) is emerging as a big noise in a niche business that larger companies tend to ignore: helping enterprises modernize old software systems so they can adapt them to new applications and markets. The "expected mass replacement of old software systems hasn't happened," notes Dale Vecchio, research director in applications development at tech-research firm Gartner. He says that BluePhoenix, with its wide array of products and services, should be on the short list of any outfit eager to avoid dumping aging systems in order to save money.
No wonder shares of BluePhoenix have rocketed from 2.69 in early June to 5.20 on Dec. 3. "The stock still has a long way to rise," says a New York investment manager, who owns shares but asked not to be identified. He thinks the stock, which has no Street following, is a long-term value play. He says it is cheap, trading at one times sales-per-share. He sees the stock doubling in 12 to 18 months. Third-quarter sales were up 84%, to $13.4 million, and earnings jumped to $615,000, or 5 cents a share, up from $32,000 a year ago. For 2003, this pro forecasts earnings of 13 cents, on sales of $50 million, up from $36 million in 2002. In three years, he expects sales of $100 million. Clients include Merrill Lynch (MER
), Safeway (SWY
), Charles Schwab (SCH
), and Fortis Bank in Europe.Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them. By Gene G. Marcial