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Cell Phone Scramblers

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Last year, House Speaker Newt Gingrich was on a conference call talking about his ethics case--and it almost did him in. The call was picked up off the air by Democratic loyalists. Too bad for Gingrich that one of the conference participants was talking on a cellular phone and wasn't using an encryption device, such as those made by Cycomm International (CYI), which would protect callers' privacy.

The need for secured wireless communications is what makes Cycomm in McLean, Va., a compelling buy, according to Anthony Marchese of New York's Dimar Partners. The stock traded as high as 73/8 last spring on the American Stock Exchange but is now at 35/16. That's a market capitalization of $25 million--about what the company expects sales to be this year.

Marchese says Cycomm is especially cheap considering that a competitor, Transcrypt International, has a market cap of more than three times as much--with about only half the sales. He thinks Cycomm will double in 12 months and notes that insiders have been buying shares since late last year.

Cycomm, which also builds "ruggedized" and secure wireless computers, is not aiming for a mass market. Most phone users don't need security enough to pay $400 to $800 for an encryption device. Albert "Bud" Hawk, a mergers-and-acquisitions lawyer who became Cycomm's CEO last year, says his market is law-enforcement agencies and professionals such as doctors and lawyers. Luke Smith, who follows the company for Chesapeake Research in Towson, Md., says secured wireless devices could sell big abroad, too.

Smith says Hawk's M&A talents will help the company grow. On Feb. 13, Cycomm said it would acquire Titan Corp.'s Secure Computing Products unit, with $2 million in sales, for just $200,000. Hawk says the inventory alone is worth three times that.

Still, the company is not profitable. Hawk says it may happen this year, but in any case "we will be cash-flow positive." Smith recommends buying the stock up to a price of $5.BY JEFFREY M. LADERMAN

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