To OTC Journal Members:
 

You are looking at charts of Lucent (NYSE: LU) and Notel Networks (NYSE: NT). As you can see from the charts, shares of both of these companies rocketed in January, fueled by perceived growth in capex (capital expenditures) for telecommunications infrastructure.

Analysts are now prepared to accept that the next leg of expansion in telco and IP build out has begun. Early returns suggest there will be substantial growth over the next five years in both wireless internet access (expect to grow 10 fold by 2007), and VoIP (Voice Over Internet Protocol).

Growth in the wireless internet access arena has been well documented, and I've covered it in the past. Put simply, wireless internet access is expected to grow 10 fold by 2007. Someone will need to install the infrastructure, and collect residual service fees. Our friends at NetWork Installation are positioned to participate in this growth, and the stock has been slowly appreciating as a reflection of multiple new contract signings.
 

VoIP Has Finally Arrived After a Three Year Delay

VoIP is an ancronym for "Voice Over Internet Protocol". Simply put, VOiP technology allows users to route calls over the internet and bypass the long distance carrier fees. The market expected VOiP to become commercially viable three years ago, but demand was well ahead of the evolution of the technology. The recent moves in stocks like LU and NT have been recently partially fueled by the belief that the new generation of VOiP technology works very efficiently, and demand is surfacing and accelerating. Here are some recently published estimates for the growth of this market:

• VoIP Enterprise Gateway revenue is expected to grow from $48.5 million in 2003, and to $146.6 million by 2007 – CAGR of 33.5% (Frost & Sullivan 10/03).
• The total VoIP-related equipment market is estimated to be about $2.2 billion at present, and is expected to more than double annually to $9.1 billion by 2006 (Buckingham Research Group 1/04).
• One growth area is business spending on hosted VoIP services, which is expected to grow from $46 million in 2001 to $36.5 billion in 2008 (Allied Business Intelligence, 2003).
• Enterprise spending should account for 75-85% of the market and more than double annually, from about $1.7 billion in 2004 to about $7.6 billion in 2006 worldwide (Buckingham Research 1/04).
• Based on a recent survey of 270 corporations, tech consultancy Meta Group estimates that nearly 30% of U.S. businesses may move to VoIP within two years. Consumers won’t be far behind: By 2009, the Internet will carry nearly 40% of calls made in the U.S. according to New Millennium Research Council (11/03).

NetWork Installation (OTC BB: NWIS) Reports Epiphanal Event- Growth Should Accelerate Rapidly

Today, just after the market closed, NetWork Installation reported it acquired Del Mar Systems in a cash and stock deal valued at $1 million. According to the press release, Del Mar Systems reported $1 million in annual revenues in 2003. The company was purchased for $.5 million in stock and $.5 million in cash to be paid in twelve monthly installments.

This acquisition should prove a bonanza for shareholders of NWIS for two reasons. First and most obvious is the valuation implications. The stock market generally values growth companies at 5 to 10 times annual sales. NWIS just acquired $1 million in annual sales, which should translate into $5 million to $10 million in additional market value. This would imply investors can expect appreciation of $.50 to $1 in shares of NWIS to reflect the immediate increase in revenue.

More importantly, the acquisition of Del Mar Systems expands NetWork's suite of products into the VOiP market. Del Mar Sytems has long been a VAR of the best VOiP technology available.

Since it is estimated 40% of all businesses will convert their long distance service to VOiP within the next two years, NWIS's sales growth should accelerate rapidly throughout the course of 2004.

This is truly an epiphanal (meaning a major dramatic changing) event for NWIS. When you couple this important and growing product offering with NWIS's large corporate customer base, the growth opporunities multiply dramatically. 

Over the past several months NWIS has opened new offices in Las Vegas and Los Angeles. NWIS now has also expanded to San Diego through its acquisition of Del Mar Systems.

I believe this company will grow four or five fold in 2004. Growth should accelerate rapidly in the June and September quarters. 

I now believe a reasonable target price over the next several months for NWIS is $6, with a shot at higher levels down the road as the company's rapid expansion begins to show in trailing financial statements. I like to refer to NWIS as my "stress free" microcap idea, as the stock keeps grinding slowly up the charts without giving much ground. Today's news could bring substantially more volume to the stock as players in the VOiP space will no doubt take note.

Here is the complete text of today's news release for your review:
 

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