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Posted by: energy2002 In reply to: None Date:5/3/2005 6:59:40 PM Post #of 309
WOW: MOBL COMMENTS FROM TOBIN SMITH JUST OUT!
ChangeWave MicroCap Investor Weekly Update Tuesday, May 3, 2005
MOBILEPRO CORP. (OTC BB: MOBL) 5/3/05
UPWARD MOBILITY
We’ve spent extra time with MOBL trying to get a handle on this question: “Are things as rosy as they look?”
Our conclusion is yes! And we want to make sure you tuck away some shares with some of the same enthusiasm we showed for NEOM so that if the catalysts we expect to occur during the next six months are achieved, we could very well see our next 10-bagger in valuation appreciation.
The key catalysts we have identified and corroborated are:
* MOBL’s refinancing should happen within the next 15-20 trading days. This will take the drag out of their relatively ugly balance sheet and improve intrinsic value (cash flow per share times market multiple) to more than 30 cents per share, based on our model.
* The refinancing decreases MOBL’s risk and positions them to ride the growth drivers of their “buy the telco trash and reinvest the cash flow into 21st-century data communications” strategic plan.
* Upon refinancing, MOBL moves closer to a Nasdaq or Amex listing -- an essential value-enhancer.
* MOBL will report its first-ever EPS-positive quarter report within 45 days -- another notch in the credibility belt.
* New wireless deals are in the queue. A Central Florida deal looks strong and would be more than 10 times larger than their recently announced Tempe, Ariz., deal. These “broadband city” deals are a win-win deal for the cities and MOBL. The cities love the return on investment they realize. And, wired cities are a plus for development -- a recent survey in the real estate development industry confirms that wireless broadband availability is one of the top attractions for new development.
* Another key acquisition in the VOIP space is reportedly on tap as well, and if we know MOBL, it will be accretive.
Finally, add to the mix a new investment banking relationship and increasing Street sponsorship. Given all this momentum, we definitely want to make sure we’re ahead of this curve.
We’re raising our Buy Up To up to 30 cents. Our intermediate-term target is 50 cents, and we’re looking for $1.20 in 2006.
The catalytic momentum we look for in an acquisition-driven tech play is all here at MOBL, so we recommend that subscribers allocate some of those huge NEOM profits to MOBL.
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Posted by: energy2002 In reply to: None Date:5/3/2005 8:30:58 PM Post #of 310
THIS JUST CAME OUT TOO....MAN, TOBY IS RECOMMENDING MOBL TO ALL OF HIS CLIENTS!!!!!!!!!! May 3, 2005
Dear Member of Our ChangeWave Family,
Man, the e-mails are pouring in about our "PaperClick" microcap stock, and they're the kind of emails I LOVE to get.
It's amazing how happy our ChangeWave MicroCap folks get when we're up 536% in a stock.
Sorry you missed it, but I gave you fair warning. If we get a dip to our buy-under price - and let's face it, these emerging-company stocks are volatile - I'll be sure to let you know, because this ten-bagger story isn't over by a long shot. In my opinion, we are in the very first inning of the story and those who hold their shares are going to see them appreciate to become a small fortune -- if not a large one -- in the next few years.
But I've got a better idea for you right now - one I'll gladly share in full when you accept your no-risk trial subscription to MicroCap Investor.
It's another low-priced stock, selling at about 21 cents - up a few pennies from our initial buy - as I write. So just a small investment can pick you up a whopping number of shares. And if and when - and I believe it's more "when," not if - those shares reach $1, you've already made a small fortune. IF the catalysts we see coming over the next 6 months come in as scheduled, we could very well see our next 10-bagger.
I wrote to our ChangeWave family about this stock once before. The timing then was not critical, but it is today.
You see, the company recently announced a major commitment to its technologies and service by a large city in the U.S. Southwest. And another wireless deal is in the queue with a different state that would be over TEN TIMES larger than the Southwest deal we just mentioned.
Both are mighty big deals, and real validation for the company's business strategies and a sign of what's to come.
We feel so strongly about this company because of several coming catalysts that we have identified and corroborated:
#1) The firm pulled in a new refinancing deal in a move to makes its balance sheet even stronger. The refinancing should be wrapped up within the next 15-20 trading days. This refinance takes risk OUT of the company and gets them primed to ride the growth drivers of their "buy the telcom trash and reinvest the cash flow into 21st century data communications" business plan.
#2) With the refinancing done, we move farther down the path to a NASDAQ or Amex listing-another big value enhancer.
3) The company just reported its fifth-straight quarter of record revenue; and management is awaiting quarterly audit results, due out within 45 days, which may show that the firm posted its first-ever positive net-income -another notch in the credibility belt.
The news and business momentum we look for in an acquisition driven tech play is all here. This company is truly on the right track. We want to make sure we are AHEAD of this curve.
As an investment, this is no slam-dunk. MicroCaps are volatile creatures, and this one's no different. But if you have some funds earmarked for aggressive growth, just a small sum invested now can turn into a pile of money.
I've attached my original message about this stock below. And you can get its name and complete buy recommendation online immediately, by accepting your no-risk trial subscription to ChangeWave MicroCap Investor now: http://changewave.com/order/mc/?acode=5FEM101&ccode=948856
Tempe 'blazing the trail' for citywide wireless Net
Stephanie Paterik The Arizona Republic Apr. 28, 2005 12:00 AM TEMPE - The city will become the first major metropolitan area in the United States to deploy wireless Internet access citywide.
The City Council has approved a contract with MobilePro Corp. and Strix Systems, and staff members are wrapping up negotiations this week. The companies will install hundreds of access points throughout Tempe in phases, starting this summer with south Tempe.
