A Speculative Venture

11/24/2006 12:00 am EST

Focus:

Michael Murphy

Former Editor, New World Investor

On the prowl for cutting-edge technology and companies, Michael Murphy explains to his subscribers why the latest profit-taking in this recommendation is an opportunity for purchasing the shares of this company, a possible 5-6 bagger for investors.

"MobilePro (MOBL.OB OTC BB) has a new competitor in municipal Wi-Fi-sort of. Microsoft said it will launch a pilot program in Portland, Oregon, in a joint venture with MetroFi. This is an advertising-supported service, and the real purpose is to give Microsoft a real-time lab to understand the market, so it doesn't get too far behind Google. Google is funding a network in Mountain View and partnering with Earthlink in San Francisco for the same reason and has indicated that it isn't interested in doing any more cities. So neither Microsoft nor Google is really a competitor to MobilePro for the other 700 cities and towns that need someone to install a Wi-Fi network.

"However, the stock took a hit on the news, although I'm not sure it was more than coincidence. Subscriber Scott wrote: "What is happening with MOBL? They dropped another 20% today. Why are you continuing to recommend this loser?" Scott, meet Peter, who wrote: "I listened to the conference call today and I like what Jay Wright had to say. Possible spin off of the wireless piece. Major announcement by yearend. Today they announced the Yahoo deal. Any comments?"

"Last Thursday, MOBL reported September-quarter sales of $23.4 million, with a proforma loss of $3.1 million. The company said that AFN, its landline telephone services operation, has a major new contract going on line this quarter that will generate $3 million to $5 million a quarter next year. Kite Wireless, one of the Wi-Fi operations, booked its first revenues in Tempe, Arizona, and this week they announced the commercial launch of the Wi-Fi network in Farmers Branch, Texas. They have partnered with Yahoo to provide the search portal for the Tempe system.

"On financing, MOBL has some positive response from a Fortune 500 company for financing, and they are looking at some attractive divestitures, which the company could use to pay off the debt. Even the wireless division could be spun off at the right price. The company has put acquisition talks on hold for the moment due to its low stock price. I expect major announcements coming by yearend. This is a very smart management that will only get rich if we get rich. MOBL is in better shape today than the day I recommended it, and remains a buy all the way up to 25 cents a share for my 60 cent target."

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