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Thursday, July 17, 1997
Geoworks HOW DID IT FIND TROUBLE? Geo? Works? Not to investors who have seen their Geoworks shares fall from $45 last summer to single-digits today. Ever since MICROSOFT (Nasdaq: MSFT) crashed the party with a competing product, the only thing that has worked at Geoworks is the investor exit door, swinging fast, furiously and often. Geoworks' strength had been in the PDA business, an acronym that may as well have stood for Pretty Darn Aggravating to shareholders who saw their stake in the company buckle under selling pressure. PDAs, actually Personal Digital Assistants, were supposed to be the next wave of computer miniaturization. While the jury is still out on PDAs -- and the first few years have been disappointing -- at least Geoworks had the leading operating system in the niche. Then Microsoft introduced Windows CE, a scaled down Windows 95 operating system for hand-held computers. Many of Geoworks prized accounts, like Casio and Hewlett-Packard, defected to the new Bill Gates standard. BUSINESS DESCRIPTION Beyond PDAs, where California-based Geoworks specializes with its proprietary GEOS operating system and application software, the company also deals in personal communicators and drawing tablets, as well as interactive set-top television boxes and low-cost educational computers like IBM's EduQuest SchoolView software. FINANCIAL FACTS Income Statement 12-month sales: $11.1 million
12-month income: ($13.5 million)
12-month EPS: ($0.88)
Profit Margin: N/A
Market Cap: $105.7 million
Balance Sheet
Cash: $6.3 million
Current Assets: $37.7 million
Current Liabilities: $4.1 million
Long-term Debt: N/A
Ratios
Price-to-earnings: N/A
Price-to-sales: 9.5
HOW COULD YOU HAVE SEEN IT COMING? While the company has been able to keep some of its larger accounts on the GEOS system, like Toshiba and Nokia, it is clearly not enough. On March 20, the company announced that fourth quarter revenues would fall well below expectations. The next day, the already battered stock took a $4 3/4 hit to $7 1/4. Those who bailed out with the Windows CE announcement back in September got out above $20. Actually, shares were fetching more than $20 well into February, despite weak earnings reports and insider selling. The "window" to sell was wide. The reasons were many. WHERE TO FROM HERE? The company has not admitted defeat, and is now enamored with something Microsoft has yet to dabble in, smart cellular phones. This emerging mobile communications device market is as exciting and uncertain as PDAs were a few years ago. "Interest in smart cellular phones continues to increase and product feedback has been very positive," Geoworks CEO Gordon Mayer said recently. The company is optimistic about ending its stream of quarterly losses by the end of the fiscal year. To that end, it is trimming operating costs for the balance of the year, and the company's asset-rich and debt-free balance sheet will forgive it for awhile. Geoworks is poised to win back Wall Street with not just a good story this time, but also with solid profitability. Analysts seem to agree and are projecting a $0.27 a share showing from the company next year. Even after the fall, Geoworks is still selling at a lofty 9 times trailing revenues, but it is the unknown potential of a promising niche, similar to what catapulted the stock to the mid-$40s last summer, that is holding the few believers in place. This time, however, the stock doesn't have as far to fall. -Rick Aristotle Munarriz (tmfedible@aol.com)
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