Tech stocks grapple with technical problems

By Peter V O'Brien

Thursday 8th April 2004

Most technology-based stocks took another dive in the past six months to add to their long-term erosion since the late 1990s.

Only six of the 16 companies in the table had a share price improvement since October.

A similar table on October 10 covered 20 companies and listed them in alphabetical order, without differentiating between their use of various technologies.

The current table omitted Beauty Direct and Online (now basically an internet licensing operation, with its website licensed to Lower Hutt's Life Pharmacy Queensgate), Cube Capital (moving to financial services), Newcall Group (a cashed-up shell, looking for something or someone), Selector Group (acquiring Green Acres Franchise Group, a "home service franchise" network), Strathmore Group (disappeared) and Training Solutions.

Pacific Edge Biotechnology and Zintel Group (formerly Zintel Communications), were added and all companies grouped into three categories of which "sundry (software, hardware, systems, electronic equipment)" was very broad.

The biotechnology and telecommunications groups were also broadly defined, given the activities of the individual companies, but the classifications brought up some order to a group of diverse organisations.

Price declines in biotechnology companies over the past six months followed the pattern of the previous two years, or a shorter period where the companies listed after late 2002.

Investors were initially enthusiastic when the companies listed, apparently seeing a new wave of boom stocks in "frontier-pushing" applied science.

Genesis Research and Development, for example, is developing new products with applications in human health and what it calls "plant biotechnology products for agricultural markets."

The company listed in 2000.

Its share price soared to a high of $8.48 and then fell steadily in the ensuing four years to the current 60c.

Blis Technologies is researching and developing several products, has four oral health and hygiene products in the local market, and is negotiating international distribution agreements.

The company listed in 2001, when the share price reached $1.10, or an adjusted 77c after allowing for a 1:2 cash issue at 10c last November.

Botry-Zen specialises in products to provide biological solutions to botrytis rot in grapes and other susceptible horticultural crops.

The shares were listed in 2002, reached 21c and retreated to the current level.

Pacific Edge was listed last year, so has a short stock exchange history.

The company has projects to develop "simple tests for the early detection of stomach and bladder cancer."

Investors in the four biotechnology companies face a familiar problem.

They either hold and wait for substantial payoffs, while accepting opportunity cost, quit the stock and/or defer investment until the companies record solid profit.

The appropriate decision is an individual assessment. There is no "right" answer, because the four stocks are still speculative, irrespective of the quality of their science.

The telecommunications group has been a disaster, excluding Telecom and, to a lesser extent Zintel, which was listed in November.

That should be no surprise.

The business world is lousy with telecommunications' companies of various types and sizes, most seeking a niche market where there can be more seekers than profitable niches.

There should also be no surprise that the best price performers over the past six months were five companies in the "other" category.

Finzsoft Solutions, Provenco Group (now justifying the name change from Advantage Group) Renaissance Corporation and VTL Group (formerly Vending Technologies) are producing solid profits, Dental software specialist Software of Excellence has forecast a profit for the six months ended March after a loss in the preceding six months.

Investors who lack financial and mental resources to handle the speculative elements associated with biotechnology companies, and the scramble for market share among minor telecommunications groups, should stick to stocks that showed price improvement in the past six months. They have the profit records on which to build and outperform other technology-based companies.

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