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This column
is strictly my personal opinion regarding one or more of the Special
Situations I follow. I will be replacing this column
each time one of these companies has reached what I feel is an important
milestone. Many of you told me the Web has lots of facts, but is
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Current Opinion:
Date Posted: 07/09/08
Propalms USA, Inc. (Other OTC: PRPM)
My Opinion
I have followed PRPM since it first went public & just interviewed CEO Owen Dukes to get an update on this emerging growth company. The last time I wrote about PRPM was on 11/26/2007. A lot has happened since then.
I like PRPM for six main reasons: (1) Its technology is a strong barrier to new companies entering its market; (2) Its technology is easier to use, has better characteristics, & is less expensive than competition; (3) It demonstrated growth with modest marketing; (4) Its market is huge; (5) It is reaching out to additional countries & closing new customers; & (6) At the present share price (it closed last evening at $0.014), it’s extremely undervalued.
PRPM on 6/17/2008 filed its 10QSB with the SEC, moving forward with its plans to up-list to the OTC BB. That has taken a large cash investment, but other than that cash drain, the company appears to be getting close to being cash flow positive. Its net overall profit will probably take a few months to reach, but from my viewpoint, now is the time to take a position, because in my opinion, the appreciation potential is rather attractive.
Think about it – assuming that PRPM continues its beginning success in having its TSE software accepted by more customers, a higher percentage of its revenues will flow directly to the bottom line. That’s one of PRPM’s primary charms as far as I’m concerned. Its administrative costs can really remain pretty constant & its inventory can remain small regardless of its sales growth.
With the many advantages its product has over competition, it will not be too long before PRPM’s TSE is selected by more large enterprises. As that happens, net profit should grow nicely in my opinion. Look at the few news releases I’ve edited in the “Recent News” section below – PRPM is certainly progressing.
Owen Dukes & I had a stimulating discussion about the world economy. He shared with me that his company is doing well – it has increased its number of new distributors, his Q1 was good, he expects solid growth, & that for his company, a poor economy is just as good as a strong economy. He made an interesting comment: ”Its not only our company that is doing well – there are many companies in the UK that are progressing very well – I am dismayed that one finds the national media concentrating almost exclusively on negative news regarding the economy – that makes people think all aspects of the economy are doing badly – a totally wrong conclusion.” I agreed, and said that I for one do indeed concentrate on the positive aspects of the economic picture. Frankly, I believe that things are moving up, & I will continue to help things to improve rather than try to cause unwarranted assumptions as much of the world’s media is unfortunately doing.
I like the fact that PRPM acquired vFortress in India in an all-cash transaction (no dilution to the stock). It thereby entered the billion dollar Virtual Private Network (VPN) market, as stated during the company's nationwide teleconference on May 1, 2008.
During that teleconference, Owen Dukes detailed PRPM' relationship as a certified partner with Microsoft & explained that, as soon as it releases TSE 6.0, it will be working towards becoming a Microsoft Gold Certified Partner. Achieving Gold Certified Partnership provides access to Microsoft's resources & support, & entitles Propalms to market its products to Microsoft's partners worldwide.
With the combined release of TSE 6.0 and Propalms’ VPN, it expects its sales to double within the next 24 months. The release of the products will enable it to gain a much larger share of the market & provide a strong alternative to competitive products released by such companies as VMware, Citrix, Microsoft, etc. Owen Dukes also mentioned that Propalms is switching customers from Citrix to TSE every month. He mentioned that in the last two years, in North America alone, 40% were former Citrix users.
During the teleconference, Robert Zysblat, president of PRPM, discussed that during the fiscal year 2008, Propalms increased its revenues by approximately 50%, while significantly decreasing its net loss, versus the prior fiscal year. Owen Dukes said: ”I visited with Toyota Group last week to check on the status of the TSE pilot that is currently being implemented. Toyota has stated that they expect to convert 70% of their desktops to thin clients. Even if Toyota converts only 50-60% of their total desktops to thin clients, it would equate to an order of approximately $10 million.”
President Zysblat said: ”In 2008, we intend to increase new customer wins, continue renewing maintenance on existing customers, & grow our revenue significantly as we release the new version of TSE & Propalms VPN. We also plan on aggressively seeking additional distributors in new markets around the world so that we can build upon our existing product line & capture a larger portion of the market.”
A Bit of Background
PRPM provides application delivery solutions for terminal services & virtual desktop infrastructures. It delivers to small & large enterprises. It offers reliable, scalable, & affordable solutions that simply work. Its belief is that application delivery solutions should be flexible, dynamic, & above all, simple to use. PRPM sells a software product called Terminal Services Edition, TSE. It's a complete management solution for the Microsoft server-based computing environment. TSE allows users to manage & operate all of their software applications centrally on their servers rather than on each individual desktop computer. TSE gives users access to any software application from any desktop or handheld device e.g. Microsoft Windows 95, XP, CE, Vista, Linux, Mac, Java. Companies buy TSE because it:
1. Is significantly more cost effective than Citrix®.
2. Simplifies deployment & administration of applications with no specialists required.
3. Offers secure remote access to applications via SSL Gateway.
4. Seamlessly extends Terminal Services in Windows™ Servers.
5. Is a Fully Universal Print management solution.
6. Allows reduced software license costs.
7. Provides portal-based access to applications for remote sites, home users, contractors, etc.
8. Affords remote control for training & support purposes.
9. Extends the lifecycle of desktop hardware.
10. Has reduced support costs.
Recent News
7/8/2008 -- PRPM provided Terminal Services Edition (TSE) licenses to Bi-State Primary Care Association through its U.S. distribution partner, Tridex Systems.
