2HRS2GO: Despite run-up, Metrocall still an unknown

Metrocall Inc. (Nasdaq: MCLL) shares are still on fire, surging another 2 11/16 to an all-time high of 14 5/16 Monday on the heels of several investments from wireless Internet companies. But for all its recent success, Metrocall's basically invisible.

There's a good reason for this anonymity considering Metrocall recently went through the equivalent of being sent to the minors when it transferred its shares from the Nasdaq's national market to the small-cap market in September.

Metrocall: Worth a shot?

That'll happen when your stock's perched at $2 a share and trading on very little volume.

Rather than go through with a 1 for 2.5 reverse stock split as its shareholders approved in May, Metrocall decided it would be better to take a step down in class and attract interest from investors who like to bet big on cheap stocks.

But all that changed late last week when the paging services provider said it received a $51 million investment from three companies and announced that AT&T's Wireless Services (NYSE: T) unit would swap its holdings of Metrocall's series C preferred stock for 13.3 million common shares or equivalents, making it the company's single largest shareholder.

After tripling from $2 a share to $6 a share Thursday, Metrocall shares more than doubled Friday, closing at 11 5/8.

Not a bad move for a company that posted a loss of $43.8 million, or $1.15 a share, on sales of $143 million in its latest quarter and was seen as a struggling paging company fighting for its life against the communication gizmos provided from the likes of cellular phones and Palm Pilots.

It's projected to lose $1.12 a share in its fourth quarter and about $4.45 a share in the fiscal year. Still, five of the six analysts covering the stock rate it either a "buy" or "strong buy."

It turns out that wireless companies actually like the comparatively crude technology provided by Metrocall and other paging companies because it's a cheap and efficient way to send little chunks of data, particularly e-mails, between users.

Undoubtedly, PSINet (Nasdaq: PSIX), Aether Systems (Nasdaq: AETH) and the private investment firm of Hicks, Muse, Tate & Furst see even more exciting and profitable possibilities down the line as they combined to invest $51 million in the company.

In the grand scheme things, $51 million isn't that big of a deal, but you'd think some Wall Street analysts would paying some attention, especially after Metrocall shares improved seven-fold in three trading days.

Goldman Sachs analyst Frank Governali, who can hardly be faulted for not being up to speed on such tiny investment among AT&T's ocean of deals, was refreshingly candid.

"This is such a little deal that, frankly, I didn?t even may that much attention to it," he said.

Prudential Securities analyst Guy Woodlief simply said that he wasn't aware of the deal altogether.

Whether this story burns out like so many other penny- or dollar-stock stories remains to be seen. But so far, it's clear that Metrocall hasn't quite made its way back to the big leagues.

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