It does not always pay to be the messenger. Just ask Comtex News Network.
Comtex aggregates business and financial news from 70 worldwide sources and 50 partners, and resells that information to 700 customers. The information ultimately gets used on some 1,100 Web sites. As of Dec. 30, 2000, Comtex had been profitable for 19 consecutive quarters, and revenue had risen from $3.5 million at June 30, 1999 to $12.6 million for the 12 months ended last June 30.
The stock price is down to $1.69 from $7.94 in the last year, and Comtex has a market value of only $17 million. No securities analysts track the stock, and the shares are not very liquid. It trades on the Nasdaq Bulletin Board with volume at about 10,000 shares per day. More than 47 percent of the stock is owned by Amasys, a company owned by C.W. Gilluly, Comtexs chairman, who acquired Comtex in 1992.
The share price has fallen mainly due to the tech and Internet meltdown of the last year. It accelerated after the beginning of the year when Comtex reported a 58 percent drop in profit to $112,388 for the second quarter. Revenue was up 49 percent to $4.3 million, but that was below the 73 percent revenue growth in the first quarter when profit was up 76 percent. Some customers ran out of money or their businesses failed, forcing the company to set aside larger than usual reserves for bad debt.
Despite this, Comtex had the cash from private placements to invest in its business when it had the chance. It also spent more than $1 million to replace an aging Digital Equipment VAX computing system with a Microsoft Windows NT system, and to improve data communications. Charles Terry, a former CompuServe executive who came on board in 1992 as president and became CEO in 1997, has guided the strategy of selling to distributors that can deliver over the Internet.
Terry says Comtex has almost $800,000 in the bank and its proprietary technology for processing diverse news feeds gives it a competitive advantage in supplying its customers. Lets see if the next quarter shows good news.