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New Deal With Greek Officials Eases SAIC’s Olympic-Size Headache

Science Applications International Corp. officially acknowledged resolving a long-standing billing dispute with the Greek government regarding the security system it developed for the 2004 Olympic Games in Athens.

In a statement released April 4, SAIC said a modification agreed to March 29 resulted in an immediate reduction of 4 million euros, or $5.3 million, resulting in a payment of $339 million.

SAIC said the original contract was for 259 million euros, which is $344.5 million at the current exchange rate of $1.33 for each euro.

The Greek government also agreed to pay 26 million euros, or $34.6 million, within 30 days for previous work already completed, and agreed on future work involving maintenance of the security subsystems during a five-year period.

When the contract was awarded in May 2003, the estimated amount was for $287 million, but changes and increases were made as the security system was put in place.

The dispute regarding the bill caused SAIC to delay its initial public offering from December 2005 until October 2006.

It also caused SAIC to take operating losses in its 2006 fiscal year of $83 million, and $34 million in the prior fiscal year.

“We’re pleased with this resolution and look forward to continuing cooperation with the Greek Ministry of Public Order to complete the program,” said Ken Dahlberg, SAIC chairman and chief executive officer.

SAIC was the lead contractor for the Greek government to design an extensive security system to ensure safety at the Olympic Games. Among other contractors on the team were General Dynamics, Siemens, Honeywell and ITT Industries.

Shares of SAIC, traded on the New York Stock Exchange under the symbol SAI, declined somewhat after news of the negotiated payment first surfaced in late March, but rebounded in the next several days. They closed at $17.63 on April 4, and have ranged from $16.98 to $21.10, the high reached soon after the stock debuted.

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Accredited Gets $1 Billion In New Financing:

Accredited Home Lenders Holding Co., a San Diego-based subprime lender that’s been struggling along with the rest of the industry, said it obtained new financing that could help it survive.

The company announced April 3 that it arranged a $500 million credit line with a large commercial lender, and renewed a $600 million borrowing line with an investment bank. That’s $1.1 billion in new funding.

Accredited needs the credit lines to fund the mortgages it makes to borrowers with impaired credit histories. Because many of those loans are defaulting, the owners of the loans, large investment banks, are returning them to the originators, causing a rising sea of red ink at many subprime companies.

In recent months, the surge of delinquencies and problem loans has resulted in many companies folding. About two dozen have filed for bankruptcy, including the nation’s second largest subprime mortgage lender, New Century Financial Corp., based in Irvine, which filed for Chapter 11 bankruptcy protection April 3.

Accredited, unlike many of those filing for bankruptcy, was able to arrange some financing, but analysts are uncertain of how much time the company has before it can turn things around.

“Hopefully, long enough to wait out the industry’s liquidity mess,” said Robert Napoli, an analyst with Piper Jaffrey, to The Associated Press last week.

Accredited also said it had $350 million in cash at the end of March, and was discussing renewing a $650 million credit line from another investment bank.

Last month, Accredited arranged a $230 million loan from Farallon Capital Management, a San Francisco hedge fund.

For the first quarter, Accredited made $1.8 billion in new mortgages, half the amount it funded for the like period of 2006.

Traded on Nasdaq under LEND, shares of Accredited closed April 3 at $10.04. The stock has declined 62 percent since the beginning of the year. Its 52-week range is $3.77 to $60.13.

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Biosite Deal Called Overpriced:

Beckman Coulter Inc.’s $1.5 billion offer for San Diego-based Biosite Inc. announced March 25 was panned by several analysts who criticized the hefty $85 per share price, which represented a 53 percent premium on the prior day’s trading price.

Alex Morozov of Morningstar said that Beckman overpaid for the company that makes medical diagnostic products, even with the cost savings that will come with the merger of product lines.

But another analyst, Steve Brozak of San Diego’s WBB Securities LLC, said the deal was positive for Beckman.

“You’re looking at a finite universe of potentially groundbreaking diagnostics out there,” Brozak said. “This is not some dot-com valuation. This will be an accretive deal when you start to see the commercialization of new technologies that will take shape.”

On April 2, Beckman Coulter, based in Fullerton, said half the financing for the acquisition of Biosite would consist of convertible notes, while the balance would be composed of straight debt. To counter the dilutive effect of Biosite’s converted stock options, Beckman is considering repurchasing up to $200 million of Beckman’s stock.

Beckman Coulter said financing for the transaction is being provided by Morgan Stanley and Citigroup.

Once the deal is completed, which is expected in the second quarter, Beckman would continue operating Biosite as a subsidiary, so most of the jobs of Biosite’s 1,100 employees appear to be safe. Beckman has more than 10,000 employees and had 2006 sales of $2.5 billion.

Biosite reported net income of $40 million on revenue of $308.6 million last year.

