WHAT'S THE FREQUENCY? WALL STREET PICKS UP SIGNAL AS FIRM AWAITS BIG PUSH.

Byline: Jeremy Bagott Staff Writer

When two giant long-distance carriers signaled they would be investing a combined $2 billion in a technology known by the oxymoron ``wireless cable,'' it felt like Christmas in April for one Ventura County company.

The long-distance behemoths were seeking to acquire the technology and manufacturing prowess to capture the Baby Bells' vaunted ``last mile'' to the home customer for voice and data communication - the Holy Grail for long-distance carriers.

The two giants were MCI and Sprint, and the local company that could gain from their foray is Camarillo-based California Amplifier.

``We were certainly relieved by the news,'' said the company's chief executive, Fred Sturm. ``What the industry needed was the capital infusion, somebody that has the deep pockets to put the infrastructure in place. The announcements reaffirmed the money was going to be spent in the right direction.''

As jubilant as Sturm has been, Wall Street investors have been more so, driving up Cal Amp's share price from its 52-week low of $1.25 to its recent peak of $19.37, a gain of 689 percent in less than a year.

CalAmp, as it's known, markets and manufactures microwave amplifiers, converters, antennas and systems for satellite television and Earth-based wireless applications.

CalAmp recently reported second-quarter sales increases of $10.2 million, or 123 percent, to $18.5 million, compared to sales of $8.3 million for the second quarter of last year. Second quarter net earnings were $901,000 compared with a net loss of $1.3 million for the second quarter ended Aug. 29, 1998.

For the first quarter, it posted a 54 percent jump in sales year-to-year from $9 million to just over $13 million.

Things began getting interesting for the company in March, as MCI and Sprint began quietly making debt and equity investments in a number of U.S. wireless operators. On April 20, MCI bought CAI Wireless Systems for $476 million. About the same time, it bought the paging company SkyTel for its network of cell towers. Other wireless acquisitions are pending.

``The market potential is big,'' said Michael Ferron, California Amplifier's chief financial officer. ``We're talking about a broad-based rollout - 3 (million) to 5 million subscribers over five years.''

According to Ferron, CalAmp has the potential for 40 percent of the market share for the transceiver boxes and antennas that would be required in subscribers' homes.

The increase in sales and earnings in the first and second quarters, Sturm said, is due primarily to increased shipments of digital satellite television equipment, another CalAmp business segment.

As far as wireless cable operations for voice and data - known in the industry as two-way MMDS - ``we're waiting to clear a number of hurdles: FTC, FCC, shareholders,'' Sturm said. ``Also, a couple of companies are bickering back and forth about licenses, so we don't see any meaningful demand until mid-2000.''

In April, CalAmp announced it had acquired technology and product rights from Garland, Texas-based Gardiner Communications Corp. in a cash and stock deal.

The agreement gives the company a significant entry into mainstream U.S. and European direct-broadcast satellite markets.

``The Gardiner acquisition is a home run,'' said Matt Robison, an analyst at Baltimore-based Ferris, Baker Watts, one of two firms that track CalAmp.

``The timing couldn't be better. It gets them into (supplying equipment for) Dish Network and Direct TV.''

The deal allows CalAmp to manufacture huge numbers of end-user set-top boxes and elliptical antennas, besides its own electronic converters and amplifiers.

``Direct satellite television is eroding the cable share,'' Sturm said. ``We see that market growing in particular in the U.S. and Canada. In Europe, the analog subscriber base is being phased out and digital phased in. We see that as an opportunity for the company.''

But CalAmp has been left at the altar before.

In 1995, CalAmp was poised for rapid growth based on its wireless cable expertise. Three Baby Bells - Bell Atlantic, Nynex and Pacific Telesis - announced they had formed a consortium dubbed Tele-TV, which would take cable programming and send it by line-of-sight microwave transmissions directly to customers' homes.

``The consortium was going to buy wireless operations and penetrate 3 million homes, and CalAmp was slated to participate as one of the major suppliers,'' Ferron said.

But in late 1996 - much to the relief of the traditional cable providers - the consortium announced some of its members had shifted their strategic focus and would abandon wireless cable plans.

The announcement had a chilling effect on the industry's ability to raise capital for wireless initiatives in the United States. And equipment makers began retreating from the technology.

Overseas, however, wireless cable caught on to a greater degree, considered a quick and easy solution for cable TV where infrastructure lacked - perfect for locales where the streets couldn't easily be torn up, places as diverse as Qatar, Brazil, the Czech Republic and Ireland.

But in mid-1996 the company announced it was losing money because of feeble demand in Saudi Arabia and Australia and loss of a follow-up order in Thailand.

By late 1997, a capital crunch in emerging markets further took its toll, forcing CalAmp to discontinue shipment of certain components. The company reported sharply lower earnings, and investors had begun showing short interest in CalAmp shares - that is, betting its stock would fall.

California Amplifier had ``a lot of things going against it,'' said Donna Coward, a senior telecommunications analyst at the Renaissance Research Group, an investment management and research firm based in Richmond, Va. ``Demand wasn't there, domestically or internationally.''

In April, a vice president and senior analyst at Moody's Investors Service in New York pronounced the wireless cable industry, especially digital video, ``dead, for the most part.''

But the company still believes ground-based wireless cable technology is the best bet to provide multichannel television in less developed or sparsely populated countries.

Not all agree.

``In my view, satellite is the best delivery mechanism for broadcasting. The MMDS spectrum (wireless cable) will be proved more effective for two-way communications,'' analyst Robison said.

In the United States, ``Wireless cable (television) has worked for Bell South,'' Robison said, ``but it's an anomaly.'' The Baby Bell offers wireless cable television services in New Orleans, Atlanta, Orlando and Tampa.

Then came MCI WorldCom and Sprint with their plans to transmit not television, but to offer two-way voice and data using the technology.

And a new roller coaster ride began for CalAmp.

``We think the objectives are for (Sprint and MCI) to be in the top 10 markets by mid-2000 and the top 30 by the end of the year,'' Robison said.

``This kind of success and this kind of rapid deployment would be a bonanza for California Amplifier,'' he said. ``They really have an industrial edge in this market. They can lever their costs in purchasing and manufacturing. They have a big advantage.''

CAPTION(S):

4 photos, 1 chart

PHOTO (1 -- color) A California Amplifier worker inspects a circuit board. CalAmp has entered mainstream U.S. and foreign direct-broadcast satellite markets.

(2 -- color) California Amplifier markets and manufactures components for satellite and wireless cable uses.

(3 -- color) At Camarillo-based California Amplifier, Petronilo Farala screws housings onto converters.

(4 -- color) Michael Ferron

Michael Owen Baker/Staff Photographer

CHART: Wild Ride