VIALOGY (VIY)

Previous Stock Tip

These companies are all previous recommendations from the Red Hot Portfolio that I have subsequently recommended and then sold from the portfolio at a later date. By no means are these companies intended to be buy recommendations for you to go out and invest money towards their shares. For the opportunity to start making serious money from the recommendations I am making now, just start your no obligation trial!

VIALOGY (VIY): Good Enough for Me - Jun 2007

RHPS Recommendation - SELL

Having risen through my initial target price of 12p, Vialogy has achieved a valuation of over £50m. Given that it is yet to record any revenue, let alone profit, this looks pretty generous. Having trebled our money, I sold on 24 May.

VIALOGY (VIY): Deal with Cisco - May 2007

RHPS Recommendation - HOLD

After a long period of keeping quiet, Vialogy has now delivered a stream of interesting announcements. First of all Cisco Systems has purchased Vialogy's Sensor Policy Manager (SPMTM) to support safety and security operations at its San Jose Campus in California. SPMTM, which can handle the signals from thousands of sensors, will be deployed within Cisco's converged (voice, video and data) products and IP-network solutions framework called Cisco Connected Real Estate.

Also the US Department of Defense has selected Vialogy to provide a Command and Control platform for experiments to develop Joint Forces Protection and Base Security Systems. SPMTM will be used to collect and interpret the signals from internet protocol-enabled sensors and systems. The lack of an effective interoperability between systems has previously been a significant problem for both the military and public sectors. Finally, Vialogy has reported that its "Pulsed Microwave Data Link" platform can be used to detect areas of weakness and stress in the composite materials that are increasingly being used in aerospace construction.

All these announcements point to Vialogy's exciting potential but it is still hard to know exactly how and when they will contribute to the bottom line.

VIALOGY (VIY): Detecting Explosives - Apr 2007

RHPS Recommendation - HOLD

Vialogy's Reverse Photo-Acoustic Spectrometer technology is to be used by UT Battelle LLC (which manages the Oak Ridge National Laboratory for the US Department of Energy) to develop systems that can detect the presence of explosives in buildings from a safe distance. Handheld chemical detection devices will also be able to identify dangerous compounds being carried by people.

VIALOGY (VIY): Shares Breaking Upwards - Mar 2007

RHPS Recommendation - HOLD

Chairman Terry Bond attended the Cisco IPICS (Integrated Communications Interoperability) demonstration at Cannes in which the IPICS version included VIY's technology. Apparently, the demo very effectively illustrated effective communication between emergency services through IPICS. It is impossible to know how this might translate into Vialogy's sales and profits but the shares have made a decisive break upwards.

VIALOGY (VIY): We Have Lift Off! - Feb 2007

RHPS Recommendation - HOLD

Vialogy has completed the Critical Design Review on a programme with Boeing called the "Multi-parallax Exploitation Electronic Eye". This is highly complex, but in essence Vialogy's signal processing technology is the engine behind the development of an "eye" which, like the eye of a reptile, can achieve panoramic or 360° vision. Boeing wants to deploy this on airborne, including unmanned, craft in order to detect missiles or to explore outer space. A second use is for surveillance at border crossings.

Vialogy has also achieved a ten-fold improvement in the stability and performance of a miniature vibratory gyroscope used by Boeing and NASA's Jet Propulsion Laboratory. Gyros are an integral part of all space control systems. They are used to sense and measure rotational motion, often in harsh environments, and must be sufficiently robust to reliably deliver real time information continuously for several years. This advance opens up new opportunities for Vialogy.

The same approach is broadly applicable to other Micro-Electric Mechanical Systems sensors, including accelerometers, clocks, Global Positioning Systems and resonator devices. These announcements have kick-started the share price, but it is hard to put a value on Vialogy's scientific prowess. So with the share price now above my 6p buy limit.

