Cycomm Seeks Smoother Waters

By Richard McCaffery, Staff Writer Cycomm International Inc. executives are optimistic that they can turn around their finances and reverse a recent decision to delist the company from the American Stock Exchange for poor performance.Amex officials notified Cycomm officials late last month of the delisting, citing four consecutive years of losses and failure to maintain at least $4 million in shareholders' equity, said Albert Hawk, Cycomm's president and chief executive officer.The McLean, Va.-based company, which lost more than $15 million in the last three years, must now focus on steps that can bring it a quick return to profitability. But Hawk is confident he can turn the ship around. "We're on the right track," he said. "We're doing good things. We just have to go up [to New York] and show them how we're going to do it."Cycomm officials will go to New York April 14 to appeal the delisting decision. If successful, they would prevent the stock from winding up on the Over The Counter stock exchange. A shift to the OTC would be a blow to investors because it reduces liquidity by making it harder to buy and sell the stock.The company's three major divisions ? laptops, encryption technology and secure computing products ? have all shown promise, Hawk said. But the company doesn't have enough cash to support them, so it's focusing on PCMobile, its flagship product. "If I had a pot of money, I'd invest in all three," Hawk said.Founded in 1986 by the merger of two companies based in Ontario, Canada, Cycomm got its start building and selling sonar equipment for marine devices. It then branched into encryption technology for wireless products, the laptop business through the acquisition of a Canadian company, and formed a secure computing group that developed 12 new products last year. Cycomm has subsidiaries in Sebastian, Fla., Portland, Ore., Albuquerque, N.M., and Montreal.Recent moves made by Cycomm include trimming the staff from 160 to 140 people, and growing revenues from sales of PCMobile. PCMobile is a portable computer sold primarily to local law enforcement agencies. Sales of the product jumped from $400,000 in 1996 to nearly $15 million in 1998, Hawk said, adding, "It's a home-run product." In the last six months the company has sold PCMobile computers to police in Puerto Rico; Philadelphia; Richfield, Minn.; Southfield, Mich.; and Tuscaloosa, Ala.Introduced in 1996, PCMobile is meant to withstand more than clumsy handling by executives. A police officer in the Florida Keys, for instance, claims his unit booted right up after it was submerged in flood waters for two days, Cycomm officials said.Hawk said the company encounters little competition from the likes of Dell Computer Corp. and Compaq Computer Corp. because its niche is so specialized. Competitors that are focused on the rugged laptop market include FieldWorks Inc., Eden Prairie, Minn., and NAI Technologies Inc., Huntington, N.Y.DFI International, a Washington-based research and analysis company, said sales of laptop computers to law enforcement agencies totaled $300 million in 1998 and will grow 7 percent a year.Phoebe Maloney, a research associate at DFI, said law enforcement agencies started off trying to mold standard laptops to police work, but found it didn't work. "The police officers were coming to the point where they wanted to buy a law enforcement product," she said. "This was the strongest product [DFI] saw." Cycomm had revenue of $15.7 million in 1997 and a loss of $5.4 million, or 59 cents a share. This was an improvement from 1996, when sales were $11.8 million and losses totaled $10 million, or $1.78 a share.Hawk said he expects Cycomm's revenue to hit $20 million in 1998, and he believes the company will turn a profit in 1999.Cycomm's stock closed Feb. 5 at $1.06, after dropping below $1 a share the previous week. In July, the stock was trading above $4 a share.Tom Taylor, president of Chesapeake Securities Research Corp. in Towson, Md., said Hawk is focused on shareholder value and expects him to turn the company around. "I think management has done an excellent job with what they have," said Taylor, who said his main concern is the company's shortage of cash. "It limits their options."According to Cycomm's third quarter 1998 financial report, the company has $737,600 in cash and cash equivalents and $9.9 million in current liabilities.But Taylor said Hawk is well-connected to the Washington technology scene and skilled in the areas of mergers, acquisitions and finance.A lawyer with a degree from American University, Hawk joined Cycomm in 1996 after serving as managing director of Corstone Corp., a Northern Virginia-based merchant banking group specializing in telecommunication and technology investments. Hawk placed more than $75 million in financing at public and private companies during his tenure at Corstone.