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Inside Wall Street
`HELLO. PRESS 1 NOW TO GET A BARGAIN'
Wall Streeters looked askance at Home Shopping Network for years, so it's not surprising that Precision Systems, a 1992 spin-off, had all the allure of a zirconium ring. The outfit that built and maintains HSN's 20,000-line computerized apparatus for answering phones and taking orders has run up big losses in trying to sell its knowhow to the rest of the world.
But some investors are accumulating the stock, which trades over the counter at 21/2, betting that the new management and business strategy will pay off. "Before, our entry-level product had 1,056 lines and cost $3 million, and you can count on one hand the market for that," says CEO Russell I. Pillar. Now, Precision has scaled down its starter system, called UniPort, to 48 lines and $90,000, and is enlisting "name brand" equipment makers to help sell it. True, UniPort has to compete with AT&T products. Pillar notes that although AT&T is the largest player, it has only 13% of a $900 million market that's growing 25% annually.
Richard W. West of Gaines Berland, who rates the stock a buy, notes management has cut overhead from $1.7 million a month to $550,000. The balance sheet is improving, too, with $7.8 million--about 90 cents a share--in cash, much of it from a $5.8 million convertible-preferred-stock investment from a partnership led by HSN founder Roy M. Speer. That's a bullish move, since the preferred stock's average exercise price is $5.19 a share. One pro who has been buying the stock expects it to double in the next year.JEFFREY M. LADERMAN