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Bottom Line: High potential

Friday 17 December 1993 00:02 GMT
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PHONELINK, which made a pounds 301,000 loss in the six months to September, is valued by the stock market at an uncompromising pounds 115m. Strange, you might think, until you consider the enormous potential of an information retrieval service the Liverpool-based software company plans to launch next year.

For an annual fee and pay-as-you-go charges, business users will have access to eight huge databases from suppliers including the AA, Ordnance Survey, Post Office and BT - what the personal computer was invented for, some might say.

The attraction to businesses is the potentially massive cost savings available on mundane but frequent exercises like looking up phone numbers, checking hotel locations, train times and traffic conditions and keeping up to date on the news.

For Phonelink the prospective cash flow will be staggering if the take-up matches initial interest.

For example, there are more than 1 billion calls made to directory inquiries each year at a cost of 38p a throw. Phonelink says it can offer a quicker service at half the price. With such a competitive advantage it could make a big dent in BT's 192 service, but even a small fraction would produce substantial turnover and profits.

Since flotation in May, Phonelink's shares have more than doubled from 155p to 325p yesterday.

No analysts are prepared to hazard a guess at possible profits and the sales are yet to arrive, so the risks should not be underplayed.

For anyone prepared to take them, however, the rewards are enticing.

Hamish McRae is abroad

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