Rising from the Ashes
Story Filed: Friday, January 12, 2001 4:33 PM EST
New York, Jan 12, 2001 (123Jump via COMTEX) -- On January 8, 2001, a noteworthy location-based, audio wireless services
agreement was announced.
The two parties involved are Airbiquity, an integrator of wireless voice and data solutions for mobile devices, and InfoSpace Inc.
(INSP), a leading global provider of cross-platform merchant and consumer infrastructure services on wireless, broadband and
narrowband platforms. Under the agreement, the companies can offer targeted audio content for wireless devices linked to a caller's
place of origin.
With this agreement, InfoSpace could take advantage of Airbiquity's recently launched GPS Accessory, a retrofittable wireless
phone accessory featuring the latest GPS location technology. This patent-pending "Push-to-Pinpoint" technology is user activated,
ensuring wireless phone-subscriber privacy. Supporting the popularity of this wireless issue is the finding of Strategis Group, that the
location services market will be worth $81.9 billion by 2005.
Rising From the Ashes
A year ago, InfoSpace was one of the analysts' favorites, when it was trading at around $50 a share and was, according to the Street
consensus, headed towards the $120 mark. At that time, the nine analysts covering the stock rated it either a "buy" or "strong buy."
In addition to the general sentiment towards Web stocks, the Street also believes that since Infospace's international wireless deals
didn't materialize as the company had anticipated, and with the large exposure to the U.S. consumer market, it didn't seem that
there was much upside to its financials.
Yet, all 16 of the analysts following InfoSpace maintain "buy" or "strong buy" recommendations. There could be two rational
explanations - either the analysts switched to wishful thinking mode or the stock's price - as much as a movie ticket - represents a
great buying opportunity for what it offers as value.
It still remains to be seen what lies ahead for the company; however there are three significant factors present that catch investors'
eyes: superior technology, solid customer base and improving financials.
The Technology
InfoSpace's wireless division is the one presenting the major opportunity - it is the fastest growing area for the company.
Furthermore, the company posses the killer wireless applications - unified communication (across all Web-enabled devices) and
secure commercial transactions.
Nokia (NOK) and Ericsson (ERICY) both project that there will be one billion cellular phones worldwide by 2003. Of those, more than
half will be Internet-enabled. Jupiter predicts that by the same year, more people will access the Internet on wireless devices than on
PCs.
InfoSpace is offering one-stop shopping for comprehensive and integrated platforms of wireless services. It provides commercial
services, including single-click instant buying and the electronic delivery of promotions; communication services that are
device-independent e-mail and instant messaging; productivity applications, including access to account information and transfer of
money; localized information; real-time alerts and security services such as personal authentication for secure transactions.
The company has a unique patent-pending single-click, instant buying technology that allows mobile users to press a single key to
make purchases from virtually any Web site, turning wireless devices into secure, e-commerce-enabled devices. The technology is
server-based and automatically fills in Web site payment forms, eliminating the need to enter payment or shipping information,
register at sites or enter any site-specific passwords from the device.
Moreover, InfoSpace will also be the first to allow mobile users to find and receive promotions on wireless devices from retailers and
service-based merchants. Using this technology, promotions are flawlessly matched and automatically credited to the user's credit
card statement through secure back-end transaction processing.
In addition, InfoSpace is collaborating with VeriSign (VRSN) to deliver a broad range of services aimed at facilitating trusted and
secure commercial applications across the wired and wireless Internet. By combining VeriSign's strengths in Internet authentication,
validation and payment services with InfoSpace's state-of-the-art capabilities in delivering commercial, content and promotion
technologies, InfoSpace can now offer a broader range of secure services tailored to the wireless market.
The latest acquisition of Locus Dialogue Inc. positions InfoSpace to speech-enable a wide variety of its existing wireless offerings,
such as personalized information, location-based services and mobile commercial services. In addition, this will allow InfoSpace to
develop other unique mobile applications, such as speech-activated dialing.
Customer Base
Leading carriers worldwide are using InfoSpace's entire suite of services as the default option for their mobile users. AT&T (T),
Vodafone Group (VOD), Virgin Mobile, Verizon Communications (VZ), Hasbro (HAS), Lucent Technologies (LU) and Bloomberg LLC,
among others, have long-term relationships with the company.
InfoSpace also announced that it has teamed with Intel (INTC) to help drive the emerging Web appliance market. InfoSpace will
provide Intel with the platform of commercial and information services for Intel's new Web appliances.
Even though not officially announced, InfoSpace's IQShopper software is being used to power American Express' (AXP) "ShopAmex"
portal. Also, InfoSpace will extend its wireless Internet platform of customizable content and services to Compaq's (CPQ) iPAQ
Pocket PC and the iPAQ BlackBerry Wireless Email Solution.
Financial Fundamentals
InfoSpace remains one of the few publicly traded Internet infrastructure companies that has reached profitability. What's more, the
wireless market offers InfoSpace a dual revenue stream. In addition to per-subscriber, per-month fees from wireless carriers, it
receives commercial transaction fees from merchants. For the nine months ended Sept. 30, 2000, revenues totaled $142.8 million,
up from $42.2 million for the same period a year earlier, which represents a 238% increase.
At the moment, InfoSpace shares trade at 64x P/E multiple of the average 2001 EPS estimate. Its Price/Sales ratio is about 15x
based on the last 12 months ended Sept. 30, 2000. The Price/Book trading multiple of the company is about 2.2x (based on the last
reported quarter), which is significantly lower that its peer group.
In the short-term, Infospace's valuation could remain under pressure until the company and the major carriers report fourth-quarter
results that reinforce confidence in the wireless business.
SBC Comunications (SBC) recently lowered its 2001 outlook. Cingular, SBC's wireless unit (19 million wireless subscribers), is one
of the major carriers that has selected INSP's mobile commercial platform.
On the other hand, Verizon reiterated its 2000 and 2001 guidance and stated that the wireless division's 4Q/00 will be stronger than
last year. AT&T's wireless unit, another key carrier for InfoSpace, has made no pre-announcements. |