The "mesh network" will cover the entire city by late summer or early fall, allowing subscribers to fire up the Internet on laptops, cellphones and PDAs anywhere within Tempe.
"Tempe is blazing the trail" to provide residents and businesses with full access, said Mayor Hugh Hallman, who logs on wirelessly at home. He said it would allow people to enjoy the community's recreational amenities while still tending to "the occasional business and family interruption."
Monthly subscriptions are likely to be $20 for dial-up speed and $30 to $40 for high-speed wireless, although prices have not been set.
Only 29 U.S. communities have gone completely wireless, mostly rural or remote regions without traditional high-speed Internet access, according to a March report by muniwireless.com. Eight urban areas in addition to Tempe plan to join the trend, including Philadelphia, Cleveland, West Hollywood, Calif. and Madison, Wis.
Tempe will be the first Arizona city to try border-to-border wireless access. Nearby communities are consulting Tempe as they consider similar action, said Dave Heck, Tempe's deputy manager of information technology.
"I think it's going to be looked at by a lot of folks," he said, "especially the model we took in letting someone else install and manage it."
Tempe is offering use of its streetlights for nodes that serve as access points; in exchange, city officials and public safety workers will get free wireless on the job.
Doug Huemme, associate vice president of marketing for Strix, tried to dispel fears about the safety of wireless Internet, saying the company uses advanced encryption and does not allow network users to view other users.
Tempe and Arizona State University will continue to offer free wireless downtown, and anyone with a wireless device can access the city and university Web sites for free.
MobilePro is taking the unusual step of partnering with multiple service providers to give residents a choice. So far, Cox Communications, EarthLink and Limelight Networks will vie for wireless customers in Tempe.
"This will be a freedom-of-choice network," said Bruce Sanguinetti, president and chief executive officer of MobilPro's Neoreach Wireless Division. "That's the magic of what Tempe has pulled off. If you look at other wireless opportunities, you have to take what they give you. . . . This allows competition."
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When Jay Wright assumed his post as CEO of MobilePro Corp. (OTCBB: MOBL Quotes, News, Charts) 16 months ago, the company was miring in uncertainty, with no revenue, or clear business strategy.
“Over the last 16 months, we have done 14 acquisitions of telecommunications companies, building to the company to an almost $100 million annual run rate on a revenue basis, that has been EBIDTA positive every month since August on a net-basis,” Wright said. “Our vision is to create a next-generation telecom services company taking advantage of disruptive trends in technology and regulation in telecommunications.”
On April 22, MobilePro announced that it was awarded a five-year, citywide contract for wireless services in Tempe, Ariz. According to Wright, “the Tempe opportunity is huge,” with an estimated 150,000 permanent residents, 65,000 households, 50,000 students attending Arizona State University, and several hundred thousand annual visitors to the city. “It’s a big potential target base with very low penetration rates,” Wright said. If the company were to take between 10 percent and 20 percent of the market share, “we could achieve between $20 million and $30 million in revenue at very high operating margins,” Wright said. “That’s the beauty of wireless networks. Once you have them up and running, the marginal cost of running them is very, very low, and a lot of your revenue goes directly to your bottom line.”
The company plans to launch a two-pronged approach to gain traction in the Tempe market place- the first is a retail marketing strategy, and the second is a wholesale strategy aimed at giving national ISPs such as Earthlink and Cox Communications access to a wireless network “on a wholesale basis,” Wright said. “By leveraging these other companies’ marketing channels and wholesaling, we think we can get very substantial penetration rates.”
According to Wright, MobilePro is on track to become a viable player in the nationwide telecom arena. The company’s subsidiary CloseCall America, Inc. recently announced that it expanded its DSL service area to Ohio, Michigan and Indiana. “We are looking, both through acquisition and elsewhere, to expand CloseCall into many more states through the end of the year,” Wright said. “Our goal is to have a presence in as many of the 48 contiguous states as possible. We want to be a national brand, and have a national footprint.”
CloseCall America also recently expanded its capabilities by developing a pre-paid wireless phone platform called Tommy Wireless. Wright said MobilePro has a shot of picking up market share in the burgeoning pre-paid wireless phone segment as well. “We think it’s a market that’s underserved, and we’re going to go after it,” he said. “Our goal is rapid growth, and we think we have the tools in place to do that.”
With roughly $6 million in cash on its books, and a stock with an average 3-month volume of 3.2 million shares, Wright said the company is “probably in the best shape we’ve been in for a long, long time.”
Investors should keep a close eye on MobilePro’s continuing geographic expansion, product introductions, and strategic alliances. The company also has several “acquisitions in the pipeline,” which should materially develop over the next 12-18 months.
“I feel more confident today than I have at any point in the 16 months of running this company that we are going to achieve a good portion of what we’re hoping to achieve,” Wright said. “The markets are favorable, we’re getting traction on multiple fronts, we have the management team in place, we’re well capitalized and have access to as much capital as we need. We’re still a small fish in the telecom world, but we have a lot of opportunity, and I’m very excited for the rest of the year.”
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MOBL Will run hard today and the rest of the week. T.Smith increased his buy limit up .30 When he increases his buy limits the stock usually follows suit quickly.. He last increased his buy limit up tp .50 on NEOM and we all no that story GLTA
We’re raising our Buy Up To up to 30 cents. Our intermediate-term target is 50 cents, and we’re looking for $1.20 in 2006.
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« MOBL from rb For all the new shareholders!
Repost from Ivg! For the new investors MOBL Update - Points From J.Wright Phone Call.
