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RADCOM Ltd. (RDCM), the maker of network service monitoring products for communications service providers and equipment manufacturers, seemed to be on a nice run. Revenue the fourth quarter of 2005 was up 30% to $6.6 million compared to Q4 04. The company said this was the fourth consecutive quarter of over 30% growth and a look at the 10-Qs verifies that. Revenues for the year 2005 were up 39% to $22.3 million and net income went positive to the tune of $1.5 million.

The company attributed the good year to a "growing recognition of VOIP and 3G providers" of the company's offerings. Since these are obviously an excellent group of customers due to the growth in the sectors, the Radcom stock took a nice run to $5 and its market cap to about $75 million.

But, what have you done for me recently? Radcom said today that the first quarter of 2006 wouldn't perform as advertised. After a forecast of $6.3 to $6.8 million, the company checked the books on March 31 and found only $5.0 to $5.2 million. Looking back at expenses in past quarters, it is likely the company will lose money on the lower revenue.

Any good news? Well, yes. One large customer order accounted for the short-fall and the company expects to get the balance of the revenue from this customer over the next few months. The company CEO said he still expects "that we shall see growth in 2006 as a whole."

An investor can look at Radcom in one of two ways now. Either their business is falling apart and the 30% growth quarters are behind them, or a customer miss has disrupted their growth by a quarter, but the company still has a fundamentally sound business.

With a 30% pull-back in the stock on the weak results, I am willing to bet with management, based on their past track record and the fact that the company is in a set of businesses, like cellular, VOIP, and IPTV, that are likely to see accelerated adoption in the next few years.

At $3.00 with a market cap that is 2.5 times sales, Radcom could show good numbers in Q2 and make a solid move back up.

Source: Radcom Gets Cheap (RDCM)