After almost two years of savage beatings on Wall Street, Glenayre Technologies Inc. has proven to have a tough chin, and analysts believe the company now is poised to come off the ropes swinging for a comeback.
Stock turnaround specialists Robert M. Cohen & Co., which recently initiated coverage of the company, listed a speculative buy rating for Glenayre. Keith Bossey, the analyst covering Glenayre, said he expects Glenayre stock to rise in value 20 percent during the next year. Bossey believes Glenayre stock, now hovering at just more than $10 a share, could rise to $17.50 per share by this time next year.
For a company with Glenayre’s Wall Street history, this comes as good news. The company was a favorite of investors for a while, but like many other paging companies, it was hurt when paging carriers found the standards by which they were measured changed from subscriber growth to revenue stream. Paging carriers cut back on spending, including expenses for equipment, and Glenayre was tagged.
“I guess at that time, they stopped looking at infrastructure,” said Mark Smalley, Glenayre’s vice president of investor relations.
U.S. paging sales, which totaled 68 percent of the company’s sales in 1996, shrank to 31 percent after the first quarter of 1997 and the company’s stock, once topping $50 a share, fell 80 percent in 18 months.
“It would have been difficult to see the U.S. market declining like it did,” Smalley said.
But the paging industry fought back, and now Glenayre potentially could find a profitable niche in this new era.
“It doesn’t take much in this particular stock to get it rolling the other way,” Bossey said. “I think it’s positioned well now.”
All it needs, he said, is a little shove to get it rolling in the right direction.
This shove comes in the form of the paging market’s expected evolution toward narrowband personal communications services networks and services. The messaging industry believes its growth is not going to come from basic one-way service, but instead from value-added technology that NPCS networks provide-such as guaranteed receipt message delivery, information-on-demand and interactive two-way messaging.
To offer these, paging carriers will need to either build out NPCS networks, or upgrade their one-way networks with a return path.
“On a general basis, we’re looking at this because there’s a limited amount of wireless real estate out there. The companies that deal in that are going to find something (to do) with that bandwidth,” Bossey said.
That means building networks, which is good news for an infrastructure equipment provider like Glenayre.
“These advanced networks allow for greater capacity and will soon be necessary to remain competitive,” Smalley said, because greater capacity means less expensive service costs.
With the technological advantages of NPCS and the renewed financial vigor shown by paging carriers, Smalley said he is optimistic. “You kind of have to be somewhat optimistic that the buildout will occur at some point,” he said.
A major sign of Glenayre’s commitment to this strategy was its decision to eliminate the Wireless Interconnect Group microwave unit (formerly called Western Multiplex) from its corner and take on pager device manufacturer Wireless Access Inc. and software company Open Development Corp. The decision drew applause from the financial community.
“These … moves combine to focus the company on its core competencies: end-to-end paging solutions and enhancing the services of telecommunications providers,” read Bossey’s report.
The company has not yet completed the sale of its Wireless Interconnect Group microwave unit, but said it has had several offers and is in the process of completing the sale.
Besides providing the networks for NPCS services, Glenayre took its strategy a step further with the recently completed acquisition of Wireless Access and has since introduced several new products, such as the AccessLink pager and the upcoming AccessMate.
Greg Reyes, president of Wireless Access Group, said the evolution to NPCS networks opens new opportunities for Glenayre and is unabashed in his confidence in the future.
“I think in this new world of messaging, there’s going to be the opportunity for new technologies and applications,” he said. “The time is right for a new company to come to market with an innovative product.”
Glenayre’s strategy, he said, is to provide NPCS infrastructure to those with NPCS licenses, upgrade existing one-way FLEX networks with a return channel to migrate to two-way and to provide subscriber devices that can be upgraded along with the network. Wireless Access’ devices, he said, can have software added to them so when the network is upgraded, the end user need only upgrade the device’s software, rather than purchasing a new device.
It is this type of innovation, he said, that will allow the company to compete with Motorola Inc., which dominates the one-way paging device market. NPCS is opening up a whole new market, he said, and anybody with the right idea and product will be able to compete with it.
“There’s going to be a whole category of devices that don’t exist today and that’s where Glenayre and Wireless Access can have something to offer,” Reyes said. “As long as Wireless Access can bring out innovative subscriber devices, we have a great future … Paging is coming around and people are beginning to take notice.”