I had a lengthy talk with Jay Wright last week about MobilePro's business plan. Considering it was a day after his meeting with two other investors who have posted on this board, much of the content may overlap with their posts and some of the language will mirror their report. The MOBL story is already big and complex, so I did not cover every detail possible, but I believe I did cover the salient points to understand what this company is attempting to accomplish. Any price targets attributed to the discussion are noted as such and the rest are mine. I do not consider either to be a promise or a guarantee in any way. I do not want people pumping this stock. I have reason to believe these targets CAN and MAY be met, but I do not have 100% certainty of that. Please do your own due diligence. I wrote at length so I could get everything into one post and then go about my business. It is my way of working out my thought process and you are free to make of it what you will. Nothing in my conversation with Mr. Wright stepped over the boundaries of disclosure constraints and thus I do not think there necessarily any secrets to reveal here though we did hash out things we could discuss in great detail. In no particular order and loosely categorized, here are the key points:
1. Financing - Mezzanine/Non-Convertible Debt/Warrants: MobilePro is definitely in a constant hunt for progressively more favorable terms of financing. They've already succeeded in their initial surge of acquisitions this year with modest share increases plus cash from financing (which in turn also = shares increased, of course). They've also begun to be able to directly tap into some internal cash flow from the businesses already acquired. And then they successfully negotiated the improved relationship with Cornell for the $100M SEDA line of equity based credit, little of which they appear to have tapped into yet.
What MOBL is looking for now is to make future deals with non-convertible debt in the form of promissory notes for future payments or, if shares are involved, issue time restricted warrants set at a higher premium than the prevailing share price. I consider the former option to be very promising since if they can issue debt in the form of corporate paper, it means they have already achieved recognition in the marketplace as a serious contender and those willing to accept such terms shows a confidence in MobilePro's earning power going forward and their ability to make good on said paper notes. If they make acquisitions for warrants plus promissory notes, that effectively eliminates outside financiers. Remember, the terms of the Cornell SEDA financing line do NOT require MOBL to tap it. Should promissory notes and effectively structured warrants be deployed, it increasingly puts MobilePro into the driver's seat with greater control over the terms and servicing of the future debt payments. In effect, in little over half a year, MobilePro has already upgraded the quality of their debt terms once and they are shooting to do that successively in more than one stage this year and next. In the (perhaps near) future, additional financing would entail bridge loans that could (a) recycle their debt onto even more favorable terms and, most importantly, (b) give them a bigger war chest to make some BIG acquisitions, bigger than CloseCall thus far. This kind of financing is being shopped for now, so it can come at any time in the coming months. If announced, it is the precursor to big acquisitions to be made.
2. Positive EBITDA - He stated that aside from EPS, this is the one item he and other major investors will be looking for in assessing the company's financial results and its impact on the stock price. As noted by the other posters, the initial positive EBITDA Jay is counting on soon may be enhanced this year by being able to roll over prior losses. But with profitability expected to grow into next year, the actual EPS should show significant growth in 2005. In a nutshell, Jay expects to soon produce good EBITDA numbers that will support a higher share price.
3. Voice and Data: what are they really? There are three division heads designated to oversee ISPs, Voice and R&D. The subsidiaries that fall under their jurisdiction will report to them. One thing Jay pointed out is the technical distinction between voice and data is getting pretty blurry at this point. What passes for a phone call is largely a matter of protocols, not infrastructure. In other words, the difference between a regular phone call and a VOIP call is the VOIP call transmission data is routed as internet packets. But the actual lines by which the VOIP call may be delivered to you is whatever you receive your internet connection on, i.e. phone line, cable, etc. What this means to a company like MobilePro is they still have to have access to a delivery system, infrastructure, to deliver for their customers either conventional low rate long distance calls, VOIP or internet connectivity. And that is why you should take note of their recent acquisitions that include LEC's (Local Exchange Carriers). This already shows MobilePro is moving to ensure they can be their own carrier in key markets (and maybe eventually all of them). In other words, they are assembling a telco company from end-to-end and the ability to control both the services offered and the pipeline. Controlling LEC access grants them the ability to offer competitive price packages and to not have to pay out extra carrier access costs where they are locally responsible for the infrastructure. And naturally, they will also be able to market phone/VOIP services to their ISP customers.
4. MobilePro's agenda is to acquire the best management and let them run their companies. Again, he cited Tom Mazerski of CloseCall as being a great CEO and an incredible asset to the company. He believes CloseCall can grow at a significant rate in the coming year. I would agree, but any excellent growth with CloseCall may be hard to quantify further (not a bad thing) since they appear to be central to the company's strategy and much of the cross-marketed services strategy could get funneled through CloseCall's marketing and service apparatus. I feel that is why he cut the deal with CloseCall. Not only do they have a decent infrastructure and superb customer satisfaction rates, but he wanted Tom Mazerski, a Verizon veteran, to lead his voice division in building up MobilePro as a multi-tiered telco. MOBL's strategy is not just a tangible asset spree, it is also a very significant talent hunt and some of the acquisitions were as much for the people as for existing business. If you don't get that and think everything is based on listed assets alone, you are missing the point about MOBL's strategy. They are also leveraging themselves to acquire a high quality talent base with the vision and experience to outplay the competition. And MOBL is a networking phenomenon which has led them to associations with some of the best people in their field and on Wall St., not to mention the additional board members and partnerships that extend to areas not even capitalized on yet, like military and HS contracts.
5. Customer Service for MobilePro's subsidiaries apparently will be centralized under the auspices of CloseCall America. Per this issue, read my post:
It goes without saying that certain localized service issues will be handled by the local subsidiaries. The notion, as I understand it, is that where customers of a MobilePro subsidiary telephone assistance, many of those calls will be routed to the centralized customer service center run by CloseCall. Should that customer require resolution by the local subsidiary in a manner that cannot be satisfied by the customer service reps, the issue would then be routed to the local office of the subsidiary in question.
