(Every week, Business Edge columnist Gyle Konotopetz profiles the top three stocks picks of one of Canada’s most accomplished investment pros.)

FEATURED PRO: Danny Deadlock is an independent equity analyst based in Hanna who has been speculating in small-cap and penny stocks for 20 years. He has published the StreetSignal Smallcap Newsletter since 1995 by e-mail subscription, building a subscriber base in excess of 20,000. The newsletter also features market forecasts by Wisconsin-based Scott Nelson.

StreetSignal’s portfolio, featuring numerous triple-digit gains, can be accessed at www.streetsignal.com

Deadlock’s Perspective: “I think the next 18 months is going to be extremely tough. Scott (Nelson) has accurately timed this market for almost three years and now he is telling us to be extremely cautious after Quarter 1 of ’03. He believes there’s even a strong likelihood that we’ll retest October (2002) lows before the end of Quarter 1.

“Under such a scenario, gold is probably one of the safer places to be, but it’s tough trying to buy now as so many of these small-cap mining stocks already trade at significant premiums. Otherwise, I’m a firm believer that 2003 is going to see a lot of mergers and acquisitions in the technology sector. If you can buy tech companies with plenty of cash, competitive technology, a good customer base and operating expenses that are under control, then these are probably low-risk candidates for a nice rebound whenever we get bear rallies, or if we’re very fortunate and they are bought out or merged with larger companies. We look for companies like this that trade at a substantial discount to cash value, leaving zero underlying value on the business itself.



FIRST STAR
* Marimba (MRBA-Nasdaq)
* Recent Price: $1.65.
* 12-Month Range: $1.10-3.40.
* Snapshot: Marimba’s change and configuration management software helps IT departments effectively manage software on desktops, laptops, servers and devices.
* CEO: Rich Wyckoff.
* Head Office: Mountain View, Calif. (212 employees).
* Vital Stats (US funds): Revenue (last 12 mos), $36.5 million; Profit/Loss (last 12 mos), $10.7 million loss; Market Cap, $41.49 million; Shares Outstanding, 25.1
million.
* Deadlock’s Comment: “With $30 million in revenue (2002), a low burn rate (about $2 million quarterly) and a 20-per-cent discount to cash value ($50 million as of Jan. 1 or $2.07 a share), Marimba has plenty of room to move in 2003.”
* Web watch: www.marimba.com



SECOND STAR
* Via Net.Works (VNWI-Nasdaq)
* Recent Price: $0.67.
* 12-Month Range: $0.48-$1.30.
* Snapshot: The company is a single-source provider of managed Internet services, serving thousands of retail and business clients in the U.S., Latin America and Europe.
* CEO: Rhett Williams.
* Head Office: Reston, Va. (922 employees).
* Vital Stats (in US funds): Revenue (last 12 mos), $79.4 million; Profit/Loss (last 12 mos), $165.9 million loss; Market Cap, $37.38 million; Shares Outstanding, 55.8 million.
* Deadlock’s Comment: “The burn rate is still high,
but with a new CEO (Rhett Williams) I think we’re going to see some layoffs and cost cutting in the first quarter. Revenue is still very strong (about $75 million annually)
so if they could move to profitability in 2003, we could see a move well beyond cash value ($90 million or $1.40 per share as of Jan. 1).”
* Web watch: www.via-net-works.com



THIRD STAR
* Tellium (TELM-Nasdaq)
* Recent Price: $0.56.
* 12-Month Range: $0.28-$7.25.
* Snapshot: The company’s Aurora optical switches route data traffic for office, metropolitan, regional and national telecommunications networks.
* CEO: Harry Carr.
* Head Office: Oceanport, N.J. (544 employees).
* Vital Stats (US funds): Revenue (last 12 mos),
$134.9 million; Profit/Loss (last 12 mos), $417.8 million loss; Market Cap, $63.85 million; Shares Outstanding, 114.0 million.
* Deadlock’s Comment: “Not too many stocks can be stranger than Tellium, but with the value of net assets around $2 per share and major liquidity, it makes for a rather interesting, albeit highly speculative, way to play
cash-rich techs over the next quarter. The downside risk should be limited to the mid-$0.50s this quarter, but because they depend upon the major telecom companies for revenue and this market has dried up to nothing, our upside may depend upon a merger or buyout.”
* Web watch: www.tellium.com
* Risk: Deadlock says the featured stocks are risky and advises investors to do their own due diligence and seek professional advice. He also emphasizes that the
information provided is not a suggestion to buy or sell but provided for informational and educational purposes.
* DISCLOSURE: Deadlock says he does not take
compensation in any form from companies he reports on and personally holds minor positions in the featured stocks.