Wave Systems Press Release Spurs Confusion
NEW YORK (Dow Jones)--Wave Systems Corp. (WAVX), a small security software company in Lee, Mass., has seen its stock price skyrocket more than 400% since Thursday after making two announcements trumpeting relationships with technology giants Intel Corp. (INTC) and International Business Machines Corp. (IBM).
Much confusion ensued after the company's Monday press release. In it, Wave Systems discloses that its security software can now "work with the IBM embedded security subsystem." Investors, believing that company had inked a bundling deal with the PC maker, pushed the stock up 21% Monday and 18% earlier Tuesday.
Lark Allen, executive vice president, clarified the release in an interview with Dow Jones Newswires. He said that the company's software has been approved by IBM as an official independent software vendor. This means IBM will point IBM customers interested in taking more security measures toward Wave Systems' security software.
The software will still be sold by Wave Systems on a CD-ROM, Allen said. Wave Systems hopes to eventually sell its software through IBM's reseller channels, he added.
Mariam Sughayer of Text100, who does public relations for IBM, also said that IBM will not actually be bundling the software.
Financial terms were not disclosed. Allen said there are no revenue sharing terms.
The IBM announcement followed on the heels of another announcement Thursday heralding a pact with Intel. In its press release, Wave Systems said it had reached an agreement with the chip maker that "will enable Intel to bundle Wave's software and services with a future Intel desktop motherboard."
Allen said Wave Systems could not be more detailed in its announcement out of respect to Intel's wishes. Wave Systems is "working with them to bundle our products. It's a step beyond the joint marketing with IBM," Allen explained.
Intel spokesman Robert Manetta confirmed the agreement with Wave Systems and said that Intel would include the software with its new motherboard, which will start shipping in the fourth quarter. The motherboard will be for PC desktop computers and targeted to business customers.
Allen called the announcements from the last few days "validation from two of the most important players in the space that [Wave Systems] has got good products."
He said the company expects to gain revenue from IBM's customers and called the pact with Intel an important distribution channel.
"Wave System's primary challenge has not been technology. ... It's been how to get into marketplace," Allen said.
Wave Systems reported a net loss of $43.5 million in 2002 including one-time charges, on revenue of $447,000. The company has not been profitable for the last four years. KPMG, its auditor, has expressed "substantial doubt" of the company's ability to continue as a going concern beyond the second quarter of 2003. In a recent filing with the SEC, Wave Systems disclosed it has only enough cash to fund operations through approximately Oct. 15, 2003.
The company is not followed by any analysts tracked by Thomson First Call.
After hitting a high of $5.24, an 18% increase over Monday's closing price, Wave Systems shares closed the day at $4.53, up just 2.5%.
