Cylink (CYLK) supplies security products--encryption technology and other software and hardware--for computer networks. And like all other high-tech outfits, it has had long-term growth in its share price and an ugly short-term performance. At 11 7/8, the company is trading at half of its 52-week high, which it reached on Mar. 7. That's bad news for its shareholders--and terrible news for its largest holder, Kopp Investment Advisors, which owns 7 million shares. But instead of dumping its stake, Kopp has been adding to its holdings.
Kopp's software analyst Pat Farley says the company has a number of products that will generate hefty revenues. In particular, he points to software that lets companies print their own postage and pay the U.S. Postal Service. Cylink has developed the authentication product that will enable the companies to communicate securely with the post office. "Every time a company prints its own postage, Cylink is going to get paid," says Farley. Cylink plans to expand its product mix well beyond its post office operation.
With Cylink's numbers boosted by the postal pro-duct, Farley sees the stock trading much higher. The price is now only four times revenues, compared with 80 times revenues for some of its competitors. Even at a mere six times revenues, which Farley sees as achievable by yearend, the stock would be trading at 17.
Gene Marcial is on vacation and will return next week.