Eagle Broadband: Business Fundamentals Improving. Revs booked in ‘07 Could Shake Monkey of Their Back

Eagle Broadband Inc. (OTCBB: EAGB) recently announced financial results and briefed the investment community on plans to expand IT Services Sattellite Group operations in Dallas, TX.

Although Eagle took a body blow in regards to its net loss from operations of $7.3M, the company seems to be shaking it off and pushing forward with improved margins, cutting gross margin loss nearly in half (-18%) for the Q on a YoY basis.

Here’s a quick look a some recent developments at EAGB and their potential impact on future profitability:

1. Eagle’s leading hospitality customer has ordered $6.4 million worth IPTV set-top boxes;

2. OEN has agreed to pay Eagle $1.9 million for a portion of its fiber network over a period of 13 months with a clause for an additional $800,000 if OEN is purchased by a third party or sells the network to a third party; and

3. The IT Services Satellite Group exceeded expected revenue (>$525K) in its first three months and is now expanding in Dallas - a hotbed for high-tech services over the past two decades.
(Source: Federal Reserve Bank of Dallas)
4. Eagle is targeting the emerging (expected to hit $40 billion by 2010, with 50 million subscribers by 2009) IPTV market with what has proven to be, believe it or not, an industry leading solution. In the past few months, EAGB has entered into relationships with:

a. InfoValue Computing, Inc. (InfoValue), an expert in high-performance video streaming that got Eagle’s IPTV top-boxes implemented in what the co. describes as “the world’s largest hospitality HD deployment“ at the opening of the Ritzy Wynn Hotel & Casino in Las Vegas; and

b. SecureNet, LLC - EAGB’s 3rd IPTVComplete(TM) customer. Also a provider of High Speed Internet and IP telephone services that when combined with Eagle’s IPTV solution, provides a triple-play of IP services designed for the exclusive residential market in the San Francisco Bay Area.

That adds up to quantifiable, potential incremental revenue increases exceeding $7.8M if all goes well, in addition to a number of unquantifiable prospects that could translate into some major sales volume with one big deployment. That would, in theory, take care of the $7.3M net loss from ops reported in Q3 ‘07.

I’m not saying that this is what’s going to happen, but if EAGB does follow through with plans and continues to improve margins, a price of less than $.05 could represent an attractive, relatively low, entry point to consider.