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Upper Echelon

Craig Matsumoto
8/29/2007

5:00 PM -- Because I stopped paying attention to them a decade ago, it was a surprise to open yesterday's virtual newspaper and find Echelon (Nasdaq: ELON) in a headline.

But there it was, the San Jose Mercury News featuring the company's recent stock run-up. All that patience -- and sticking with CEO Ken Oshman for 19 years -- is finally paying off.

Echelon closed at $24.35 late yesterday, 193 percent higher than a year ago. Or two years ago; the stock was flatlining for the longest time.

The brief history: Echelon went into home-appliance networking in the '80s. And that pretty much explains it all. The company did go public, but it's never exactly caught fire.

What catapulted Echelon this year was the business of automated electric meters. Ironically, that's another industry that was "poised to take off" in the '90s; I remember seeing a startup targeting a similar niche at some goofy Red Herring conference.

Now, optical stocks haven't been awful for 19 years, but I thought it would be fun (note that I didn't say "useful") to compare optical companies to Echelon's gradual decline.

Taking the Jan. 2, 2002, closing price as the zero point, here's the percentage change in selected stocks over the years. I've picked these dates just to show the relative peaks when certain stocks outperformed Echelon. In the end, of course, Echelon crushes everyone.

Table 1: Percentage Change in Stock Price Since 2002

01/02/2002 09/22/2003 01/12/2004 08/09/2005 03/20/2006 08/28/2007
ELON 0 -7% -17% -38% -45% +68%
SCMR 0 -12% +3% -28% -16% -31%
NT 0 -42% -18% -10% -63% -77%
BKHM 0 -14% +25% -82% -65% -88%
AVNX 0 -5% -4% -84% -52% -73%
All figures adjusted for stock splits and reverse splits.
Source: Yahoo




(I wanted to include JDSU (Nasdaq: JDSU; Toronto: JDU), but it's underperformed Echelon for the entire period.)

Sure, this doesn't prove much, other than to show Echelon was more predictable than optical. If there's a lesson, maybe it's that Echelon had to stretch beyond its original business to get its lucky break. (See Valley Wonk: Optical's Options.)

— Craig Matsumoto, West Coast Editor, Light Reading

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