Casino Capitalism

ActivIdentity Turnaround in the Early Stages

Yesterday, ActivIdentity (ACTI) released earnings results for the March Quarter. As expected the company burned thru more of its cash hoard, but on a more positive note signaled that the cash losses would begin to decline steadily with cash breakeven expected later this year. In addition, the company is guiding towards modest revenue growth next quarter. Finally, we should hear sometime this year what the company plans to do with its $140 million cash balance (down to $135 million by the end of the year). As mentioned in the first write-up, I think the company is way overcapitalized and I hope for a special one-time dividend to be announced.

Internap Insights

Recently I received the following excellent comment from a subscriber concerning Internap (IIP):

"On the question of high costs, have you factored in the possibility that the new FCP 10 gig boxes could really take off in terms of sales? Internap has the best route control product on the market and very little real competition at the high end. These boxes will sell for around 100k when they go on the market in June and Internap's profit margins on those boxes are around 70%. If Internap can really start to reach critical mass in terms of selling these devices, it could significantly alter the gross margins of the business. Also, given that broadband useage will go from 38 to 88 million Americans over the next 6 years or so and video is really starting to take off with Google Video, youtube.com etc. I see the demand for Internap's FCP and IP services growing significantly. Thoughts?"

BlackRock Ventures Gets Acquisition Offer

Congrats to all those who have followed us in on our leading Canadian oil investment, BlackRock Ventures (BVI.to). This morning Shell Canada offered to buy Blackrock for $2.4 billion Canadian or C$24 per share. That makes for a nice day and provides us with about a 150% gain on our initial investment.  The important thing to take away from this acquisition offer is that the smaller independent Canadian companies with even minor Oil Sands exposures are clearly all still good investments given the acquisition appetites of the majors, who flush with cash are looking to snap up long-term producing assets in areas with incredible reserve growth. The Canadian Oil Sands remains, in my opinion, the best place to find this needed reserve growth. There are a few other Oil Sands plays that are rising on the news and we´d be buyers on any weakness. We´ll be holding onto BlackRock until the actual acquisition date gets closer as there is always the chance a higher bid can come in. We still recommend holding onto Suncor (SU), the #1 Oil Sands play.

Pulse Data Could Join The Seismic Rally

If you have followed this blog for some time, you know that I´ve been quite bullish on the seismic sector since late last year. As my two seismic picks, PGS and SELA.ob, have continued to soar  based on  industry consolidation, greater than expected cash-flow growth at each company, and still relatively reasonable valuations, I´ve been searching diligently for another investment in the seismic sector. Well after alot of digging around, I think I have found a decent "gamble" in Pulse Data (Toronto: PSD.TO or PLSDF.PK) at C$3.10.

As the rest of this post will explain, Pulse Data appears to have little downside risk at current prices and potentially offers 50% upside price appreciation  in 2006, should the company follow in the footsteps of competitors SELA.ob and PGS by reporting outstanding financial results and guidance in the coming months. Importantly, Pulse also pays a yearly dividend of $0.15 per share providing investors with the safety of a nearly 5% dividend yield on top of any share price increases.

Internap: Where to Now?

Last night Internap (IIP) delivered financial results that confirmed the strong turnaround at the company. From my perspective the most important part of the financial release was the increased revenue growth guidance for 2006, since the meager revenue growth projected last quarter was a factor in limiting the upside valuation for the company.

Web.com Continues to Make Progress

Today, Web.com announced results for their first quarter which were pretty much in line with my expectations. As is the case now with the vast majority of public companies, the financial numbers are completely confusing, due to charges related to stock options. The company claims to have had positive income after adjusting for stock option expenses, but in looking at the the company´s balance sheet  (i.e. actual cash position), it appears as if the company burned thru a bit of cash this quarter. However, the amount of cash burn is clearly insignificant, and I would say that the minimal cash burn is a great accomplishment for the new management team at Web.com, given the prior history of the company (formerly Interland).