- ThinkEquity notes they had the chance to test Verizon Wireless' Chocolate phone, and we believe it is selling very well. Verizon Wireless plans to put increasing emphasis on its music phones, boding well for Smith Micro's (NASDAQ:SMSI) near-term revenue prospects. In the future, they expect Verizon Wireless and other carriers to offer some version of Smith Micro's QuickLink Music, which is a more direct assault by mobile phone operators on iTunes. Longer term, they believe Smith Micro's biggest success will be in StuffIt Mobile.
Having said that, the firm checked some Verizon Wireless stores in Midtown Manhattan and it is clear that the Chocolate phone is selling very well. It was sold out in some places, and almost sold out at others. Likewise, research suggests that a very large percentage of those buying a Chocolate phone also buy the $30 Verizon music essentials kit, made by Smith Micro.
Therefore, even though they believe the Chocolate phone has an unusually poorly designed interface versus the BlackBerry standard, it appears to be selling extremely well and should bolster Smith Micro's near-term prospects.
More importantly, however, they believe StuffIt has a shot at becoming "must have" software for every cell phone. It could compress 40% of the basic resource software suite, and up to 30% of traffic such as pictures, music and video. As Mike Lazaridis at Research In Motion has shown (and the firm believes), that capability would be a gold mine. The math here is simple: 1bn handsets a year, assuming $0.25 per copy, is $250m or $10 per share, virtually all of it falling to pretax income. In their opinion, while this is likely outside our 12-month investment horizon, it could yield a $200 stock at a decent 20x multiple.
Maintains Buy and 12-month $20 tgt.
Notablecalls: $200 tgt sounds unbelievable. But it's bound to draw attention. I don't dare to call this one actionable but one to keep on the radar.
Having said that, the firm checked some Verizon Wireless stores in Midtown Manhattan and it is clear that the Chocolate phone is selling very well. It was sold out in some places, and almost sold out at others. Likewise, research suggests that a very large percentage of those buying a Chocolate phone also buy the $30 Verizon music essentials kit, made by Smith Micro.
Therefore, even though they believe the Chocolate phone has an unusually poorly designed interface versus the BlackBerry standard, it appears to be selling extremely well and should bolster Smith Micro's near-term prospects.
More importantly, however, they believe StuffIt has a shot at becoming "must have" software for every cell phone. It could compress 40% of the basic resource software suite, and up to 30% of traffic such as pictures, music and video. As Mike Lazaridis at Research In Motion has shown (and the firm believes), that capability would be a gold mine. The math here is simple: 1bn handsets a year, assuming $0.25 per copy, is $250m or $10 per share, virtually all of it falling to pretax income. In their opinion, while this is likely outside our 12-month investment horizon, it could yield a $200 stock at a decent 20x multiple.
Maintains Buy and 12-month $20 tgt.
Notablecalls: $200 tgt sounds unbelievable. But it's bound to draw attention. I don't dare to call this one actionable but one to keep on the radar.
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