Get Connected with iPass: The Long Case

How many times have you used a product and really didn’t understand how the technology inside that little gizmo of yours worked? For me, I think about things like that way too often, enough to drive me to research products, various technologies, and applications to answer these very questions. In doing so, I came upon a company called iPass (IPAS), Inc. from California. Some of you might have heard of this wonderful little tech company but I bet many people have not. If you are not aware of iPass, I am convinced that you have used their technology to get you access to the internet.

In a recent press release issued by iPass on May 5^th, iPass announced the first enterprise-configurable Wi-Fi hotspot solution for the Apple (AAPL) iPhone and iPod touch. The company also announced availability of new versions of its iPassConnect™ mobility manager software for devices running Apple Mac OS X and Nokia (NOK) S60 operating systems. iPass provides the broadest support for smartphone devices in an enterprise mobility service. There are approximately 38 million smartphone units sold in Q408 – iPass today enables connectivity to platforms accounting for roughly 70% of this number. With already over 2,000,000 active iPass users you can see why getting connected to iPass might be a smart investment.

Evan Kaplan, iPass president and CEO, states:

“iPass is dedicated to helping our customers harness the power of the mobile internet in a simple, secure and cost-effective manner. Extending and improving our iPass Mobile Office service across consumer-driven enterprise platforms such as the iPhone, Nokia S60 and Mac OS X is critical to this effort. As web-friendly smartphones enter the business via employees' pockets, they are driving increased IT complexity. iPass will continue to be the answer for enterprises who want to cost-effectively serve the evolving needs of their mobile workforce."

The benefits of using iPass' world-leading global Wi-Fi hotspot network on smartphones include:

• Lower 3G charges: enterprises can offload megabytes from their user's 3G data plans, and avoid international roaming charges, without adding new user fees for a second device.**
• Ease of use: users simply download the iPassConnect mobility manager software from the Internet, enter a company-specific code for a one-time configuration to corporate policies and connect to iPass hotspots using their existing corporate username and password.
• An integrated enterprise solution: There is no up-front work required by IT to enable the service. IT Managers get detailed usage reporting and an integrated invoice from iPass covering all of a user's devices and usage methods.
• Real-time and multimedia performance: Wi-Fi delivers higher throughput and lower latency than 3G, and is better able to support real-time applications such as Skype, videoconferencing and online collaboration.
• Rural, indoors and in-flight coverage: 3G coverage often degrades or disappears as one leaves urban centers or head indoors. On flights, Wi-Fi is often the only data solution.

In their latest financial results for 1^Q09, Evan Kaplan said,

"The economic downturn continued to impact our customers' business travel and adversely affected our revenues; however, we achieved positive operating cash flow and returned to non-GAAP profitability as a result of our restructuring in late February, additional cost re-engineering and an increase to gross margin." Kaplan continued, “having seen easing in the back half of the first quarter due to the recession-driven travel downturn, we are cautiously optimistic about the remainder of 2009 and believe we can be both Non-GAAP profitable and operating cash flow positive for the full year."

So, if you followed my past two investment ideas (APP: recommended on August 26, 2008 to buy in around 7-8 as my charts signaled APP to hit $10 – it did. SQM: re... on March 9, 2009 to get in around $24.50 – now $33.50), this stock looks like it’s ready to breakout. iPass closed above its 200-day moving average on fairly good volume. However, I would like to see it push through for a few more days to be more confident – if possible. With the S&P trending towards its 200-day MA the market might and probably is due for a slight correction here. That being said, the stock technically and fundamentally looks very strong, so get connected with iPass.

Disclosure: Long IPAS and AAPL

Comments

[Jae Jun:]

I've come across iPass recently as well and although they have the first hotspot for iPhone, it hasn't been proven to be profitable or generate enough cash flow. It's a make or break situation like more small companies banking on one product. They are also no longer a net net so there is more downside if things don't go as well.

May 11 01:28 PM

[Sean O'Grady:]

I've been an IPAS shareholder for a while now. I like their long list of corporate customers. Shamrock Holdings is an activist fund and owns approximately 10% of the shares. (They evidently see value too.) Evan Kaplan is new as CEO and seems to be steering things in the right direction. No debt; over $1/sh. in cash with a 25% 5-yr. expected growth rate (per Yahoo). It's worth a look.

May 14 11:42 AM