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CyberBucks Network Solutions transaction puts SAIC in red for first time ever

RF Industries Awaits End Of Inquiry By the SEC

Science Applications International Corp., the San Diego-based research and engineering firm, lost $736 million in its fourth quarter ended Jan. 31, caused by a write-down of its shares in VeriSign, Inc., the Silicon Valley firm that bought nearly all of SAIC’s former subsidiary, Network Solutions, Inc.

Ironically, it was the sale of NSI that provided SAIC with the bulk of its profits last year. It was the sale of NSI and some other shares that resulted in a pre-tax gain of $4 billion. After all the taxes were accounted for, the company said it had a net gain of $1.7 billion which provided the bulk of its overall $2.1 billion profit for the past fiscal year.

After selling most of NSI to VeriSign, SAIC retained about 9 percent of the company, and it was the decline of those shares’ market value that accounted for the majority of the “impairment charge,” another term for writing down an asset’s value.

The quarterly loss was SAIC’s first in its 32-year history, and was attributed by CEO Chairman Bob Beyster to the stock market’s nosedive.

“Although our equity investments in VeriSign, Inc. and certain other companies were adversely affected by the faltering stock market in the fourth quarter, it is important to note even after the related impairment charges, our net gain before taxes on our investments sold during the year exceeded $2.6 billion,” Beyster said.

SAIC’s annual net income of $2.1 billion on revenues of $5.9 billion, compared favorably to a profit of $620 million on revenues of $5.5 billion for the previous fiscal year.

Despite the quarterly loss, Beyster said SAIC is in fine shape, and had a record of $10.5 billion in contract awards during the last fiscal year, and a backlog of $5.1 billion in the pipeline.

In other news, the company said it opened a new office tower in McLean, Va., and said it plans to construct a new office campus in Orlando, Fla. SAIC has some 14,000 employees in the Washington, D.C., area, making it one of the region’s largest employers.

The total head count at SAIC is 41,333 worldwide, including about 4,500 persons in San Diego. It is the nation’s largest employee-owned company, and was ranked No. 296 on the Fortune 500 list.

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RF Industries Still Waiting:

San Diego-based RF Industries, a manufacturer of coaxial cable assemblies used in the wireless industry, radio communications and computer networks, said it has no word yet on an inquiry by the Securities and Exchange Commission that officially began last August.

President Howard Hill said to the best of his knowledge, the inquiry was concluded last month and the results could be known next month.

RFI disclosed the SEC has been investigating the small, Nasdaq-traded firm for a number of reasons, including misstatements regarding the company’s sales, order backlog and stock ownership.

Hill said his attorneys told him the inquiry stems from a letter sent by a former disgruntled employee.

RFI reported net income of $245,000 for its first quarter ended Jan. 31, up 11 percent from the previous year’s first quarter. Revenues also increased 33 percent to $2.3 million, compared to $1.7 million in the previous year’s first quarter.

The record revenues benefited from continued strong orders for coaxial connectors and custom cable assemblies typically used for data and telecommunications applications, Hill said.

The future looks promising based on RFI’s order backlog of $9.9 million for the coming year, up from a backlog of $8.6 million on Jan. 31, 2000.

All this did little to stem the slide of its stock (RFIL) on Nasdaq. Since January, the stock declined from about $4 to its position just above $2 as of April 10. The stock had traded above $17 in March 2000, but took a steep dive soon after that along with the rest of the Nasdaq.

At its current price, RFIL is below the company’s book value of $2.48. Shareholders’ equity as of Jan. 31 was $8.4 million.

Deal Management Completes Financing:

Deal Management Systems, a San Diego-based software provider, closed a second round of financing, bringing the total of private investment to $2.5 million since the firm’s founding in 1999. The latest investments, which were not disclosed, came from Flynn Gallagher Investments of Las Vegas and Commonwealth Associates of New York.

The company named Thomas Ahn as CEO and to its board. He was recently a general partner at Gallagher, the company said. DMS founder Jeff Davids remains a board member and serves as the chief product officer.

DMS software streamlines corporate finance transactions through a process of setting up a secure, Web-based digital conference room. It has 12 employees.

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WebSideStory Attracts $3 Million:

San Diego-based WebSideStory, a Web site tracking service, received $3 million in new funding led by Westcliff Capital Management, LLC of Santa Cruz. The latest round was done for an increased valuation above what the firm raised several months ago when it received $7.5 million from several national VCs.

Without revealing actual revenues, privately held WSS said its subscription sales rose by triple digits over the comparable quarter last year.

It also said it signed up several new high-profile clients, including Media DNA and Alaska Airlines. Existing customers include Cisco Systems, Terra Networks, Hewlett-Packard, Sun Microsystems and Akamai Corp.

WebSideStory, which provides an Internet traffic analysis for clients, postponed a $45 million IPO last October because of poor market conditions.

AirFiber Gets $50 Million:

Air Fiber Inc., a telecom equipment supplier of wireless optical networks, said it received $50 million in its third round of equity financing. The round was led by GM Capital Partners, and included London Merchant Securities, Qualcomm, Enterprise Partners and several earlier round investors.

“This financing is a show of support, not only for AirFiber and its advanced products, but for the wireless optical networking market as a whole,” said CEO Jim Dunn.

AirFiber products are based on free-space optics, a technology that delivers broadband services over the air using beams of light without having to install fiber optic cable beneath the ground or acquire expensive microwave licenses.

Send high-tech finance news to mallen@ sdbj.com.


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