If I were a casual visitor to Wall Street, I would rush out and buy LanOptics (Nasdaq: LNOP). Why? Because things are happening there that are typical of the lull that precedes the next round of gains.
LanOptics announced last week that it would increase its stake in its subsidiary EZchip Technologies to 78% from 60%. This is another step towards the acquisition in full of EZchip by LanOptics, as previously agreed by its various shareholders back in 2003. What is actually happening is that EZchip investors are exchanging their shares for those of its parent.
EZchip, which develops and manufactures advanced network processors that are said to represent the high-end of these technologies, is LanOptic’s sole asset and it may well be that the stock swap is a technical transaction only, in order to, as LanOptics put it, “rationalize corporate structure by unifying the shareholdings in the two companies.” On the other hand, many people will interpret this move as a sign of an imminent breakthrough business-wise, and that they would therefore be better off with LanOptic’s marketable shares rather than the non-marketable ones of EZchip.
LanOptics is classic example of the chasm between Wall Street and Main Street that I am constantly referring to. In LanOptics’ case one of those involved is leading technology guru George Gilder. He believes in the product and the company, which he recommends at every opportunity. The trouble is that he has been waxing enthusiastic since the turn of the century, and the breakthrough has yet to come.
LanOptics slipped from $10 at the beginning of 2002 to $4 a year later. By the beginning of 2004 it had rallied to $11, and then fell to $5 in July, only to climb back up to $15 by the end of the year. By November 2005 it was back down at $5, rising to $10 in May 2006, and then slipping again to $7, following which it rallied once more to its current price ($14.26 at the close of trading yesterday).
A right old yo yo on Wall Street combined with steady progress on Main Street. This is what classics are made of.
LNOP 3-yr chart:
Published originally by Globes [online], Israel business news - www.globes.co.il
© Copyright of Globes Publisher Itonut (1983) Ltd. 2006. Republished on Seeking Alpha with full permission.