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12/3/2004
03:44 PM
William Schaff
William Schaff
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Taking Stock: ParkerVision Spots Opportunity In LANs

If sales ramp up, the company's cash burn rate should decline.

Ever have trouble with your wireless LAN? The signal doesn't reach to the far end of your house, perhaps? Or you can't get a signal from the wireless router located in the room next door? There's a new product on the market from a small company called ParkerVision that promises to solve most of these problems.

ParkerVision has been around since 1989 but recently left the high-end video business and fully committed to the wireless market, initially focusing on wireless LANs. With an ordinary wireless LAN, the signal is transmitted using analog radio-frequency technology. ParkerVision's version utilizes a digital technology, which it calls Direct2Digital or D2D. ParkerVision's wireless LAN works at distances up to a mile in open-field outdoor tests, which is quite a bit more than the 1,500 feet a normal consumer-oriented wireless LAN could reach. By the time a conventional wireless LAN is set up in your home, the range may be down to as little as 20 to 40 feet, according to the company.

ParkerVision has several market opportunities. Of course, there's the regular do-it-yourself wireless LAN market for access cards or routers. More exciting would be the inclusion of the company's wireless LAN access cards in notebooks from one or more major manufacturers. Also, ParkerVision has plans to launch a cordless phone using the same technology, addressing a different market.

Because of its transformation into a wireless company, ParkerVision has sold off all other revenue-generating segments and is only now starting to generate very modest revenue from its wireless business. Last quarter, the company had revenue of only $96,000, though deferred revenue was $540,000, far from enough to offset operating expenses.

The company is focusing on the consumer and small-office segments and has developed a distribution network from scratch. It has managed to obtain distribution through several larger outlets such as CompUSA, TigerDirect.com, and Amazon.com. But falling prices for wireless LAN products may make it hard for ParkerVision to get the premium price it believes its offering warrants. I should also add that ParkerVision's product runs at only 11 Mbps; 802.11g operates at 54 Mbps. A home user probably won't notice the difference given the slower speeds caused by DSL and cable-modem connections.

Given the low revenue base, ParkerVision seems likely to produce losses for quite a while. The company has no debt and approximately $20 million in cash on the balance sheet. However, operating expenses in the most recent quarter were $5.1 million on revenue of $96,000, which equates to a cash burn rate of roughly $5 million per quarter. If sales ramp up nicely over the next three to four quarters, the cash burn rate will decline rapidly. If not, watch out for a rapidly descending stock price.

The margin for error isn't great, in my opinion, but who knows? Maybe a larger company will find the technology attractive enough to acquire ParkerVision. In my view, though, this stock is definitely just for speculative investors, given the relatively high-risk profile.

William Schaff is chief investment officer at Bay Isle Financial LLC, which manages the InformationWeek 100 Stock Index. Reach him at william.schaff@bayislefinancial.com. This article is provided for information purposes only and should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security. Bay Isle has no affiliation with, nor does it receive compensation from, any of the companies mentioned above. Bay Isle's current client portfolios may own publicly traded securities in one or more of these companies at any given time.


To discuss this column with other readers, please visit William Schaff's forum on the Listening Post.

To find out more about William Schaff, please visit his page on the Listening Post.

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