On July 24th Wavecom S.A., a provider of digital wireless modules, reported 2nd quarter 2003 revenue of 69.9 million euros which was down approximately 40% from the prior year's 2nd quarter without taking currency fluctuations into account. The decline in revenues should be seen in a larger context as 2002's 2nd quarter revenues were up well over 100% from 2001's 2nd quarter revenues. Net loss for the quarter was 6.5 million euros. Wavecom expects 3rd quarter revenue to be down sequentially mainly because of high inventories in China. However, after speaking with customers in Asia, they remain positive that 4th quarter revenue will be higher than the 88 million euros reported in the 1st quarter of the year. 

     In early December 2002, the company stated that it's largest customer was canceling orders. There was fear that Wavecom would lose the customer altogether and this was a huge problem since the customer accounted for 77% of sales. The stock went from $30 to under $15 overnight and then continued down for another 3 months. Since then Wavecom has not lost that customer. Also, they have made a big effort to broaden their customer base. Now the largest customer accounts for no more than 33% of sales. The huge risk of potentially losing the majority of revenue with 1 customer is gone. Yet the stock price does not reflect this.

     Wavecom has cash, short and long-term investments worth $167 million or $11 per ADR/share. Book value is $11.33 per ADR/share. WVCM trades well below 1x sales and the company carries less than $2 million of debt. We gave the cash and book value in dollars instead of euros so you can easily compare them to the stock price. WVCM is an ADR and the price will follow Wavecom's overseas stock price. You can easily get the overseas stock price in euros at Wavecom's web site by clicking on the link "Investors".

UPDATE 10/15/03 - Recommend closing position. 
Sold on 10/16/03 at $20.30 for a gain of 83%.