He confirmed my assumption that customer service and referrals is one of the key aspects of sustaining growth. The telco sector is splintering before our very eyes (my words) and he confirmed that the opportunities to grow a customer base are particularly opportune at this historical moment.
CloseCall seems to be very important to MOBL's strategy. If you haven't visited their website, do so and note that they are actively selling VOIP services. The importance of the CloseCall deal should not be underestimated and I think it may be viewed in retrospect as a huge turning point in MobilePro's corporate history. I believe them when they said in their PR: "The combination of MobilePro and CloseCall heralds the arrival of a new national telecommunications company." And many now realize how important the associations with Vivendi and Spencer & Trask are to MOBL that came as a result of this merger. I did not discuss Spencer Trask with Jay, but regarding recent posts I would say they are now involved in an advisory capacity which at the very least will increase management's profile on Wall Street.
6. Billing and Accounting for the subsidiaries will be centralized directly under MobilePro's control. This is what he said when I asked. I do see that billing is mentioned as a potential responsibility of CloseCall in a PR, so either I misunderstood or they have subsequently decided to centralize billing under MobilePro senior management instead. If so, this means they will have their own personnel to service and oversee the financial operations of their subsidiaries. This is good as they will know where the money is going and where it is coming from. MobilePro does NOT plan to use outsourcing services for any of the business. It will either be handled directly by the main company or their subsidiaries, but not by outside contractors. This is a good sign to me. I've spoken of the need for cultivating a culture of accountability without a company. This bodes well for MobilePro to maintain a quality organization and to oversee their subsidiaries to ensure quality control.
7. Zigbee. First off, anyone who says Zigbee is on the back burner because it will not see fruition until next year simply does not understand R&D timelines. If anything had been put on the back burner, it was the NeoReach R&D. The whole point of why people have been so enthusiastic about MOBL is they did the one thing many OTC companies never do: they ensured they will have significant revenue streams INDEPENDENT of their R&D so they would (a) not be dependent on the timing or particular success of any one tech initiative (he said businesses too often fail by putting their eggs all in one basket) and (b) be able to fund the R&D and push to bring any tech then ready to market. This, independent of Zigbee's value as a technology, is to me a perfect example of this management's savvy thus far. The OTC is littered with failed and struggling companies with interesting stories or technology and lack of funding or even potential customers. It takes them too many years to even develop prototypes.
MobilePro is avoiding those pitfalls and they ARE developing Zigbee chip prototypes in the labs in Korea (and my personal assumption is Samsung may end up a partner). They can afford the R&D now, but even with money it still takes time. Jay said he could not grow the share price for shareholders if you were all only waiting on news of Zigbee and he is so right. He is giving you the birth of a national telco while their Zigbee technology is being developed in Korea.
We discussed the future Zigbee market which we both agreed is going to happen. Just to be modest, we took 2% of market share to be about $200M in revenue within this decade. The profit margin on Zigbee will be high at 50%, thus the example would add $100M in profit. With few ongoing net expenses associated to it, to add $100M PROFIT (not just revenues) to the bottom line would easily equal additional dollars per share.
This is the MobilePro business strategy then: build the telco worth $5-15 dollars per share by the time Zigbee gets rolling and by 2006 you can have a telco with a billion dollar revenue stream and then if any of their tech products hit the markets with even modest success their high profit margin can add anywhere from $3-10 per share (my numbers) in those first years and then perhaps significantly more. Either way, the company would have grown significantly and the Zigbee and other tech ventures would just add more value. That is how you create a $20-40 per share stock.
MobilePro never plans to be a manufacturer of Zigbee chips. At most, they will partner with a semiconductor company like a Samsung who will be responsible for the manufacture of the chips. But MobilePro will also license the rights to certain aspects of Zigbee chip production to other companies so you may end eventually up seeing MobilePro agreements with other big chipmakers like Intel. Why? It boils down to their patents. They are NOT trying to create a proprietary Zigbee standard and what their patents are about is the right to package open standard Zigbee chips with other tech protocols within the same chip design. Hence, a sole Zigbee chip is not impacted by MOBL patents, but when someone wants to package WiFi capabilities with Zigbee on the same chip/board, the patents would be invoked and produce a royalty payment to MobilePro. Jay confirmed this explanation and that is where the value of the patents will accrue to the company.
The primary technical considerations for MobilePro's Zigbee initiative are MobilePro designs will be based on non-proprietary open source protocols which allows for interoperability with other Zigbee chips manufactured by other companies using open source designs. This is important since it allows for market share without going for a home run. To design a proprietary standard is expensive and risky and if it is not widely adopted as THE standard it can be a total flop. In this case, even modest market share is hugely profitable and the way you get that is by letting your chips talk to other manufacturer's chips engaged in wireless com links between other consumer devices using Zigbee chips.
MobilePro's Zigbee chip designs will also be modular. This allows for the Zigbee component to be combined with other protocols like WiFi or Bluetooth as per the clients wish. In a nutshell, MobilePro should have a definitive stake in the Zigbee market where additional protocols are combined within the same chip design which at minimum will generate royalties for MOBL. And they are prepping their own designs that will be modular and have the potential to implemented for many customized uses in Zigbee driven components. I'll be looking for a serious partnership agreement with a major semiconductor manufacturer by the middle of next year at the latest, but probably sooner.
I did not discuss NeoReach, but my understanding is it will be given attention again and/or shopped around for partners or buyers again in the future. I have no reason to expect they will squander the assets of this intellectual property thus far, but I'm not going to weigh in on its merits or viability. My one note is the same Korean lab involved with NeoReach is working on Zigbee, so there may yet be ongoing R&D work done on NeoReach there. Jay did say that they are the best lab you could possibly want to develop the prototype for the Zigbee chips. His tone was particularly strong when making this affirmation.