Beckman, traded on the New York Stock Exchange as BEC, saw its shares drop more than 3 points to below $63, but it regained most of that last week, and closed at $65.40 on April 3.

Biosite, which was about $53 for much of last month, shot up to the low-80-dollar range once the deal was announced, and was at $84.28 on April 3.

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Kintera Loss String Continues:

Kintera Inc., a locally based firm that makes software to help nonprofit organizations track their fund raising, reported a net loss of $33.1 million on revenue of $41 million for 2006.

That compared with a net loss of $41.9 million on revenue of $40.9 million in 2005.

In addition, Kintera said March 29 that it was laying off 60 employees, or 16 percent, including 18 people in San Diego. The firm has 370 employees, including 210 based here.

Kintera has been reeling in recent months after getting hit with a raft of demands from shareholder groups that co-founder and Chief Executive Officer Harry Gruber resign. He finally did resign as CEO on March 5, but retained a seat on the company’s board.

The groups were demanding a change in management because of Kintera’s lack of any profit and lackluster performance since the company was founded in 2000. It has yet to produce a profit in its six years, and practically all of its growth came as a result of acquisitions.

Its stock, KNTA on the Nasdaq, also declined to near a dollar earlier this year, but since Gruber’s departure, shares have gained ground. As of April 3, they were at $1.70 and within striking distance of their 52-week high of $2.02.

Kintera also said it was following the recommendation of its audit committee to revise financial results from its first, second and third quarters of 2006. Kintera said the corrections are related to revenue recognition policies covering certain contracts. The corrections are not expected to have any impact on already reported revenues, or cash levels, the company said.

That last part is important since the company’s cash at the end of December was $18.9 million, compared with $30.2 million at the end of 2005, so the burn rate has been fairly rapid.

CEO Richard La Barbera said the company expects to show “positive adjusted EBITDA during the second half of 2007.”

That’s earnings before income taxes, and depreciation of assets, not net income according to generally accepted accounting principles, but at least it would be a move in the right direction.

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ImageWare Reports Loss, Late Filing:

ImageWare Systems, a locally based provider of identity management software, reported March 30 that it had an operating loss of $5 million, but in a filing April 2 notifying regulators it would be late in filing its audited financial results, the company provided a different number for its anticipated net loss. The company said it would not be able to meet the prescribed deadline for filing results because it had not completed an accounting review related to preferred stock financing.

In the latest filing, the company disclosed its net loss for 2006 was $5.9 million, or nearly $1 million more than the operating loss disclosed in a press release.

ImageWare’s revenues for last year were reported as $10.2 million, compared with $9.2 million in 2005.

CEO Jim Miller said while the first quarter of 2007 was busy, overall revenue will be down from the amount reported in the fourth quarter of $2.4 million.

Traded under IW on the American Stock Exchange, shares closed April 3 at $2.49, close to the past 52-week high of $2.81.

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NextWave Revenues Show Sixfold Increase:

NextWave Wireless Inc., a provider of mobile broadband and wireless products, reported revenues for 2006 exploded to $24.3 million, compared with $4.1 million in 2005.

The company’s main subsidiary, PacketVideo, makes software that enables cell phones to stream, download and play video and music.

On March 28, the company completed the sale of Series A convertible preferred stock, which generated $351 million and will provide the company with sufficient resources to fund operations at least through 2008, NextWave said.

For all of 2006, the company reported a net loss of $105 million compared with $46 million in 2005.

NextWave, which completed its corporate conversion in November and trades on Nasdaq under WAVE, closed at $9.83 on April 3, and traded between $9.45 and $12.75 during that time.

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Novatel Tabbed To Break Through:

The April issue of the California Stock Report features local telecom Novatel Wireless Inc. “on the verge of a major breakout in 2007.”

The publication, written by analyst Bud Leedom, said surging demand for wireless mobility and Internet connectivity has propelled Novatel’s recent growth along with an entire industry serving the same market.

On March 26, Novatel increased its forecast for annual revenue in the first quarter that ends March 31 to above $100 million from an earlier forecast of $80 million.

Novatel makes wireless PC cards and modems along with software that enables customers to access the Internet.

Leedom said the stock, NVTL on the Nasdaq, is a buy at current prices for aggressive growth investors.

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Ticker Takes:

NTN Buzztime Inc. closed the sale of its wireless communications subsidiary to HM Communications for $2 million. SYS Technologies obtained new orders totaling $2.5 million from the Department of Defense. Leap Wireless International is offering its Cricket customers new rate plans that include unlimited messaging and nationwide roaming. Glacier Water is paying a 40 cent per share dividend to shareholders of record as of April 16.


Send any news of locally based public companies to Mike Allen via e-mail at

mallen@sdbj.com

. He can be reached at (858) 277-6359.

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