ORIGINAL INVESTMENTS (OIP): Takes control of Vialogy - Oct 2006

RHPS Recommendation - BUY

Sharecall: (0906 812 1210) 4189
Original Investments is to buy out the 56% of Vialogy that it does not already own in a deal that values the Californian company at £8m. Original believes that Vialogy's extraordinary technology, that can discern background "noise" is on the verge of commercialisation. Vialogy has signed deals with Cisco and Boeing and sees potential applications in border surveillance, homeland security, the early detection of air and water contamination, the detection of oil and gas deposits and much more.

Original's other interest is the Acrobot Company Limited, which has signed a commercial agreement with Corin so that its precision surgical systems for minimally invasive orthopaedic surgery can be applied to Corin's hip implants.

ORIGINAL INVESTMENTS (OIP): Signs new deal with Cisco - May 2006

RHPS Recommendation - BUY

Sharecall: (0906 812 1210) 4189
Original has announced that Vialogy Corp has signed a development contract with Cisco Systems. Unfortunately nobody is saying any more than that, and I understand that Cisco was reluctant to allow even this snippet to emerge. However, I would guess that this relates to Vialogy's application to mass spectrometry, in which Cisco has some participation. OIP is a speculative buy.

Spotting steroids, crude oil, tainted fish and bombs from 500 metres away - Apr 2006

RHPS Recommendation - BUY

Every now and then an invention comes along that truly shifts mankind's ability to innovate. Take the microscope and the computer, for instance. They have given us the ability to measure and map the world in ways undreamt of before. And the first company I want to tell you about today owns what has already been called "a true paradigm shift in the field of scientific measurement." Separating what matters from mere "noise"

Original Investments - which is quoted on AIM - owns 43% of a company that has developed this technology. It promises to dramatically alter the quality of information available to scientists, inventors, doctors, even financial analysts. The company is called Vialogy and it has cracked one of the great barriers to scientific progress - background noise.

We come across background noise every day.

Just try speaking to someone across the aisle when you are in an aeroplane, for instance! But background noise is not confined to sound alone. It can affect our ability to interpret optical, mathematical or acoustic information - in fact, any time we try to pick out one "primary" signal from within a mass of data. In order to reveal the signal underneath, we may want to strip away the background noise. But this only works if the signal is louder than the background. Supposing that the signal is substantially weaker than the noise?

For the last 20 years, scientists have used a method called active signal processing. This adds a new signal to the noise, and measures how that signal changes to pick up and track the key information that's desired. In detecting submarines under water, for instance, an active signal processor will pick out how a magnetic signal is disturbed by the magnetic field surrounding the submarine's steel hull.

Active signal processing technologies are found in highly complex and expensive hardware such as active radar and laser pulse devices, and used in medicine, defence and space exploration. But each target requires its own kind of data processing. This makes them high cost, and they cannot be widely used.

Enter Dr Sandeep Gulati...

Sandeep Gulati used to lead the group responsible for weak signal detection at the NASA/Caltech Jet Propulsion Laboratory. There, he grappled with the problem of listening to signals transmitted by space craft - signals which get weaker as the craft travels further from earth, while the background noise intensifies.

What Dr Gulati has now invented is a way of finding signals by interpreting them as a disturbance to the background noise itself. This is done through software modelling, and it's both cheap and highly effective. It can detect weak signals up to four orders of magnitude less than the background noise.

Dr Gulati was one of the founders of Vialogy, the private Californian company established to profit from this breakthrough. The process essentially involves the interpretation, through software, of raw digital data. It models the background noise, then it models the item of interest, and then it compares the two to spot the "primary" signal lurking in the data.

Vialogy believes the technology can create value in virtually any market that rewards information and content quality. It has potential applications in energy research and exploration, medical imaging, database analysis and even financial markets. The early target was the analysis of readouts from micro-array chips, the kind used in drug development. Many genes are too well-hidden to be seen above the background noise. But although the technology worked, there are no common standards for micro-chips in this industry. So Vialogy's product had to be tailored for each new application. Now the company's turned its attention to mass spectrometry instead. This is an analytical technique used to identify very low concentrations in chemically complex mixtures.