8. Share Structure, RS & Buyout Considerations - Pretty much everything in this section is predicated on whether or not you believe Jay Wright is dedicated to enhancing shareholder value. If you do, you will be sensible enough to understand that under varying circumstances different scenarios can develop. Viewing such potential actions in this context of enhancing shareholder value, as Jay insists is his objective, is important because it is no good to bury your head in the sand about anything said that follows.
For instance, MOBL is in no way interested in being bought out at a minor premium over their share price. They certainly are not going to entertain any offers while the stock is under a dollar per share. The only circumstance in which this would be considered is if the premium gained is of a greater net gain than Jay Wright feels he could attain by growing the share price in the following year. In other words, if the PPS was $1 and an offer came of $1.50, would he take it? Probably not, since he could probably achieve that share price in a decent time span. If offered $2, a double premium on a $1 share price, would it be considered? Again, applying the above criteria, maybe, maybe not.
My take on the situation is the acquisition agenda is NOT going to slow down rolling into to 2005. Some of the acquisitions will be BIGGER. The goal is to achieve a $1B revenue company by some time in 2006. Assuming this is achievable, Jay said if you just calculated a slightly higher OS x 2.8 x $100M revs (the already mentioned 2.8x revenue ratio is a good, conservative comp for telcos operating at a profit) , the share price should be above one dollar per share. The latest point in his mind would be by the Feb. 10Q which would validate those calculations and earnings on an annualized basis, but he does NOT preclude that MOBL would be over a dollar before then. Knowing how much MOBL has going for it so far, a dollar at any time will not surprise me, but I'll stick to pure valuation considerations for now and stick with a December-February time frame to achieve the first dollar per share.
The goal is to take the PPS considerably higher during 2005. MY interpretation is (a) he's shooting for a bigger exchange first (with or without a RS) and (b) the share price will be at least $6-10 before a buyout would be considered by MOBL. Of course, that would entail an additional premium by the buyer over the prevailing share price. But that does not mean a buyout would happen that quickly either, because he expressed confidence that once he got the stock over $5.00, the advantage in being able to sell the stock to institutional shareholders is so considerable that he clearly intends to do more than double the stock from there. He said once they got to $5 and a new exchange, it is much easier to get from $5 to $15-20 PPS than it is to get from $1 to 3. Or the ultimate best case scenario is MobilePro becomes a major within five years themselves and can buy out bigger boys on the block and will never be taken over, excepting perhaps a mega-merger among equals.
As far as those of you who get all upset about mentions of reverse splits, it is time to put on your thinking caps. I'm frankly amazed at what a hot button topic it is for so many people, but such a reaction is usually based on misinformation and is lacking in context. So if you have a problem with that, skip this item. The company has no pending plans to do a RS. Okay? Relax. What he said in his letter to shareholders is consistent with his current views. But what you do have to understand is that with MOBL you not only have the rare opportunity to invest in incredible managerial talent, but they are also one of the most shareholder conscious companies you will ever find on the OTC, much less anywhere else.
That said, should the topic of a RS ever be put on the front burner, I believe he is sincere in that it will only be done if it is advantageous to shareholders. It is no secret that his financial success is tied into ours with his restricted stock on hold for the next year, so what is good for us also applies to management. He would only be willing to consider a RS if it will definitively help attain an exchange listing on the big boards in a timely manner not otherwise achievable by growing the stock to $5.00 under the current OS structure. He is totally open to seeing the stock graduate to a bigger exchange with the current share structure in place, but has no prudent basis upon which he can make such an assurance. He actually does not diminish that possibility (and I would not be surprised by it occurring), but he clearly knows under what circumstances a RS would also be the prudent thing to do.
Do not forget that he is an attorney who worked on mergers and acquisitions at the biggest law firm in the world. I am personally familiar with Skadden Arps and other mega law firms and their M&A departments service the largest companies in the world. Working 2 years as an associate means 80-100 hour weeks and a crash course in securities law, financial accounting, share structure and SEC compliance. He then expanded upon that legal experience and worked on Wall St. doing M&A as an investment banker. If any CEO would know how to minimize the effects of dilution or when a RS is beneficial to both the company and the shareholders it is going to be Jay Wright.
The key points he raised on this hinge around issues of Volume/Liquidity and Eligibility for Institutional Purchase. When the stock trades under a dollar, the volume is more readily liquid and thus facilitates trading which begets the ability for the share price to grow. A price between $1 and $5 can often be a difficult range for a stock to trade in because the liquidity gained at lower prices dries up as small cap investors and traders often reallocate their funds back down to cheaper equities. But unless the stock is over $5, it is not readily purchased by most large institutions restricted from investing in a stock under $5.
Should the company do very well and find its stock at, for example, $2.50-3.50, it may hit a point at which it is difficult to grow the stock price regardless of proper valuation if there is a lack of buyers from both the low and high end of the buying spectrum. Should this become an issue, a RS would be considered if it was certain the price would subsequently be based at a healthy price above the $5.00 price line. No matter what, it will never happen under a dollar. The greatest amount I think he would entertain would be a 4-1 RS ratio, but he said it also could be as low as a 2-1 split which is his actual preference should it be necessary in order to get over the $5 hump.
He does feel that the current share count (plus what is added to facilitate upcoming acquisitions) would actually be more appropriate for a company with hundreds of millions in revenues and I certainly agree that the larger share count could be more appropriate at prices above $5. So the essence of it is it would be preferable to not do a RS, but if so it would be as small a ratio as possible. It would be much further down the road. It would be calculated to maximize shareholder value. And he does feel that once $5 is attained, the impact of institutional investing is so considerable that the stock can then easily grow past $10 and beyond.
