Telular


Telular held much promise in the years past but never capitalized on it.  The hope was that fixed cellular phones would takeoff worldwide, unfortunately Telular could not compete with the low cost providers in Asia.  They have since exited this part of the business.  I put much on the blame on past management which turned out to be less than marginal.  They too have been replaced.  New management is focusing on the alarm and M2M business.  They seem to be moving in the right direction increasing the recurring revenue side of the business (Alarm services) and buying a M2M company (SupplyNet), which also generates recurring revenues.  Growth to date is extremely slow, actually declining but this is due to a onetime event called sunset issued by the US government which lead to a spike in Telular’s sales in the past.  The effects from this event have passed and new management needs to grow the business.

 

The balance sheet is in great shape, albeit small, but they have no debt and plenty of cash which they have used to buyback large amount of shares.  The company is free cash flow positive but again the numbers are small and management needs to grow revenues.  I’m sure the economy is not helping but they are holding their own given the global economic climate.  Longer term visibility is lacking so it’s hard, for the investor, to get a handle on future growth.

 

That said they have a balance sheet that should weather the economic storm assuming growth does not move backward but they pay no dividend so it’s hard to rate as a good investment.  Truly speculative given any PR shock could move the stock quite a bit given the small size of the company and the outstanding shares continue to shrink from the buyback program.  The stock is not very liquid which could lead to large percentage gains or losses.

 

Although Telular has been a disappointment over the years with few exceptions I still hold out some hope given its balance sheet, new management, where the stock price is and events over the past year.  That said success could  prove elusive given the lack of overall growth and visibility.

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