From Briefing.com 2/8/00
Pick Up the Phone
[BRIEFING.COM - Robert Walberg] After spending the past few months consolidating within a broad range, one of last year's hottest stocks is back on the rise. That stock is Phone.com (PHCM 138 5/16). PHCM is a leading provider of software and services that enable the delivery of Internet-based services to mass-market wireless telephones. The company's products include:
UP.Link Server Suite - a product that network operators use to connect their subscribers' mass-market wireless telephones to Internet services.
UP.Browser - a browser that is embedded in mass-market wireless telephones and enables wireless subscribers to access Internet services.
UP.Smart - a suite of software applications that delivers personal digital assistant features to smartphones.
UP.SDK - a software development kit that Internet content providers and third-party developers use to create WML-compliant applications.
Basically, PHCM products expand the Net's reach from the desktop to portable devices, making access to stock quotes, news, email, weather forecasts, etc. that much more instantaneous.
Booming Market
Though PC prices have come down significantly, it's still cheaper to buy a cell phone. In fact, with cell prices coming down and quality going up, the market for wireless services is exploding worldwide. According to the Yankee Group, total wireless subscribers will hit 1.26 billion by 2005, up from 469 million at year end 1999. PHCM is superbly positioned to leverage the surge in wireless subscribers into explosive top- and bottom-line growth, as the company's current customer list serves over 40% of all wireless users. In order to maintain its market share advantage, PHCM is following Microsoft's lead and giving its WAP (Wireless Application Protocol) browser away. The company than plans to make money on the back end by selling its other products to telcos and content providers.
Inside the Numbers
Recent evidence suggests that the company's approach is working, as second quarter revenues surged to $12.8 mln, an improvement of 603% year/year and 50% sequentially. Over the past three quarters, the average year/year revenue gain is an eye-opening 518%. The company also announced that its customer base swelled to over 50 wireless operators worldwide, while the number of users jumped from 280,000 subscribers to 700,000 - in the last quarter alone.
Not surprisingly, the strong revenue numbers led to a narrower than expected quarterly loss of $0.08. The street had been looking for a loss of $0.17 v. year-ago loss of $0.39. In the three quarters that the company has reported results, it has a record of beating the consensus estimates by 53% (Q2), 36% (Q1) and 7% (Q4). Given the explosive growth of the wireless industry, the company's impressive customer base, a strong suite of products and a number of recently announced new contract wins, Briefing.com expects PHCM to continue posting better than expected results. At present, the company is expected to lose $0.16 in Q3 and $0.55 for FY00. Traders should note that loss estimates have come down by two and eight cents, respectively, over the past 30-days.
Technical Tone
In addition to having an attractive story and relatively solid fundamentals, PHCM's technical tone is improving significantly. The stock just crossed back above its 50-day moving average. Money flow characteristics are also encouraging. As PHCM emerges from its trading range, look for the stock to test its old high of $175, with penetration resulting in an intermediate- to long-term run at the $200 area.
Robert Walberg |
