Datacom Wireless Reorients Activities Around the Sale of Mobicom Fleet Management Solutions
July 30 2008 - 9:00AM
Marketwired
LAVAL, QUEBEC , (TSX VENTURE: DAT), a Canadian leader in the
design, development and marketing of mission critical vehicle fleet
management and theft prevention solutions today announced its
action plan to focus on Fleet Management solutions with its Mobicom
product line and Mobiguard product, following the announcement by
wireless network operators of their decision to cease providing
analogue service.
Management initially believed that longer delays would be given
by wireless network operators for the termination of analogue
service but said termination is finally scheduled in November 2008.
As previously indicated in the March 31st 2008 Management
Discussion and Analysis report, this termination will mean that
some 9,000 Mobilus and Vigil security units will be unable to send
or receive signals, thus preventing them from detecting the theft
of a vehicle or the transmission of its location. Because of this
situation, there will be a loss of the recurring revenues that had
been generated by these units, as of November 2008.
To maintain its recurring revenues, Datacom considered the
option to replace analogue units now in service with their digital
counterparts. Such replacement, would, however, have required the
investment of $3,500,000 to $4,000,000, clearly not warranted by
the products' levels of profitability. The Company's Board of
Directors therefore decided not to offer the replacement of
analogue with digital units and take this opportunity to
concentrate its efforts on the Fleet Managament products where a
larger potential of growth and profitability exists.
Furthermore, based on an economic analysis demonstrating the
unprofitability of this sector of activity in this context, the
Company will stop selling Mobilus and Vigil Digital products over
the third quarter and will focus its efforts and financial
resources around the sale of its flagship product: Mobicom, while
continuing with the sale of Mobiguard product.
In July 2008, the Company also finalized its agreements with its
principal clients with respect to the termination of analogue
service. We shall maintain analogue service until the scheduled
network shutdown date for analogue units in November 2008 and shall
maintain digital service until December 31, 2010.
We estimate that the annual loss of recurring revenue for 2009
associated with analogue security products (the digital product
will continue to generate revenues until December 31, 2010) will be
approximately $1,085,000 with an estimated reduction in the gross
profit margin of $520,000. Management expects to fully offset this
loss of profit margin through cost-cutting efforts that were
initiated in the second quarter and that will continue due to the
reorganization that will follow the completion of this activity.
Datacom will lay off about a dozen employees within the next two
months in the course of this reorganization.
The anticipated cost of implementing the cost-reduction plan,
expenses related to agreements we have finalized with our principal
clients with respect to the termination of this activity and
expenses for maintaining digital service until December 31, 2010
are estimated at some $525,000, which we plan to pay according to
the following schedule: $475,000 in 2008 and $50,000 in 2010.
This decision complies with the action plan that the Company
instituted at the start of the second quarter and that is designed
to enhance the Company's profitability by orienting activities
around profitable Fleet Management solutions and by cutting
operating expenses.
About Datacom Wireless Corporation:
Founded in 1999, Datacom has grown to become one of the Canadian
leaders in the design, development and marketing of mission
critical vehicle fleet management and theft prevention solutions.
Its products and services use wireless communications and
satellite-based tracking technologies (GPS) and a state-of-the-art
ASP information portal. For further information, visit
www.datacom.com.
Forward-Looking Statements:
This press release includes certain statements that may be
deemed "forward-looking statements". Forward-looking statements are
frequently characterized by words such as "plan", "expect",
"project", "intend", "believe", "anticipate", "estimate", and other
similar words, or statements that certain events or conditions
"may" or "will" occur. All statements in this release, other than
statements of historical facts, that address future events or
developments that the Company expects or anticipates, are
forward-looking statements. Although the Company believes the
expectations expressed in such forward-looking statements are based
on reasonable assumptions, such statements are not guarantees of
future performance and actual results or developments may differ
materially from those in forward-looking statements. Factors that
could cause actual results to differ materially from those in
forward-looking statements include market prices and general
economic, market or business conditions. There can be no assurance
that forward-looking statements will prove to be accurate, as
results and future events could differ materially from those
anticipated statements. The Company undertakes no obligation to
update forward-looking statements if circumstances or management's
estimates or opinions should change. The reader is cautioned not to
place undue reliance on forward-looking statements.
All trademarks and brands mentioned in this release are the
property of their respective owners.
Contacts: DATACOM Eric Morin General Manager 450-781-6006
emorin@datacom.com
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