Since opening its initial public offering at $16 on July 9, Phone.com Inc.’s stock price recently has been closing in the $70 range, with sales during the day breaking $80.
Whether this success will stand the test of time remains to be seen, but for now anyway, the company is basking in its glory.
“We are extremely pleased,” said Ben Linder, Phone.com vice president of marketing. “The stock’s performance has a direct relationship to the faith of investors-be it sophisticated investors from large mutual funds or individual investors,” Linder said. “The market as well as the wireless industry sees us as a leader.”
While Phone.com always has been its own most vocal advocate, even those in the company were somewhat taken aback at the overwhelming response to the company’s public offering.
“The company overall is pleasantly surprised and very excited about the IPO,” Linder said. “The stock market is very unpredictable, of course, but I think Wall Street received our story well and our technical leadership and time to market well.”
Financial analysts initiating coverage on Phone.com have proven quite bullish as well. Credit Suisse First Boston analyst Mark Cavi has recommended the stock as a strong buy, and set a 12-month target price of $100.
Also initiating coverage is Marianne Wolk of BancBoston Robertson Stephens.
“We are initiating coverage of Phone.com with a buy rating,” she said. “We see Phone.com as a pure play on two macro trends-the global adoption of wireless communications and surging demand for e-commerce and Web applications. In addition, we believe Phone.com’s solution is positioned as the ubiquitous standard for wireless data services, with approximately 25 of the leading global wireless carriers already licensing the company’s UP.Link server suite.”
Views differ as to why the public offering went so well. Both Cavi and Wolk said they believe it is because the company offers software that will be of great value in the changing wireless environment.
“Incorporating Phone.com’s (Wireless Application Protocol)-based suite of services, we believe carriers can change their customer dynamics and combat churn,” wrote Cavi in his report. “As the general population transfers more of its communication, banking and shopping to the Internet, the appetite for ubiquitous Internet access is bound to increase.”
Beyond early adopters, Cavi said a WAP-based phone solution soon will appeal to a greater market-those who desire Internet access but are not willing to spend thousands of dollars for a computer. “We believe there is a substantial market opportunity for companies that can provide portable Internet access inexpensively and conveniently and reach the broad consumer market.”
Strategy Analytics recently released figures predicting 1 billion wireless phones in use by 2003. About half, or 525 million, are expected to be WAP enabled. As the leading provider of WAP-based software for both handsets and networks, many analysts say Phone.com is well positioned for dynamic growth in the future.
However, this view is not ubiquitous. Rich Luhr of Herschel Shosteck Associates-long a critic of WAP technology and services-said WAP solutions based on present Phone.com technology are a temporary solution at best.
“The best you’re going to get out of us is that we see WAP as a short-term strategy for network operators,” he said. “I don’t think it matches its hype.”
Asked why the company’s stock has done so well, Luhr pointed to the company’s name change-to Phone.com from Unwired Planet-just weeks before the IPO.
“This is classic `.com’ exuberance,” Luhr said. “It’s the same as many other companies that put `.com’ on their name. This short-term speculation is based on that. I don’t think their stock value has anything to do with their business case. A lot of it has to do with the current state of Internet investing and not with the viability of their business plan.”
But Luhr’s view represents the minority opinion in the face of industrywide Phone.com enthusiasm, which Linder said has nothing to do with a mere “.com” suffix.
“I think its foolish to think the .com name in itself has a lot of meaning,” Linder shot back. “I could sell plumbing supplies and call it plumbing.com and not sell a lot … investors are not foolish. I think our name represents the convergence of wireless telephony and the Internet, which is the fundamental nature of our company.”
Regardless of whether the technology succeeds, with $60 million raised through the public offering, even Luhr did not deny the company has gained significant staying power.
“They’re going to be around for a while,” Luhr said. “They’ve got enough to be funded for years even if they never sell another UP.Browser again. With that kind of capital, they could reinvent themselves and come up with a better version … I’m not going to predict Phone.com’s demise. They bought themselves some time.”
“We do in fact have the capital to be a key player in this industry for a long time,” agreed Linder, adding the company will spend the money primarily on research and development to continue the product’s evolution.
“We are in a relatively new field I call infrastructure software. Carriers rely on our software to run part of their business. They expect things from our software like what they expect from a switch,” he said. “We invest heavily in research and development and quality assurance and that doesn’t come cheap. The funds we’ve raised will be used to make investments to keep ahead of the game and stay ahead always.”
Linder pointed to the many agreements made to date with both hardware vendors and network carriers as proof of the company and WAP’s staying power. Sprint PCS plans to launch nationwide data services using WAP phones and servers later this year, while Nextel Communications Inc. intends to roll out six markets this year and complete the effort nationwide by next year.
“Lumping them all together, I think WAP has achieved a critical mass where it is no longer a question of if, but when carriers roll these services out,” he said. “I think if you look at the industry momentum and embrace of WAP, with more than 125 member companies who have licensed the browser … this is definitely taking the industry by storm.”
Phone.com’s next big event is the Unwired Universe conference to be held July 27-29. Linder said he expects 800 content and application developers, carriers and phone vendors and other industry-related attendees to be there.
The conference will include business and technology tracks to discuss how to make money using WAP as well how to create successful applications and engage in successful rollouts. Developers also will be given sneak previews of upcoming WAP phones, Linder said.
“The overall purpose is to educate all sides on what this business is all about and get the most value from it.”