“This new software is a great benefit for Bi-State. We were attracted to Propalms because of the cost-effectiveness of the product & its reliability over long distances. Since we're operating in two states, it's providing our users in remote locations with increased connectivity & seamless communications. We've had it for about two months & it has been a tremendous asset for us,” said Adam Woodall, IT/Systems Manager of Bi-State Primary Care.
Owen Dukes says: ”I'm thrilled that Bi-State Primary Care Association has chosen to use our software with their systems. TSE is a popular choice for thin client server-based computing & it will serve them well in their business of bringing medical care to those in need. We look forward to continuing to do business with Bi-State Primary Care Association in the future & signing additional customers in the upcoming months.''
7/1/2008 -- PRPM signed a new distribution agreement with Y-B Initiatives & Projects (operates primarily in Israel & Romania, & specializes in developing & improving IT solutions). It will distribute PRPM’s TSE software, enabling Propalms to expand its outreach to the Middle East, a previously untapped geographical market for the company.
Y-B Initiatives is expanding into other countries. Its clients include: Storwize (data compression specialist in Israel); Encore-USA (networking solutions); & Chip PC (leading manufacturer of low-cost, centrally-managed computers). It also works with leading computer equipment manufacturers including HP, IBM, Dell, & Acer, specializing in the deployment of full IT environments to enhance performance & reduce maintenance costs.
”Our clients span the Middle East with a wide range of target markets, & TSE offers an effective solution that is applicable to networks of all sizes. In today's IT market, accessibility, manageability, & cost-effectiveness are paramount to keeping systems up & running effectively,” stated Yaniv Beeri, owner & manager of Y-B Initiatives & Projects.
Owen Dukes said: ”Our technologies will benefit their customers, & we are proud to be working with such a successful young company in their segment. We have continued to exceed our expectations through 2008, & are delighted to add another distributor to our growing list.”
6/27/2008 -- PRPM announced that Nu-Phalt, a leading UK company with a revolutionary infrared road surface repair technology, purchased Propalms TSE as its management software solution. Nu-Phalt selected PRPM's comprehensive, server-based management solution to streamline the delivery of software applications on its network & simplify IT operations. Nu-Phalt has clients in the UK & overseas & has experienced phenomenal growth as a result of its patented technology. The infrared heater produces a heat-sealed, seamless repair to re-establish the original integrity of the road, with only a minimum of new material required, making it faster, safer, & more cost-effective than conventional repair methods.
”At this critical juncture in our history, we look to Propalms' management software to enable us to focus on growing our business,” stated Steve Smith, managing director of Nu-Phalt.
6/24/2008 -- PRPM signed a new distributor agreement with Liontech Company, Ltd., which provides Internet technology consulting services for a wide range of industries in Kenya. Liontech will distribute TSE software in Kenya, creating additional revenue for Propalms, & enabling Liontech's customers to better serve their clients by streamlining the delivery of applications & creating more cost effective solutions.
Liontech provides experienced technicians & resources to help its clients evaluate their computer technology needs, & provides fast, efficient computer repair services at locations throughout Kenya.
”We were attracted to Propalms because of its cost effective pricing & secure remote accessibility to applications from any location. Similar to Propalms, our IT solutions have been developed to facilitate reliability & ease of use, & we look forward to a mutually beneficial relationship with Propalms,” stated, David Kahindi of Liontech.
Owen Dukes said: ”This agreement enables us to extend our outreach & gain exposure on the African continent, & we look forward to working with other companies as focused on delivering exceptional customer service as Liontech.”
6/5/2008 -- PRPM showcased the latest version of its TSE software, TSE Version 6 at the Municipal Information Services Association Conference, 6/8-11/2008 in Collingwood, Ontario with its Canadian distributor, Global DL.
Call Propalms' IR firm at 866-843-2775 -- & by all means check www.propalms.com.
My comments in this column are strictly my personal opinion. At times, I will include forward-looking information as that term is defined in the Private Security Reform Act of 1995. Such information & the related company are subject to many risks & uncertainties. There can be no assurance that actual results, business conditions, business developments, losses & contingencies, local & foreign factors, & other matters will not differ materially from those suggested in any of my forward-looking statements. Such differences are the result of all sorts of factors (some examples: market conditions, competition, advances in technology, acquisitions, mergers, potential litigation, personnel changes, market changes, capital availability, etc., etc.).
Do not run out & buy a stock just because I am enthusiastic about the situation. Call the company before you buy -- satisfy yourself first. I always include a phone number for that purpose. My purpose in this column is to respond to your request for my personal opinion. You have the responsibility of making your own investment decisions. Do not give up that responsibility.
My editorial coverage has always been, is now, and always will be without charge. That includes what I write in Conservative Speculator, and what I write in "Larry Oakley's Opinion, " "Larry Oakley's Stock Pick," "Larry Oakley's Comment," & "Larry Oakley's Bold Ventures" columns. It also includes what I write in such venues as articles submitted to other publications, interviews on radio & television, and at the investment seminars and conferences at which I am a featured speaker. By doing all my editorial work free of charge, I have the advantage of writing about what companies I particularly like. There are occasions when I will write about a company that is a paying participant on WallStreetCorner -- that's because I like the company. I always make it clear to them that editorial coverage is free and is not a part of the fee they pay to have their Profile researched, prepared, & posted at WallStreetCorner.
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