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I rarely, if in fact ever, make an unsolicited pitch for a stock. I'm making an exception. I'm recommending you all take a look at Shared Technologies Cellular (STCL). It currently is trading at $7 on the NASDAQ. It was originally brought to my attention by BMauerman who some of you may know, but I have since done my own due diligence. It is still an "unknown" stock and I know of no reason it should "pop" in the immediate future, so I'm suggesting you take a good look and not buy it on an impulse. STC "owns" the market for rental cell phones. If you ever rented a cell phone from Hertz, Avis, National, Budget or Alamo, it was STC who provided the service. This business "forced" STC to develop 100's of relationships with local cellular carriers and they now have contracts covering 94% of the U.S. No competitor, despite claims to the contrary, can match that coverage. The "sizzle" in STC, however, is their new "Debit" business, which leverages these local carrier contracts and a series of other unique alliances to enable STC to offer a Prepaid Cell Phone "in a box" on a nationwide basis. A "Debit" or "prepaid" cell phone is one in which the user "buys" airtime in advance, then consumes their available time. Hence no contract, no credit check, no billing, no security deposit, free 911 service and no hassles. About 40% of individuals wanting a cell phone get turned down for credit reasons, so we're talking a HUGE market. Philips Consumer Products (which includes Lucent as a partner), provides the phone, their highly acclaimed ISIS phone. The phone has embedded "debit accounting" software from a company called Telemac. This software is patented and as far as I can tell is superior to any other debit technology out there. STC provides the activation services and the airtime. Worldwide Direct (WDC), the king of "As Seen on TV" advertising will distribute the product and sell it direct to consumers via TV advertising. WDC 's sister company, Direct To Retail (DTR), will sell the product to major retail channels under the "As Seen on TV" logo. If this all sounds complicated , it is. But no RBOC or other cellular competitor has come close to matching it, especially on a nationwide basis. It is, in itself, a formidable barrier to entry and one which is about to get better. DTR has already signed up Home Shopping Network and K-Mart (nationwide). These two channels alone have blown away STC's initial sales projections. The product launched in both channels on 3/31. Their original goal was to sell 65K units in 1998. They've already doubled that plan. DTR has had discussions with a dozen additional retailers. They've pushed them off because they're already selling at peak capacity. WDC starts advertising in June or July. I've seen the ad (Dick Clark no less), and it looks great. It's been delayed for the same reasons as above. As of May 15 they had 35000 active lines. New lines are being added at 500 - 750 per day, with plans to up that capacity to 1000 by the end of June. Plans for monthly revenues per phone are $40, but actual long term monthly usage rates and turnover rates are unknown at this early date. I estimate the stock could be valued at $1500 - $2000 per subscriber. There are about 11.5M shares out today on a fully diluted basis (about 3M of these are warrants which will eventually generate additional cash). The company is seeking more near term capital through a strategic alliance partner or another convertible offering which should take the shares to about 13M. The math: 130,000 subscribers by year-end * $1500 / 13M = $15 per share. Remember, they've added about 20,000 subscribers in the first 45 days since they launched this program, with only two channels and basically no advertising. I think HSN did 5000 in one weekend! Downsides: Measly public float, less than 2M. Could be a fad. Company not profitable yet. Negative working capital. Need cash (but there are plenty of offers I'm told). Competitive reaction to STC's success unknown. Rates per minute are high. Current demand is overtaxing their customer service and activation groups, so their current service may stink. This stock is completely unknown. I've participated in two conference calls, I believe there were no analysts on either. I attended the shareholder's meeting last Friday and spent plenty of time with all the senior management. BMauerman was the only other shareholder present. No SI or Motley Fool Board exists. No activity worth mentioning on Yahoo board. This stock has not been hyped on the internet and there is no analyst coverage, though Solomon Smith Barney just raised $6M for them. I challenged management on all these negatives and I'm satisfied they are trying to address them. Bill and I will try to get SI and Motley fool boards going on STCL. If it looks good to you, please spread the word. It's definitely one to watch. Thanks for your time | ||||||||||||||
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