MAIL
——-
MAIL has been an incredible disappointment and I have sold out of my position. My worst nightmare has come true. Management has used all of the company’s cash and then some to acquire a speculative web company. Worse, they don’t seem to have any coherent integration strategy. Recently, the company has decided to potentially even take on debt to fund additional acquisitions. In general, acquisitive companies, especially those funding acquisitions at multiples that are higher than the current business valuation, do not perform well. MAIL may very well succeed in their aggressive strategy, but I’ll watch from the sidelines for now.

ABTL
————–
ABTL’s results in the last quarter were surprisingly good, especially considering the overall auto market given the Japan situation. I plan to hold on to see how the company does in a decent auto market. There is significant operating leverage here, so if the auto market picks up, as I expect it will as Japanese production is back to normal, ABTL could continue to suprise.

INAP
——-
Same old story with INAP. The company struggles to grow meaningfully. However, I still believe in the company’s data center strategy, which has yet to fully play out in the marketplace. Given the recurring nature of the business, and the still strong balance sheet, I see no reason to panic here and I plan to hold INAP as it remains a strong acquisition candidate. Notably, the CEO purchased some shares at sub-$5.

BWEN
——
BWEN has been a disaster and easily my worst stock pick since Britesmile. However, I am still not ready to give up here yet. The company’s last quarter was not all that bad, the financial condition is definately improving from a disaster level. Liquidity seems decent for at least 12 months. The real problem with BWEN is that I invested in the company as a play on wind energy, but now the company’s entire strategy is to diversify away from wind into oil, gas, and mining. If I wanted to invest in an oil services company, I would have chosen something else. Frankly, I have no interest in investing in BWEN as an oil/mining services play. That being said with the stock off some 50% from the highs, the CFO buying shares at $0.90, and upcoming quarters looking good, I am not going to sell yet. But, I would look to sell on any rally and would NOT advise averaging down in BWEN.

I. The new CEO of VITC, Jeffrey J. Horowitz, is the former founder and CEO of Vitamin Shoppe (VSI). VSI now has a market cap of around $1.3 billion and trades at an EV/Sales of over 1.6.

II. At it’s current price of around $5.50, VITC has an EV of around $120 million vs. sales of over $220 million, for an EV/Sales of around 0.6X. Clearly, if VITC is able to continue to grow revenues, the company’s multiple will expand and the stock price will increase.

III. When VITC resumed trading the company voted to terminate the Company’s stockholder rights plan.

IV. Additional changes at VITC, can be read about here: http://finance.yahoo.com/news/Vitacostcom-Announces-bw-2694796597.html?x=0&.v=1

More about Jeffrey Horowitz
Jeffrey J. Horowitz was appointed Chief Executive Officer on February 17, 2011. He served as Interim Chief Executive Officer and a Director of Vitacost from August 2010 through February 17, 2011. Mr. Horowitz provided consulting services to Vitacost in 2010 prior to being appointed Interim Chief Executive Officer. Over the five years prior to joining Vitacost, Mr. Horowitz pursued personal interests. Mr. Horowitz founded Vitamin Shoppe, Inc. (“Vitamin Shoppe”) in 1977 and served as its President and Chief Executive Officer from 1977 to January 2000, during which time he oversaw the retail expansion from one store in 1977 to over 200 stores in 11 states. In addition, Mr. Horowitz expanded Vitamin Shoppe’s business by establishing a catalog to solicit mail order sales in 1981 and pioneered the online vitamin sales industry in 1998 with the launch of VitaminShoppe.com. Mr. Horowitz also led Vitamin Shoppe during its initial public offering on The NASDAQ Stock Market in 1999. Mr. Horowitz served as President and Chief Executive Officer of VitaminShoppe.com, Inc. from July 1999 to January 2000. Mr. Horowitz served as Chairman of the Board of Directors of VitaminShoppe.com, Inc. from June 1999 to January 2000, as a Director of VitaminShoppe.com, Inc. from May 1999 to 2007 and as a Director of Vitamin Shoppe Industries Inc. from its inception to 2007. We believe Mr. Horowitz’s knowledge and valuable insight into the health and wellness industry, his experience as the Chief Executive Officer of Vitamin Shoppe and his service on several boards of directors provide the requisite qualifications, skills, perspectives and experience that make him well qualified to serve on our Board of Directors and as our Chief Executive Officer.

It’s difficult to fully quantify the upside in IPAS with these new services, but suffice to say it is not reflected in the current stock price. A quick review of WIFI (the symbol for Boingo), shows the potential here, even if Boingo is more of a direct-to-consumer company.

IPAS’s revenues will likely remain stagnant for a few more quarters, but the stock could continue to rise if the company signs more WIFI offload agreements with carriers, on expectations that these agreements will lead to substantial growth in the years ahead.

IPAS remains an acquisition candidate, and I would think that WIFI/Boingo + IPAS would be an excellent combination.

But, since as I’ve pointed out, the Internet IPO’s today are being valued at roughly 10X to 20X the valuations during the first bubble, it should be clear that in terms of valuation, we really only need about 10 to 20 IPO’s this year to reach the peak of the last bubble in terms of market value. My guess is that we’ll get there easily, since Facebook alone is worth 100 IPO’s from the last bubble.