Why Jim Slater keeps buying Vialogy

Mass spectrometry can detect, for instance, the presence of steroids in athletes, the location of oil deposits in rock formations, the presence of dioxins in contaminated fish, and can establish the elemental composition of semiconductor materials. It could also be used to detect the presence of explosives in the luggage of a suicide bomber at a distance of 500 metres.

There are about 100,000 mass spectrometers in the world costing up to $1m each. Increases in their sensitivity come at great cost. Vialogy, however, believes that its technology can be integrated into existing devices to enhance their accuracy tenfold. This is a sensational advance, and the only way to invest in it is via AIM-quoted Original Investments. Formerly known as BioProjects, it was set up by legendary investor Jim Slater, with Terry Bond - the founding father of UK investment clubs - and Joe Dwek, the highly successful chairman of Bodycote. Its aim is to invest into biotechnology companies.

"We very much underestimated the whole thing," Slater candidly admitted to me last week. "But we have stuck to our philosophy of cutting losers and adding to winners. We made eight investments. We have sold out of six, taking a profit on only one. But we have added to our investment in Vialogy four times."

Get this great new surgical tool thrown in!

Original Investments also has a 25% stake in Acrobot. This firm was set up to commercialise the work of Brian Davies and Justin Cobb, both professors at Imperial College, London, and experts in visualisation software.

Acrobot's first product, which is already in use, is the Acrobot® Planner. It gives a surgeon the ability to visualise a three-dimensional bone surface model built from a CT scan (computerised tomography). The surgeon can then select and position implants onto the computerised bones, and judge the range of motion each would give the patient. This enables the surgeon to precisely plan the procedure in advance. It reduces surgical error, hospital time and the number of patients who have to return for corrective surgery.

This year Acrobot is planning to launch the Acrobot® Navigation System, which tracks the location of tools and patient, and depicts them on a computer screen against a pre-operative plan. It acts as a guide for the surgeon and is especially helpful for soft tissue management and minimally-invasive surgery.

The third product, also scheduled for launch this year, is the Active Constraint System. This ensures that a tool mounted on a motorised programmable device is confined by hardware and software, so that the surgeon can only move it within a predetermined space. Original Investments' stake in Acrobot may be worth about £0.5m. So although it has some £3m of cash in the bank, its market capitalisation of £15m rests heavily on the prospects of Vialogy. In particular it rests with Vialogy's plans to have its technology incorporated into mass spectrometers. The principal manufacturers of mass spectrometers are Perkins Elmer, Agilent, and Waters Corp. A deal with any one of these will signal a commercial breakthrough - and should provide a big pay-off for Vialogy's patient backers.

RHPS Verdict: In December Original reported that Vialogy was in "detailed commercial negotiations with a number of international organisations," and I expect to hear the outcome of these soon. This should help us to assess the true value of Vialogy's technology. The shares are very speculative, but I am putting them into the Red Hot portfolio as a HIGH RISK BUY.

To take advantage of the recommendations RHPS is making today, start your no obligation trial now!

The figures refer to the past and past performance is not a reliable indicator of future results. The past recommendation highlighted here is a small company share.By their nature, such investments can be relatively illiquid and, as a result, hard to trade. This makes such shares more risky than other investments. Please seek independent financial advice if necessary. These figures do not include the bid-offer spread, unless otherwise stated. Since the service began on 01/12/98 running through to 31/07/07, the average overall performance of the shares recommended is up 19.91%.All gains exclude dividend payments and dealing costs, unless otherwise stated. Profits from share dealing are a form of income and subject to taxation. Levels and bases of, and reliefs from, taxation are subject to change, and depend on individual circumstances. Full portfolio available on request. Fleet Street Publications Ltd is authorised and regulated by the Financial Services Authority. FSA No. 115234.

www.fsa.gov.uk