To OTC Journal Members: 
 

Procera (AMEX: PKT) Scores Big With A Trio of Tier One Players

When I first introduced Procera Networks (AMEX: PKT) and gave my technical commentary on the stock, I came to the conclusion that “something was clearly happening” with it based on the current explosive volume.

At that time, this software company--in the business of helping ISPs save money by routing their traffic more efficiently based on priority-- clearly had a strong wind at its back.

Revenues for the year jumped 387% over 2007. The company pulled in $1.7 million in Q1 of 2008, then $2.6 million, then $2.7 million, and then topped off a record 2008 with fourth quarter sales of $4.5 million. EBITDA took a turn for the better starting in Q3, while the net loss started to shrink considerably in Q4.

Fast forward to today: News that three global tier one service providers have purchased its PacketLogic systems in the first quarter of 2009 could easily prove our analyst right with his projection that PKT would reel in $28 million in revenue and earn $0.5 per share in 2009. Back on April 20, when I gave a strong speculative buy recommendation on the stock, it traded at $.80. Today’s opening price: $.99. We’re looking for it to reach $2.00-$2.10 in the short-term (six months). You might consider this one for your long term portfolio (over one year to go for long term capital gains).

All of the above give these projections even more merit. We should see higher volume and prices as a result of this latest purchase by a trio of behemoth network providers. Could it be AT&T? Time Warner? Comcast? Verizon? Names are never disclosed in these sorts of announcement because the customer doesn't want their competition to know what they're up to. Regardless of which tier-one trio it is, the boost in revenue should be nothing short of spectacular. 

PacketLogic is deployed at more than 600 broadband service providers, telcos, governments and higher education campuses worldwide, including the recent addition of the national University of Singapore.

Interestingly, PKT's flagship PacketLogic 1000 didn’t even launch until May 2008. The company immediately added 200 customers that year, including two tier-one ISPs. Add three more tier-one companies, and this year’s growth could be phenomenal. The company has an 80% award ratio- 8 out of 10 presentations yield an order.

Plus, in mid-April, PKT announced that by outsourcing operations and logistic functions it would reduce its workforce by 25% yet not add any material costs. These cost-cutting measures should improve gross margins over the next few quarters.

Why has demand for this product heated up so quickly? There are too few 'pipes' and/or too much information being transmitted over the Internet, and it's becoming something of a free-for-all. As such, the web basically needs a traffic cop to prioritize and route data being sent from point A to point B. PacketLogic 1000 essentially acts as that traffic cop.

Independent research has suggested the market size for this technology could reach $1 billion by 2012. PKT hinted some time back that it had identified approximately $45 million worth of potential new clients that could be garnered in 2009. Clearly, some portion of that $45 million has gone from potential to reality.

Barring any extreme changes (to the up or down side), we're anticipating 2009's quarterly revenues to come in at approximately twice the revenues achieved in each respective quarter of 2008, with the move to net profitability possibly occurring in Q2 or Q3 of this year. 

You're looking at a weekly chart going back to 2006. Note the last time the stock made a big run- $.44 to over $3 from September of '06 to April of '07. Is that kind of run just getting started? It's a better company today than it was back then.

This idea is in its infancy. Lots more upside is on the horizon.
 

Do You Twitter?

My weekend idea to short the Financials through FAZ was a failed trade. One of the most important skills you can develop as an investor is the ability and discipline to recognize an idea that has gone bad, and trade out of it as quickly as possible. 

The folks who are Twittering the OTC Journal were notified by text that it was time to get out on Monday, and they turned what could have been a big loss into a small loss. Twittering in critical to take maximum advantage. Read on.

About a year ago I asked my techies if there was any way we could get ideas to investors with text messaging to cell phones. I was prepared to spend some money as I saw this as the easiest way to quickly notify investors of important events.

The folks at TWITTER did it for me, and it's all free. Worth waiting for. Set up your TWITTER account (free), and become a follower of the OTC Journal. I'll use it for quick updates and coming events.

Just go to www.twitter.com, and enroll. From there, adding to your Twitter network is a little tricky, and there's a learning curve. Then, go to the home page at www.otcjournal.com, and click on the "Follow" button on the Twitter box. Or, go directly to http://twitter.com/otcjournal.

Sign up today, join as a follower, and I'll start using it to everyone's benefit. Tell your friends to sign up as well.

Home Page : www.otcjournal.com
Email Questions or Comments To: editor@otcjournal.com