I spent the time on RS with Jay because it is a hot button issue that gets repeatedly twisted out of context and I'd like to alleviate any fears over this. It may never be necessary, because many already believe this stock may be capable of reaching $5 next year without a RS and you'll get not argument from me that it might be possible. But I think people must realize that companies with a very profitable bottom line and securities savvy management are the only situation in which it can be favorable and I think MOBL would be one of those exceptional cases should it be so.
Just to put in context: if you did a 2:1 at $2.50, your 1000 shares worth $200 at 0.20 now would have become 500 shares worth $2,500 at 5.00 per share. If it then goes on to $10 per share, you will have achieved a 2,500% gain and at $20 per share a 5,000% gain. I will weigh in that if the company can achieve $5 per share, it will then be very much a candidate to double from there. The main point is Jay wants $5+ to qualify MOBL's stock for institutional buyers, preferably without a RS, but with as small a ratio as possible with one, if necessary.
9. Share structure - In 2004, some shares should be expected to be issued as part of the acquisition campaign and perhaps to retain certain advisors to MOBL. With the current OS around 250M, he pointed out that up to now they have used about 100M shares to bring online closed and pending company subsidiaries that add $78M in annualized revenue. He feels that is a very large amount of added value to account for an increase of 100M shares in the OS (and I agree that is true to me as a shareholder). With OTC companies issuing 100M shares like candy, this is a very rare phenomenon and certainly lends credence to his stated attention of bringing accretive value to shareholders. In a nutshell, that means as the OS increases, each share can still become fundamentally more valuable than each share at the lower prior OS count. He believes he can continue this performance and maybe improve upon it with the next 100M shares and add as much as another $100M annualized revenues to the bottom line. If done, that would amount to $178M added for 200M shares or $178M on 350M shares total for revenues of .50 per share.
Most companies have trouble adding so much as a nickel of income per share, much less 50 cents or more when diluting shares. This is an extraordinary accomplishment and it blows any wrongheaded complaints about the effects of dilution right out of the water. To have a company with operational revenues of $100-150M and a 350M share count is outstanding. To think that their pending profitability and significant revenue flow could then grow the company going forward without a great deal more of additional dilution would be extraordinary, but not necessarily the point. If such a healthy return on investment for their acquisitions is maintained, the future size of the OS would be fairly immaterial should the ongoing net result be higher revenues and greater accrued value per share.
10. Overall Business Objectives - In 2005, the goal is to get the company on the road towards a one billion dollar revenue stream in 2006. With the goal of $100M in revenue by year's end 2004, the next phase of acquisitions can entail up to $500M in revenue added to the bottom line as MobilePro steps up the size and impact of its acquisition schedule in 2005. They are setting up a strategy that would enable them to successfully bid on some companies they already have in mind, ones larger than any acquired thus far. But there are still acquisitions on the list for this year that will have a significant impact on both the bottom line and the direction of MobilePro. They have already made headway with ISPs, VOIP and are now acquiring LEC's. I would monitor the amount of regional coverage MobilePro attains should they announce more deals for Local Exchange Carriers. If they start to put together broad contiguous areas of coverage, then we may be talking about a play to first become one of the leading regional telcos in the US on the way to a national end-to-end hub of MobilePro controlled exchanges. For now, I'll scale that expectation way back and merely say that continued LEC pick-ups very much bear watching.
One key area that has not been significantly bolstered yet is broadband WiFi and it was confirmed that WiFi remains a serious part of MobilePro's tech and service offering business plan. My own assumption is I would be surprised not to see some new acquisition aspect of WiFi incorporated into the company in the near future and at least this year. WiFi is too important an aspect of being a new breed telco capable of servicing all manner of clients, particularly businesses, to not have a strong WiFi team in place. Later, I'd look for sector specific efforts by MobilePro to use WiFi to capture market share and then cross-market their other services (or perhaps vice versa). An example of this is the Crescent subsidiary which has IT services geared specifically to the health care sector. I confirmed that MobilePro is very interested in growing Crescent into a lucrative division capable of winning many health care contracts for both IT services and to provide wireless data services (internet/WiFi, phone, VOIP, etc.) to hospitals. This would be a significant sector to gain traction in and MOBL is evidently seeing that tiny companies can't target a whole sector competitively while the bigger players are often unable to focus on so specific a business category. Look for MobilePro's WiFi strategy to find sector niches they will try to mine for business and build a competitive advantage in specific business areas.
MobilePro's business plan is to be a competitive new breed telco capable of delivering all of the latest voice and data services via conventional infrastructure pipelines and wireless. Their cross-marketing strategy still requires a cohesive company-wide culture that transcends the different work cultures of each subsidiary. Since MobilePro is not absorbing the new companies so much as monitoring them and integrating the availability of their services to one another, the success of cross-marketing still requires the subsidiaries to execute their duties at a better level than the competition and achieve consistently high customer satisfaction ratings. The success of conglomeration via acquisitions does ultimately rest on the ability of MobilePro senior management to propagate a company vision throughout the subsidiaries and ensure that quality control remains high. This can become difficult with size and growing hierarchies, so much will depend on the quality of the CEO and the division leaders immediately under him. This is not trivial nor mundane. Should they achieve their target growth rate towards a billion dollar churn in 2006, they'll need this top leadership hitting its marks to distinguish MobilePro's consumer and business offerings from the competition. And this is why so much attention has been and rightfully should be paid to the experience of the management Jay has picked up via the acquisitions. These are going to be his right hand men to pull off this audacious business plan. So far, what I've seen shows quality additions, but that leaves room for yet more DD.
