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October 31, 2005 Stock Pick: Vodavi Technology, Inc. (VTEK)

Stock Price: $4.93

Vodavi Technology Inc. is a communications solutions provider delivering innovative business communications solutions that help small to large enterprises increase productivity and reduce costs. The company is engaged in traditional telephone systems, Voice over IP (VoIP) technology and helping companies make the switch from legacy technology to VoIP.

VTEK is a VoIP and systems integration play. Companies involved in the VoIP space are gaining more and more contracts, Vodavi's VoIP sales increased by 64 percent for the most recent quarter. VoIP will become hot again as an investment play and VTEK is well positioned and undervalued at a market cap of only $18.39 million.

Third quarter results were released last week with revenue of $12.3 million and net income of $657,000. VTEK is trading significantly below sales and has a P/E of only 11.79. Most VoIP companies are trading at much, much higher multiples of earnings and sales.

There are a minimal number of VTEK shares in the float at only 2.4 million. VTEK will trade up fast when it is discovered by value investors. VTEK is also near the bottom of its range.

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