Dow Jones 9334.70 -5.75 8:15 am PST, August 27, 2003  NASDAQ 1773.83 +3.18 For info, visit access.smallcapnetwork.com S & P 500 996.42 -0.31 To be removed, please click here Russell 2000 488.51 +2.00 VOLUME 03: ISSUE 48  ACE*COMM: Show us the Money When acquiring another company, what's more important to the acquisitor: new technology, new customers or enhanced management? In the case of ACE*COMM's (NASDAQ: ACEC) potential merger with i3 Mobile (NASDAQ: IIIM) it's none of the above. Instead, it's all about the cash. I shall endeavor to explain. In March 2003, i3 basically suspended its operations and was left sitting on about $10 million in net cash. Once upon a time (July 2000), IIIM's shares were trading at $18. As the company imploded, operations finally ceased and the company attempted to facilitate a transaction to salvage something out of the morass. Enter ACE*COMM, an interesting little global provider of "convergent mediation" out of Maryland, which has also suffered, but at least has a customer base, ongoing business and decent prospects. ACEC was, as well, trading in the high teens in 2000, but has since seen its shares slide to 40 cents by the last quarter 2002. Recent initiatives and good contracts, as well as the potential acquisition of i3 could well turn ACEC's fortunes. The shares have improved to the $1.60 level, Tuesday. Data,Data,Data ACEC is a custom manipulator of data for businesses. As stated before in this column, data is the Holy Grail of business efficiency and profitability for, basically, the foreseeable future. The prudent and judicious use of trends, information, and inventories has become de rigueur for modern business. You'd better have access to data, so as to know what your customers want and what your business needs, and be able to quickly deliver it. Anything else is just unprofitable noise. I guess i3 found that out. i3 shareholders will receive shares equal to the net cash in the company--about $7-9 million. The deal is expected to close in the fourth quarter, 2003. ACEC needs the cash to expand its business, specifically its telecommunications operation support systems and business support systems. And that takes cash, apparently. ACEC is an extremely volatile stock. Currently, the shares appear to be trying to form an up-trend after a 3-year slaughter. The stock had a nice run Monday on very heavy volume, but the true test will be if it can break above $1.75-- a resistance point the stock has had trouble with recently. If it does break out above that level, the stock could move nicely. You have to admit.... The full year  2003 (as at June) numbers should be out in the next couple of weeks. For the 9 months 2003, ACE's revenues were $10 million versus $14 million for the same period 2002. There are only 10 million shares outstanding-- although one assumes that the shares necessary to close the i3 deal will raise that number significantly; the current market cap is presently around $16 million.  That said, the deal looks good for ACE which boasts 3500 installations over its 20 year history and names among its clients such behemoths as General Dynamics, Cisco, AT&T and Alcatel to list a very few. The company lost 18 cents for the first nine months of fiscal 2003, but it lost 33 cents in the same period 2002.  For risk oriented investors, ACE looks like a reasonable speculation. Numbers to be reported in the next couple of weeks will reveal more details although it doesn't appear that the company is going to vapor. It has signed some decent contracts lately--fourth quarter 2003-- including several lovely government deals. No specifics were given--perhaps they'll come at the pending earnings announcement.  ACEC claims that the reduction in revenues was due to the usual generic reasons --downturn in customer spending, geo political concerns etc. It appears, with around $2-3 million in cash as well as an order backlog of approximately $4 million and the prospect of snagging another $7-9 million from i3, that things could move ahead apace from here. Of course, the i3 deal isn't done until it closes, but that looks relatively certain. Obviously, the company is closely watching and cutting costs while attempting to add velocity to its sales effort. M&M, and M Seems a savvy bunch at ACE*COMM. Especially if they succeed in rolling in i3's cash. There are three M's in small cap investing; money management and moxie. This one seems to have all three. If you want to punt, I'd look at a small purchase now and some more after the numbers hit in a couple of weeks. Stop loss at $1.25 or so would also be prudent. 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