Finally, as already discussed in the Zigbee section, Jay said he is determined to succeed in a big way whether or not the company ever makes a single dime from their R&D work. That said, he is very optimistic about Zigbee. He has obvious reasons not to emphasize it now since it is R&D and prototyping is being done in Korea and he is not going to build up false expectations. When he has tangible developments, we'll know about them. In terms of the business plan, Zigbee's success would clearly be meant to add hundreds of millions of dollars of revenue to the bottom line. Again, that is high margin at 50% pure profit. I gave some market share and monetary examples before, but my personal assessment is that by 2006 that even with only $50M initial Zigbee revs that still adds $25M to the profit margin which would be a minimum of 0.05-0.08 per share EPS which is significant. If Zigbee becomes a big driver of success for MOBL, then the numbers would be quite large and the EPS benefit could be anywhere from a nickel to a dollar. Obviously, shareholders are not dependent on Zigbee to make MOBL a mid-cap company, but with it a $5-10 stock could grow to many times that. That is what MOBL is up too and they've conceived their growth plan so they can't lose either way.
11. Revenue statements in the PRs. The expected revenues stated in their acquisition PRs are based on fully audited statements conducted for the quarter preceding the acquisition. These previous quarterly earnings are then reported in the PRs on an annualized basis. As we know, some of the acquisitions like CloseCall may be on a growth curve that will exceed those projected revenues, but everything stated is done by the book without forward expectations factored in. To me, that can mean the $78M annualized revenues of the closed and pending acquisitions can end up being considerably higher in the forthcoming year as the company executes their strategy of cross-marketing services.
In closing, I believe this is an opportunity to place your bets on a future bigshot CEO who has had the inclination and determination to start from scratch what would be hard for him to attain by working up the ranks of another major corporation. Other than finding a growth situation with a potentially high profit bottom line, management capability and trustworthiness should be the primary things you look for in an investment. I believe Jay Wright has exceptional communication skills that have served him well in cultivating the network of relationships that have grown up around him to support his bold drive to grow MobilePro into a company to be reckoned with in what seems like a record breaking pace. If I did not feel this man was a straight shooter who has walked the talk when it comes to shareholder interests, I would not be saying this. If I did not feel his legal and investment M&A background did not uniquely equip him to pursue the acquisition strategy MOBL is taking, I would not be investing in this business plan. In sum, I have seen him do what I have not seen any other CEO of any OTC company accomplish, which is achieve significant growth while adding to the shareholder value. And he has displayed a well rounded knowledge of the shortcomings of being on the OTC and how to overcome them. If I could tell you of any other CEO I think is capable of getting a company listed on the major exchanges on terms that benefits shareholders I would, but I can't. I think Jay understands the obstacles very well and he is executing a very bold plan. If it continues to progress as he intends he will achieve the growth he is aiming for and the PPS of MOBL's stock will be growing right alongside it.
ADDENDUM:
The following essay was written for the benefit of my investing friends on May 4, but never posted publicly. It may still be interesting for some and it also shows I have been considering MOBL's business plan for some time. Even back then, this was still only ONE aspect of those considerations. At this point, I would amend it mostly by saying MobilePro is not ducking urban concentrations at all while much of their strategy will also be marketed and serviced via an internet and toll phone based infrastructure. While the ROI from picking up smaller markets not well served by broadband and delivering those services can be very worthwhile, we now know MobilePro's agenda is to be a national telco with coverage of the whole contiguous 48 states. Nonetheless, part of their strategy may still include some of the aspects touched upon below. And per the posts about MobilePro focusing for now on the South and Midwest part of the geographical coverage they provide for their services may continue to service areas like those discussed below.
Here is a link to support the following article which I have not revised since I wrote it over two months ago:
I had recently considered MOBL's stated objective to build revenues via acquisitions a solid sounding plan and had also speculated it may provide them with a captive consumer audience to test their potential products and services in development. I am now seeing a broader and perhaps ultimately even better picture of what this strategy may entail. MOBL is acquiring ISPs in under served areas of the US with customer bases in the tens of thousands (or even less). Though a few of the half dozen acquisitions thus far appear to have well developed technical capabilities and can even install dedicated T1 Internet pipes for bigger clients, the bread and butter of these ISPs are retail clients, many of whom subscribe to local dial-up internet services in regions, some still outside the reach of high speed internet access services.
The wireless/WiFi internet access revolution is the rapidly arriving tipping point nationally and globally in getting broadband access to under served regional areas without the past need for expensive infrastructure costs that will become technologically obsolete. With the push to extend the capacities of wireless transmission from just serving hot spots in the midst of WiFi hubs to the range of perhaps miles from a transmitting hub, these same under served regions may soon be in line for a major upgrade in internet services.
It does seem evident MOBL expects to be providing those broadband wireless services to the regions where they are acquiring ISPs in (SE/SW - Texas/Louisiana and now the MidWest). This does mean my original premise of providing a broader range of services to the client base looks highly plausible, but, more importantly, this approach shows a broader ranged plan to build a large customer wireless customer subscription base where MOBL may have very little competition. This is very appealing for numerous reasons.
These ISPs are sometimes the ONLY viable ISP in the region they operate in. They are holdovers from the first generation of internet access, but many are still not ready to morph into modern services delivery solutions providers easily found in urban/exurban/suburban areas. The market density is lower, so the ability to gain millions of customers from major cities is not there, but in the big markets the big telcos and broadband providers have to aggressively compete to gain retail and corporate accounts.
In the areas of the ISPs where MOBL is planting its flag, the actual competition may be little or none. Big players may not want to expend the time and capital to cultivate these smaller markets, leaving them for smaller aggressive companies to serve those clients. The past proliferation of smaller ISPs were often sole proprietor or small partnership type businesses run by local business people and techies serving their communities. Many of the remaining ones (and there still seem to be quite a few with many up on the auction block) do not have the capital resources to modernize and will either fade out or get acquired by firms like MOBL that are beginning to conglomerate these interests into more coherent corporate strategies.
