NEW YORK-As a consultant, Phone.com Inc. is building a portal that British Telecommunications plc intends to offer by the end of June, and this arrangement points to an expanding suite of product and service offerings, said Alan Black, chief financial officer of Phone.com.
Phone.com, a leader in developing the Wireless Application Protocol, provides software that enables delivery of Internet-based services to mass-market wireless phones.
“Today, we are much broader as a company in terms of the offerings we have,” Black said May 17 at the Donaldson, Lufkin & Jenrette Securities Corp. “Communications, Software and Enhanced Services” conference.
Under its agreement with British Telecom for commercial license and product development of its MyPhone, Phone.com will charge the carrier $1 per month per subscriber for a “framework” that includes electronic mail, personal identification numbers and certain other services, he said. Unified messaging is not part of this arrangement only because Phone.com had not yet completed its acquisition of that capability when it negotiated with British Telecom.
“We see many opportunities to do the same thing for other operators,” Black said.
“Many carriers want to control their service offerings and bring them in-house down the road. We have expressed a willingness to work under an [application service provider] model for those wishing to get to market fast, and to migrate to a product license format.”
Phone.com introduced its ASP model this quarter, and it expects profit margins of about 73 percent in this sector of its business through the end of next fiscal year. In contrast, margins run about 95 percent in the product license format, Black said.
Licensing comes in several “flavors” that contribute to Phone.com’s recurring revenues, he added. These include fees per subscriber, fees based on blocks of maximum numbers of transaction per hour and, as in the BT agreement, fees based on usage.
Under the “perpetual model” of licensing, Phone.com’s recurring revenues account for about 10 percent, while upfront license payments comprise 90 percent.
“As more and more of our business goes to applications, there will be a period of time where recurring revenues will rise to about 20 percent. As we add ASP to our business model, we expect it to take down (profit) margins modestly over the next five quarters,” Black said.
“We will observe operator behavior. When it is possible for them to move to an (in-house) product model, will they or won’t they? Some will. Some won’t.”