My expectation is for this current Internet bubble to be very compressed in nature, just due to the fact that “things” move much faster nowadays, and also because of the insane market caps of the new crop of Internet companies. I’d venture to guess that the new Internet bubble will pop in about 12 months, still plenty of time to make some money.

Now back to the analysis:

I. Wind Power Industry

Let’s start with the overall wind power industry, because the improvements in the US wind power industry will undoubtedly effect BWEN.

The best source for industry data is at: http://www.awea.org/

An April 2011 press release from the AWEA, highlighted the improvements in the wind power industry in the US.

From the release:

“U.S. wind power turned in a solid first quarter, AWEA reported April 28, installing enough new generating capacity (1,100 megawatts, MW) to power the equivalent of a quarter of a million average American homes.

What was slightly surprising, though, is the amount of new wind capacity reported to be under construction as of the quarter’s end–5,600 MW, enough to power another 1.4 million homes. More importantly, that 5,600 MW is more than twice the amount under construction at the comparable point in 2009 or 2010.“

“The total wind fleet now stands at 41,400 MW—producing enough clean energy to supply 10 million American homes.”

The entire press release is here:
http://www.awea.org/newsroom/pressreleases/1QNumbers4282011.cfm

II. BWEN’s Financials Specifically:
Shares Outstanding: 107 million
Cash: $22 million
Debt: $10.6 million ($1.4 million due this year)

BWEN mentions a potential liquidity issue in its 10-Q, but I am not entirely clear why. The company appears to have sufficient cash to manage operations for the next twelve months. Of course, if any of their suppliers face a cash crunch, BWEN could also suffer dramatically. However, the company has little debt and so I don’t see much financial risk here.

Most importantly, BWEN’s last quarter showed significant financial improvement. Sales increased 100% and the company reported positive EBITDA compared to a loss the year before. At March 31, 2011, backlog totaled $227 million, a slight increase over the December 31, 2010 backlog of $226 million. Interestingly, the company’s largest division, Towers, reported an operating profit of $2.4 million in the quarter. The other businesses lost money.

As BWEN’s other businesses reach breakeven and/or start to make money, the company could show significant bottom line growth that would boost the share price.

While Cypher stent sales were a very important part of SRDX’s revenue stream in previous years, the decline in Cypher stent sales was well underway prior to this JNJ announcement. In fact, this is a prime reason why SRDX’s stock has suffered in recent years. In fact, in the most recent quarter, SRDX’s reported a 40% dive in Cypher stent royalties, and yet revenues were only down 2%. SRDX also clearly informed investors prior to this JNJ announcement that they expected Cypher sales to essentially trend to $0 by year end 2011. Relevant quotes are below.

So overall, I do not think the JNJ announcement is much of a surprise and I do not believe it effects the primary investment thesis for SRDX, which is that the company is going to divest a money-losing operation later this year, after which SRDX will be well positioned to report solid profitability from its remaining operations, most of which are high margin licensing businesses. Of note is that SRDX had $60 million in cash and investments as of 3/2011, and no debt. So the company is very well capitalized.

From the last 10-Q (bold added by me):

“Revenue in Medical Device was $10.0 million in the second quarter of fiscal 2011, a decrease of 2% compared with $10.2 million in the second quarter of fiscal 2010. The decrease in total revenue reflects lower R&D and royalty revenue, partially offset by higher product sales and license fees. Growth in our royalty revenue from our hydrophilic coating license agreements was not strong enough to offset the decrease in royalty revenue from Cordis Corporation, as a result of 41% lower CYPHER® stent sales. R&D revenue decreased $0.5 million in the second quarter of fiscal 2011, as we completed work on a significant customer feasibility project, which is currently not anticipated to move to a further stage of development.

Medical Device derives a substantial amount of revenue from royalties and license fees and product sales attributable to Cordis Corporation, a Johnson & Johnson company, on its CYPHER® Sirolimus-eluting Coronary Stent. The CYPHER® stent incorporates a proprietary SurModics polymer coating that delivers a therapeutic drug designed to reduce the occurrence of restenosis in coronary artery lesions. The CYPHER® stent faces continuing competition from Boston Scientific, Medtronic and Abbott Laboratories. Stents from these companies compete directly with the CYPHER® stent both domestically and internationally. For the last several years, royalty revenue and reagent product sales have decreased as a result of lower CYPHER® stent sales. We anticipate that royalty revenue from the CYPHER® stent will continue to decrease slightly in the remainder of fiscal 2011 until it reaches the minimum royalty levels per the license agreement with Cordis Corporation. We also receive a royalty on sales of delivery systems used to deliver the Medtronic Endeavor® and Endeavor® Resolute drug-eluting stents. These stent delivery systems incorporate our proprietary hydrophilic technology and are sold in the United States and internationally. ”

From the company’s PR on 6/16/2011:

“While we are disappointed by J&J’s announcement, we have long anticipated the continuing decline of royalties from CYPHER in our strategic and operating plans. Despite today’s announcement, J&J remains an important customer, as our hydrophilic coating technology is used on a broad array of products across the Cordis franchise. Importantly, today’s development reinforces and validates our long-term strategic plan of focusing on our core hydrophilic technology and in vitro diagnostics businesses. The Company re-affirms its previously communicated fiscal 2011 guidance.”