate future brings, though i confess my expectations of solid good news get progresively lower as october slowly draws to a close with no trading update let alone any indication as to when the company is likely to move into profit.

cynic, if you were looking for profit in what is still largely a blue sky company, you must have been crackers
We have a company here still in the early stages of commercialisation, with a very exciting technology.
But I can assure you it isnot going to be profitable in the near future. As you know, in the early stages of a companys growth, everything is ploughed back in, to build up infrastructure, technical staff, sales guys, management etc etc. Profit is , asthis juncture, not the main priority, for very good reasons. If you don't understand that, well.......

If you are after profit, I suggest you wander over to the door market 'ftse100', or any other large companies for that matter, as you are only likely to end up disappointed here with your unrealistic and totally stupid expectations.

companies cannot live on promises; they actually have to perform and live up to expectations or the market punishes severely - ask the guys at SEO! ..... as far as i can see, the sp in VIY rose significantly on unwarranted hype and has now drifted back ..... it is still arguably well over-valued as is likely to be proven or otherwise within the next two weeks, if i recollect my rns dates and info correctly.

at least i had the sense to commit only about 35% of my norm here

well, sell whatever you have then!
clearly you have no idea about young growing companies and how they operate.
Yes, deals with Cisco, Boeing, US dept of defense, all hype, eh?!!!!!!

We'll have a better idea on the 30th (AGM) - not long to go. It will be interesting to see for myself what the directors of VIY are like, and what they have to say, rather than having to rely on an RNS. Quick profits, though, are unlikely to be on the menu - I'm holding this for the long term.

quite so Toya ...... growing company or not, it still has to meet its targets to justify not only its sp, but much more importantly, to retain its credibility in the city ..... i am not convinced that VIY has achieved this, but perhaps AGM with an all-important trading update will shed some light ..... watch for what is NOT said!

yawn