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Update:
 Money Talks — or not
Talk.com missed its earnings expectation by 3 cents last month. Its share prices ended down more than 15 percent the day of the announcement.
Talk.com earned US$13.4 million, or 20 cents a share, in Q1, compared to US$12.3 million, or 20 cents, a year earlier. First Call had a 23-cent consensus estimate. The company spent US$36 million on advertising, which ate into profits.
On the plus side, sales rose 41 percent to US$156.1 million from US$110.6 million a year earlier, but the increase was only 4.6 percent above the fourth quarter's level of US$149 million.
Hello, operator...
The long distance business is overrun with competition. Pricing power is an oxymoron and even the big boys like AT&T are having problems and laying off workers in order to cut costs. The industry is gearing up for a massive shake-out.
Talk.com has a number of advantages, which would suggest that they will be a long term winner. The first is valuation. With a US$618 million market cap, Talk.com now has a price-to-earnings ratio of 10 and a price-to-sales of less than one. And remember, Talk.com is the low cost producer of long distance.
Secondly, AOL has reaffirmed Talk.com's exclusive contract to market long distance service to AOL subscribers.
Little bundle of joy
Third, the company plans to build out its new local business, which it started with the purchase of access one last month.
The company will leverage its local customers and sell them long distance in a neat bundle utilizing AOL marketing channels.
I haven't met a business owner yet who didn't think that Talk.com was a fantastic service.
The upshot of all of this is that local and long distance is now a commodity. Whoever can produce it at the lowest cost and has the cash to hold on through the money-burning-high-advertising-duel-to-the-death-for-market-share dance will be the winner.
Dell did it in computers. Wal-Mart did it in retail. Can Talk.com produce in carrier service? Only time will tell. But at these valuation multiples I'm willing to wait it out — at least for now.
Valance Technology picks up a new order
Taipan's newest hot stock, Valence Technology Inc (NASDAQ:VLNC), announced that it has received a small initial purchase order from a major satellite and cellular phone customer for its advanced rechargeable lithium polymer batteries. These batteries will go into a mobile wireless device currently being built for high bandwidth Internet.
The batteries are Valence Model 25C. This is a slimmed-down version of a battery Valence already provides to this particular telecom OEM. The new battery measures less than 6mm and contains approximately 4 watt-hours of energy in a form factor of 25mm x 110mm x 5.7mm.
The share price seems to have found a base at US$13. Valence looks like a good buy below US$17 and a great buy if it retests the US$13 level.
ClearWorks.Net gets another contract
ClearWorks (CLWK:OTC Bulletin Boards) signed a deal to deliver Bundled Digital Services to the Team Reach community in Fort Worth. This community comprises 700 single-family homes, thirty acres of multiple dwelling units and eighty acres of commercial property.
Revenues for the life of this project are expected to be US$76 million with a gross profit of US$46 million. These are long-term contracts with life expectancy of 25 years. Though the majority of the profits won't hit the books anytime soon, you have the peace of mind of knowing that the tech company you are investing in will be around for quite some time.
ClearWorks has sold off from our entry price, but with sizable contracts coming in at a rate of two a month and a US$567 million market cap, I can't help but think that this company will be a long term winner.
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In addition to his duties at Taipan, Chris DeHaemer is the editor of The Hammer.
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