Comarco Inc., a defense contractor and a provider of wireless products, said it will sell its services businesses, including management, staffing and engineering technology, to focus on wireless communications and increase shareholder value.
The wireless business accounts for about 80% of the Santa Ana-based company's earnings.
Comarco said it will be better received on Wall Street as a pure wireless company than as a company with several unrelated businesses.
"We were a defense contractor, and when the Berlin Wall came down we diversified and built a very nice wireless business that some people think has more value than the whole company," said Don Bailey, Comarco chairman and chief executive.
Bailey said he expects earnings to grow 20% once the company focuses on wireless communications because Comarco has little competition for its testing and measurement equipment for cellular phone companies and roadside emergency call boxes. Comarco earned $5.7 million, or $1.13 a share, on revenue of $92 million for the fiscal year ended Jan. 31.
The company, which believes all the units are "salable," hired investment banker Quarterdeck Investment Partners Inc. to advise on the sale.
Proceeds from the sale will be invested in its wireless business, Comarco said.
Comarco said it is responding to shareholder dissatisfaction with the company's stock performance.
Before the company announced last Thursday that it planned to unveil new plans Wednesday, the shares had moved up less than 1% over the last year, compared with a 41% increase in the Nasdaq composite index.
The shares have gone up 12% since the Thursday announcement, however. On Wednesday, Comarco shares closed at $22.25, down 75 cents.
The company has almost 800 employees in 15 states and four foreign countries.