B.C. network gear maker examining its options

A Victoria maker of broadband equipment for large cable companies and network equipment makers like Cisco Systems Inc. has hired a financial advisor to look at options for the company’s future.

Vecima Networks said Wednesday it has retained Stifel Nicolaus & Co. for advice on ways “to maximize the value for the company’s shareholders.”

The announcement put an initial spark in Vecima shares, which jumped to $4.60. The day before shares closed at $3.61.

“I think everything is on the table” in terms of options, Alan Brick, the company’s investor relations officer, said in an interview. That includes partnerships, alternative strategic business models, a sale of assets or what Vecima described in a statement as “other transactions.”

“We feel the company is undervalued from a market cap (capitalization) perspective and that’s why we’re beginning this process,” Brick said.

Asked why some see it as undervalued, Brick said the company looks at share prices of its peers. He also said Vecima’s book value is higher than the market capitalization.

“We’ve been saying for a number of quarters we feel the valuation (by the stock market) is unfavourable.”
(Vecima’s Terrace QAM gateway)
Vecima [TSX: VCM] makes wired and wireless products for service providers to increase bandwidth over the so-called “last mile” between a network and a subscriber’s home, enabling them to offer quad- and triple-play bundled services.

On the wired side, two of the newest products are the Terrace QAM gateway for the hospitality industry, which eliminates the need for HDTV set top boxes,  and Concierge IP to QAM appliances for digital video.

On the wireless side, it offers the WaveRider backhaul systems and VistaMax base stations.

Some solutions are made for other network gear makers. For example, in March it announced a $19 million OEM deal with an unnamed video access equipment maker.

Like many stocks, Vecima has trended downwards since 2008, when shares were in the $8 range. It has tried to make its books better by selling assets. In 2010 it sold $14 million in wireless spectrum used by a Saskatchewan wireless Internet provider subsidiary to the Inukshuk partnership owned by Bell Mobility and Rogers Communications, followed by another sale of $8 million in 2011 to an unnamed carrier, and $7.3 million in spectrum to Xplorenet Broadband Inc.

Last month it gained $4 million by selling land in Saskatoon.

After these sales, Vecima believes it still has approximately $30.0 million in real estate holdings and perhaps as much as $15 million in radio spectrum licenses.

In April, 2011 it laid off 142 employees, Brick said and since then the number of staff has stayed at around 625..

Dr. Surinder Kumar, Vecima’s chairman and CEO, has said in public statements the company’s balance sheet is strong.

At least one financial analyst believes the company isn’t in bad shape. In a report to investors issued in May after Vecima released its Q3 financials for the three months ending March 31, National Bank Financial’s Kris Thompson said the stock could be trading in the $4.50 area.

At the time Vecima reported quarterly revenue of $25.8 million and net income of $6.2 million. For the same period a year ago it had a loss of $6.2 million.

Thompson said it appeared the company’s new products are gaining momentum.

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