PIE in the sky

A 21st century upgrade for the payphone is big news for a small W.A. company.

a woman

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A 21st century upgrade for the payphone is big news for a small W.A. company, writes The Motley Fool.

Telstra Corporation Limited (ASX:TLS) announced the success of a trial deployment of 50 pieNETWORKS' Hotspot Webphones into Australian capital city airports. PieNetworks (ASX:PIE) and Telstra will now negotiate the terms for  the deployment of a larger network of pieNETWORKS' Hotspot Webphones in the Australian market.

Recently appointed pieNETWORKS chairman Justin Milne said the success of the trial, and the commencement of commercial negotiations with Telstra, was a significant event in the company's development.

Significant indeed. This deal could be transformational for this speculative W.A. company.

"Hotspot Webphones are a 21st century upgrade for the payphone," Mr Milne said.

"These user-friendly touch screen and keyboard operated devices offer access to the internet, WiFi, online payments, telephony and direct access to a range of Telstra services," Mr Milne said.

It takes money to make money!

Many investors associate Western Australia with the mining boom, and the share price boom that has followed many exploration companies significantly higher over the past year.

For example, Bathurst Resources (ASX:BTU), Jupiter Mines (ASX:JMS), Gryphon Minerals (ASX:GRY), Beadell Resources (ASX:BDR), Alkane Resources (ASX:ALK) and Ampella Mining (ASX:AMX) are W.A.-domiciled miners with minimal revenues yet sharply higher share prices over the past 12 months.

Proving there's more to W.A. than loss-making mining companies, loss-making Perth-based PieNetworks is a small cap firm that has been burning through cash at a pace as it tries to mine the 21st century communication products market.

To raise more money, they annually go cap in hand to shareholders, and are likely to do so again in the coming months. As of June 20 they had $1.4M in cash. Given a current burn rate of $900,000 a quarter, I expect news on funding in the coming quarter.

Will 2011 be remembered as pieNetworks breakthrough year?

It could be. With long term deals for webphones inked with Christchurch and Wellington airports, and now a deal with Telstra, pieNetworks may have struck gold.

Need to know

Why did pieNetworks change the jockey just as they were coming into the straight? The Chairman, Mr Peter Abery was replaced last week, with immediate effect. Mr Justin Milne was appointed Non Executive Chairman.

Time to buy?

With a share price of just 2.7 cents, pieNetworks is a highly speculative company.

When I feel the speculator inside me trying to get out I turn to the wise council of one of the greatest ever investors. Peter Lynch advised that you're better off to wait until small companies turn a profit before you invest.

Investors want to buy great companies which will grow for many years. Not jump on the latest speculative opportunity. So, for now, my money is staying in my pocket and PieNetworks is going on The Motley Fool watchlist.

More from The Motley Fool:

Free report: Read this before the market crashes

Dean Morel owns a slice of Telstra, he does not have a position in any other companies mentioned above, but he sure does enjoy the occasional slice of pie. The Motley Fool has a living and breathing disclosure policy.

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