STM Stock Flies High on Contract News
Shares of lagging STM Wireless Inc. soared 72% Wednesday on word that it closed a $5.5-million contract to provide high-speed networking technology to an educational facility affiliated with the Communist Party in China.
The Irvine manufacturer’s stock gained $3.50 a share to close at $8.38, its highest point in the past 52 weeks. Nearly 4.4 million shares traded hands on the Nasdaq system, almost 40 times its average daily trading volume over the past three months.
The contract is the company’s second this year with JiTong, a public data network service provider in China that will actually be implementing the system. It also is STM’s largest contract yet for its high-speed satellite networking technology, which was launched in October.
“STM has been refocusing itself on the broadband market, and that opens new opportunities for us,” said Joseph Wallace, STM’s chief financial officer. “We have traditionally had a lot of business overseas, but investors today may have been attracted by our movements in China.”
The maker of satellite communications equipment, which has about 100 employees, had been a company on the rocks. It defaulted on a $10 million line of credit just last May and narrowly averted foreclosure by its lender, Wells Fargo HSBC Trade Bank.
In the past four quarters, the company lost $18.2 million on revenue of $27.3 million, though the losses occurred primarily in the first six months.
The company, which concentrates on rural areas primarily in foreign markets, has tried to right itself by focusing on higher margin products, such as high-speed networking technology, and contracting out more of its manufacturing.
The deal with JiTong calls for the company to receive $400,000 immediately and the balance over the next year or so, Wallace said.
STM operates in a highly competitive market with companies like Hughes Network Systems and Scientific Atlanta that have significantly greater financial, technical and marketing resources.
STM’s strategy has been to establish relationships in smaller and harder-to-reach areas, such as China and South America, where they also have contracts.