When you consider that many areas still use dial-up (my mother does, don't know how she manages!), I think it is reasonable to assume that ,if higher speed wireless access becomes available, a local dial up subscription base would not only migrate to it, but that the new service could also build a larger customer base than the dial up service accounts already accrued. I say this because (a) if there is more than one ISP offering dial-up in a locality and one provider switches to WiFi, I think it will put the other ISP out of business over time if they fail to compete and (b) there is probably still a large rural audience that may become first time web surfers with the advent of better service and (c) those clients who had no choice but to subscribe to expensive satellite services from Hughes Corp. and such will likely switch over, particularly if they have already amortized their initial material capital outlay for the satellite connection or it is just cheaper (and probably a better service) to switch.
This sounds like what MOBL is doing. They are figuring out how to cannibalize weak and ripe markets, thus avoiding head on competition with the majors. In the process, they can build their revenue base, customer base and brand name to the point they are stable, successful and lucrative enough to compete on a larger business scale in bigger markets, if and when they choose to enter them. It is a process of finding opportunities and advantages on the margins of the marketplace and growing themselves from there. It also is appealing if my analysis is true in that it could represent a solid business model from an earnings point of view, thus giving MOBL what should be a very satisfying risk to reward ratio for investors going forwards.
All of this is completely without taking into consideration their R&D and technology development efforts. Should they be capable of really establishing proprietary value through defensible, and USABLE(!), tech patents, then they will doing so down the road with an already established customer base with which MOBL can both test and market those technologies. The acquisition plan represents a form of horizontal expansion and that those ISPs will become folded into the MOBL corporate structure, thus enabling the company to integrate marketing, billing and support into a more centralized corporate entity. That then becomes the first step in vertical integration.
True vertical integration fully occurs when MOBL also generate new products and services and is also the service provider. Down the road, I can also see this as a very strategic plan whereby MOBL builds up a very well integrated, competitive ISP/Telco/Wireless services entity servicing multiple US regions until the time their R&D and integrated chip initiatives become ready for prime time. At that point, they can wait until those initiatives become big revenue earners themselves and then sell off the now potentially large services division servicing perhaps millions of customers for a very handsome sum in the hundreds of millions of dollars that will then further bankroll their metamorphosis into an advanced technologies company. I believe that may be their logic, unless they truly want to build a fully vertical company well into the future to ensure market access, distribution channels and a dependable revenue flow no matter what.
Back to the ISP acquisition strategy. Over time, the conglomeration of ISPs builds economies of scale that will generate a higher bottom line return from each ISP when redundancies of basic management needs are eliminated. MOBL acquires the companies to get the client base and they can then retain the acquired ISP's personnel needed to keep each local operation going. If anything, it does not necessarily require MOBL to hire more people, but perhaps to cut down the employee count to what is essential to keep each local ISP running, since they should be able to centralize much of the database and accounting requirements. When more advanced service offerings are ready to be implemented and rolled out, MOBL can then hire technical specialists for each locality to bring those plans to fruition.
At the rate MOBL is making these acquisitions (and acquiring revenue bases to further fund new acquisitions), I believe they have a pretty big objective to become one of the premier service providers in the very markets where they will have the least competition. As technological advances move forward, with attention to quality customer service, within several years MOBL could have a loyal customer base in the millions covering various regions of the US. If the result is not a contiguous web of local service providers, then at it could still amount to millions of customers in the targeted areas they are operating in.
I don't know if seamless coverage of wireless communications hubs from point to point is part of MOBL's agenda, since the current game plan would require a very heavy pace of acquisitions to put together such extensive regional coverage. Nor do I know if they will start up from scratch additional local providers to fill those gaps, but they might once they feel they are hitting critical mass in any one general region. That would only be predicated upon wanting full geographic coverage, but I think their acquisition model remains their primary strategy for some time to come.
If MOBL does start to behave like a full fledged internet telco offering a wide range of multi-tiered services including subscription plans to mobile services, then it will have to be considered how they would guarantee roaming data stream connectivity outside of the localities of the ISPs they are absorbing. That may involve buying access to the larger telco networks to ensure seamless coverage, but I don't really know yet what the FCC might allow in terms of larger competitors denying paid access of smaller telcos to their networks. While paying for a fractional bandwidth portion from existing major providers may be feasible, it seems more likely MOBL is gearing up to contract for the provision of enough satellite bandwidth to feed those wireless services they seem destined to provide to their customer base.
Also, as I have mentioned in the past, this customer base enables MOBL to introduce innovative services and essentially test market them if need be. If MOBL does actually succeed in innovating, as in the case of home based wireless interactive Zigbee devices, then they may have to ability to compete within a developing market sector from the get go since they would already have a client base to market to. And should they truly innovate to the point of being unique in the marketplace, then that same customer base can be the foundation upon which MOBL can enter bigger and competitive densely populated markets after having already established their brand name. Either way, they seem like they have a plan to achieve profitability and perhaps a foundation to grow very big if they are innovators too.
And this does not even touch upon the possibility of securing corporate clientele or their recent announcement of inclusion in the GDC (Global Defense Corp.), which certainly indicates the possibility of federal, military and HS deals. Perhaps I will be able to look deeper into those possibilities later, but the primary point here and now is the above scenario is very reasonable and does not really seem highly speculative. If you need to invest on the basis of fundamentals, this is the key for MOBL investors now. The future of their R&D and potential government contracts would just sweeten the pot, but MOBL is not making themselves wholly dependent on them to become a profitable company.
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