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UDS
Group Gains Operational Momentum |
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| Though
it could still be considered a start-up by some measures, based on its
current rate of progress, UDS Group (UDSG.PK)
may not be a true start-up much longer. Thursday morning the company announced
their operational test with Salad Creations was expanding by two stores.
Only the Boca Raton, Florida store was utilizing UDS Group's order processing
service. With the logistics of the partnership refined using the Boca Raton
as a testing ground, now the Coral Springs and Weston units are being added
to the effort.
In
general, we consider this is a sign of feasibility. Given that Salad Creations
is comfortable enough with the results so far that they're expanding the
offer, we believe the news speaks well for the whole concept. And, from
UDS Group's perspective, three stores can be handled as well as one store....or
as well as 300 stores for that matter. The order processing model is completely
scalable; once one store's process is optimized, the others can follow
that model.
Eventually,
we expect all 25 Salad Creations units to utilize the UDS delivery/pick-up
ordering system. However, success here should make it much more likely
the concept can be sold to much bigger restaurant franchises later. Nationwide,
there are over 900,000 restaurants - a far cry from 25 Salad Creation storefronts.
The sheer size of the underlying growth opportunity is clear.
Beyond
restaurants, similar delivery/pick-up opportunities exist for grocers,
pharmacies, and dry-cleaners just to name a few. In fact, an order processing
agreement with a group of convenience stores has already been forged. The
logistic details should be worked out soon.
As
we've discussed before, there's really no viable direct competition for
UDS Group. Our opinion stands - UDSG appears to be a highly-compelling
speculative investment.
For
more on the Salad Creations news, click
here. |
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Research
Update: Isilon is 'Certifiable' |
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 It's
been nearly two months since our last look at Isilon Systems Inc. (NASDAQ:
ISLN), but it's been a very productive two months for the stock. Shares
are up 17.1% since we initiated our coverage, and we believe the technicals
as well as the underlying fundamentals could mean much more upside is in
store. So, before Isilon falls off anybody's radar, we'll update our research
and analysis today.
Since the beginning
of July, Isilon has been awarded interoperability certifications with three
major data protection and data backup services. These certifications demonstrate
how the company's unique combination of software and data storage techniques
appears to be increasingly accepted within the industry.
As a brief reminder
of Isilon Systems' opportunity, the advent of the Internet has also created
the means to collect huge amounts of information. However, the amount of
collected data is now so staggering, storing all of it is starting to require
new solutions, as most traditional data storage options are just not efficient
enough. Clustered storage is a viable solution, and has been implemented
with some success. Yet, clustered storage systems created with multi-hundred
terabyte single file systems may also requires thousands of disks, and
tens or even hundreds of nodes. Each disk or node is a potential point
of failure. So, protecting this data from loss due to hardware failure
has proven to be more and more difficult.
Isilon Systems
can circumvent most of these issues by offering clustered storage services
with multiple nodes. Isilon's OneFS(r) (a patent-pending distributed file
system) software provides the intelligence behind their clustered storage
systems. The three layers of traditional storage architectures - file systems,
volume managers, and RAID - are unified into one component, creating a
single file system that spans all nodes within a cluster. No single point
of failure will disrupt the entire storage system.
While the technology
is not brand new, it is recent. As such, many technology managers may have
remained skeptical to utilize multiple-node clustered storage.
That hesitance
highlights the impact of the recent certifications. CommVault Galaxy, Symantec,
and BakBone - three of the big names in data security and backup - have
all successfully tested Isilon's clustered storage solution for themselves.
With OneFS essentially 'working' for these companies, we suspect other
technology executives will warm up to using Isilon's solution.
 As
of our initial coverage, we were already aware of the company's Q1 results.
They generated $21.6 million in revenues in the three months ending April
1st, and took a net loss of $3.7 million. Though in the red as of then,
the company had been improved their top line for three consecutive years,
and were on track to make it four straight in 2007. More importantly, each
quarterly loss was being narrowed with each top line increase. Most analysts
are expecting a profitable 2008, and some are even forecasting a swing
to profit during Q2 or Q3 of this year.
Fortunately,
the wait to find out if Q2 was the turning point will be minimal. On Thursday,
July 26th, Isilon will host a conference call to discuss their Q2 results.
The financial results will be publicly available sometime after the market
closes that day - presumably shortly after 4:00 P.M. EST. The audio broadcast,
however, will not take place until 2:00 P.M. PT (5:00 P.M. ET) that day.
The call will be accessible on the investor relations section of Isilon's
website at www.isilon.com/company/.
An archived version will be available for approximately 60 days.
Analysts are
forecasting Q2 sales to be between $25.8 million and $27.4 million, and
a per share loss of 3 cents to 5 cents. We believe those estimates are
generally on target, but may slightly underestimate Isilon's potential.
Regardless, these same analysts believe, on average, Isilon will incur
a per-share loss of 9 cents this year, but will generate a per-share gain
of 21 cents in 2008. The average 2007 sales forecast is $118 million, and
$210.7 million for next year. For perspective, the company saw sales of
$62.3 million in 2006.
 We
believe investors are in agreement with the sales and earnings forecast,
in that the stock has created an active buying interest for the first time
in months. With demand outpacing the supply since early May, ISLN shares
have made what many chart technicians would consider meaningful progress.
First and foremost,
shares have made their way above the 50-day moving average line (not shown),
and more recently, above the 100-day line (shown). Both may indicate a
'bigger picture' bullish view from the market as a whole. You can also
see how ISLN broke past a long-term resistance line in late June.
Moreover, the
uptrend has been made on stronger volume....one of the subtle hints of
deep buying interest, as opposed to simple volatility.
With such a
limited trading history (Isilon went public in late 2006), it's difficult
to pinpoint any potential relevant support or resistance levels. So, we
won't. Instead, we'll take the simple tools like moving averages and volume
at face value. The 100-day line is now at 15.98, while the 50-day line
is at 14.62. We feel both may be technically significant as future support/retest
levels.
As always, the
ideas and assumptions expressed in our newsletter are strictly the opinion
of our research staff, and based on our best interpretation of all available
data. However, we also believe Isilon's data speaks for itself; many analysts
also consider the above numbers to be highly encouraging. In our view,
the attraction to Isilon as an investment opportunity remains rooted in
the idea that the story has not yet fully spread, though recent progress
suggests the market may be starting to catch on.
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Updated: 9:18 am PST (17:18 GMT), January 5, 2009
