One recent Wednesday, Zi Corp. of Calgary reported lousy year-end numbers for 2001. And things degenerated from there.

First, the Globe and Mail blistered the company for losing $18 million, after projecting record fourth-quarter revenue in a lollipops-and-roses press release last Dec. 31.

Other scribes didn’t get quite so excited. They simply phoned analyst Kevin Lo, and let him do the dirty work.

David Lazarowych, Business Edge
Lightyear Capital analyst Kevin Lo doesn't pull punches when picking stocks.

As usual, Lo prefaced his remarks with an upbeat opener.

“Zi Corp. is selling very good technology,” he began. “And they had better revenues ($6.2 million) than in previous years.”

And then came the “but.”

“There’s no way they’re going to be profitable any time soon. Not with $6.2 million in revenue and $17 million in selling and marketing expenses alone,” he said flatly.

“Fundamentally, the company is over-valued. It hasn’t lived up to its promise.”

Lo’s a modest, pleasant character who doesn’t go looking for trouble.

But he has attracted some notoriety as an unflinching gunslinger.

He’s the one whose “sell” recommendation on Zi Corp. (ZIC-TSE) last year got under the skin of the company’s CEO, Michael Lobsinger. The result was a snarky letter of complaint and a few angry telephone chats with Lo’s boss.

Lobsinger chastised Lo for dumping on the company before he visited it.

So Lo and a few colleagues came to take a closer look.

But nothing the analyst heard or saw changed his mind.

Lo feels Zi Corp. is flogging a good core product, while employing a “shotgun” marketing approach. He also questions other strategies, such as the wireless software manufacturer’s ongoing attempts to crack the Chinese market.

“So far as I know, there have been one in a hundred North American companies which have made money in China. Seems rather futile,” Lo shrugged.

In weak moments, execs such as Lobsinger may grumble that certain analysts hold an inexplicable grudge against their companies. But a “sell” isn’t personal. It’s based on simple math and close scrutiny.

Though they’re still few and far between, analysts like Lo refuse to shovel the garden variety of old-boys’ weasel-speak.

Instead, they spill the straightforward beans about every balance sheet they study. Whether you’re a client or a nickel-and-dime investor, you’ve gotta love it.

Lo is one of the justly well-publicized young team built by Jason Donville, boss of Lightyear Capital, in Bow Valley Square.

“All we do is ask ourselves: ‘If this was our money, would we want to buy the stock?’ And if the answer’s no, we say so,” reasoned Lo, whose specialties are telecom and manufacturing stocks.

Lightyear restricts its coverage to about 500 small-cap public companies and, frankly, the seers have to dig deeply to find a small-cap telecom that doesn’t give them the heebie-jeebies.

Lobsinger shouldn’t feel slighted, because his outfit’s not alone. At the moment, Lo’s boosting one telecom company – and only one.

“I like Aastra Technologies Ltd. (AAH-TSE). They’ve been able to increase their revenue to about $140 million last year, and I’m predicting more than $200 million this year,” he said.

“They’ve been extremely profitable over the past five years.”

Aastra makes cable modems, phone sets and digital transmission equipment. Lo describes the Aastra bosses as “savvy operators” who follow a conservative and prudent growth plan.

But all things considered, he’s generally thumbs down on the sector.

And though Lightyear doesn’t follow large caps, Lo’s personally sour on staggering dinosaurs such as Nokia and Nortel, no matter how far below the surface the share price submerges.

In fact, Lo may have been the first analyst to deduce the Nortel bubble had reached bursting point.

Trouble is, he wasn’t tracking stocks at the time.

An engineer by training, with a background in phone and software design, Lo worked in product design at Nortel before ultimately re-inventing himself as an investment analyst.

Before leaving in semi-disgust, he was witness to a panorama of tragi-comic scenes. Just the normal management idiocy, so familiar to anyone who’s worked in a top-heavy corporate environment overseen by blundering bosses (enjoy your retirement, John Roth).

“We saw them spend a lot of money (to design) products that it seemed obvious would never sell. So why do it in the first place?” Lo complained.

“As an engineer, you’re frustrated by that. Designing products that never see the light of day? I just said: ‘This is dumb, right. This is going down.’ ”

That’s known as delivering the straight goods – from the inside out.