The man who has eight years of his life and millions of dollars invested in Wi-LAN Inc. isn’t losing sleep over the high-speed wireless company’s plunging share price.
Hatim Zaghloul, co-founder, chair and chief executive of Calgary-based Wi-LAN, says he’s committed to his baby for the long haul. “Anybody who was there to flip the shares or thinks it’s going to make a quick buck was in the wrong company,” he says.
Zaghloul, who has a PhD in physics from the University of Calgary, is a self-confessed optimist. And he sees plenty of good news on the longer-term horizon for his company.
Wi-LAN’s share price, which started to slide on Friday, Nov. 3, had dropped 31 per cent by last Friday. It was down to $20 on the Toronto Stock Exchange, compared with the $30-range where it traded in October and light years removed from a record high of $94 in March.
Zaghloul says he and his family own some 3.5 million of Wi-LAN’s 22 million shares. At $94 a share, that would have made the holding worth $329 million back in the spring.
Zaghloul also holds about 2.2 million shares or approximately 10 per cent of Wi-LAN’s Calgary-based sister company Cell-Loc, whose stock price peaked at $80 in March. Cell-Loc also has taken the TSE tumble, to about $12 last week.
All together, the Zaghloul family’s holdings in both companies would have topped $500 million only eight months ago. They’re now worth less than one-quarter of that.
“From a money point of view, this is all money on paper,” Zaghloul says. “I didn’t act any different when the net worth was over $500 million and I don’t act any different when it’s down to $100 million. I’m still the same guy.”
Wi-LAN’s share price has dropped because the overall stock market is down, he says. Some of the TSE’s leading high-tech stocks — witness Nortel Networks — are getting hit like punch-drunk boxers.
One national newspaper columnist speculated that Wi-LAN, like Nortel, had disappointed shareholders by reporting good, but not spectacular, third-quarter revenues.
That’s a flawed analysis, Zaghloul says.
Wi-LAN’s share price started downhill nearly a week before the company reported its third-quarter revenues on Nov. 9. “The revenues obviously had nothing to do with the share price (decrease),” he says.
In any case, those revenues look pretty healthy. Wi-LAN announced that unaudited preliminary revenue for the three months ended Oct. 31 — not including earnings from its U.S. subsidiaries — stood at $5.2 million compared with fourth-quarter revenues of $1.4 million in 1999.
Zaghloul also points out that the share slide started, ironically, a day after the Alberta government announced that Wi-LAN would provide the wireless component for the province’s new $300-million Supernet high-speed Internet fibre optic network.
Wi-LAN’s share of the Supernet contract will amount to at least $15 million, Zaghloul estimates. The fact the shares dropped the next day “suggests it had nothing to do with (the company’s) performance.”
Many investors in Wi-LAN also hold shares in Cell-Loc, so the two companies’ stocks tend to ride the up or down escalators together. Cell-Loc’s stock dropped last week after Sprint PCS Group said it will use a hand-based solution, rather than a network solution like Cell-Loc’s, to meet the U.S. Federal Communications Commissions’ mandate requiring wireless phones to have locating technology.
Zaghloul doesn’t believe Sprint PCS’s decision will have much impact in a North American market where nearly 100 million cellphones will have to be located. The hand-based technology will only be able to locate phones that have been modified, unlike Cell-Loc’s solution, which can locate all phones.
Zaghloul also said that he has stepped down as a director of Cell-Loc’s board. “Being a board member is a fiduciary responsibility and I don’t have the time for it.”
Cell-Loc, which plans to deploy its cellphone-locator technology in 42 U.S. cities over the next 18 months, also wanted to add more directors from the U.S., he says.
Another factor in his stepping down was that the boards of Wi-LAN and Cell-Loc were sharing four directors, he says. “We felt that wasn’t appropriate in two public companies . . . there was too much cross-management.”
But he adds that he has no intention of selling his shares in Cell-Loc. “I continue to believe in the company and wish them nothing but success.”
Zaghloul predicts that Wi-LAN will succeed in establishing a worldwide industry standard for high-speed wireless, based on his company’s patented bandwidth-boosting technology called W-OFDM (wideband orthogonal frequency division mulitplexing).
OFDM technology allows multiple simultaneous transmissions in spread spectrum radio networks, increasing the networks’ capacity.
Wi-LAN is a chair company of the international OFDM Forum, a 46-member industry association promoting a single global OFDM technology-based standard. Forum members include wireless giants Nokia, Ericsson, Alcatel and Motorola.
Several members made presentations last week on a proposed new standard to a subcommittee of the Institute of Electrical and Electronics Engineers (IEEE), an international standards-approving body.
Zaghloul says he’s hopeful that the IEEE will be in a position to approve a single OFDM standard by July 2001.
If that standard is based on Wi-LAN’s W-OFDM innovation, the Calgary firm will be able to licence its technology around the world and promote it as the global standard. It’s still a pretty big “if,” because some competitors have their own idea of what the standard should be.
But if the “if” becomes reality, then watch what happens to Wi-LAN’s share price.
