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The Apple (NASDAQ:AAPL) app store is a game changing distribution model for software developers. 3G mobile internet connection speeds have enabled the distribution model to really take off to the tune of 1 billion app store downloads in less than a year. There’s a small cap company that you need to know about who is perfectly positioned to benefit from the mobile boom.

This sector is one of the only things booming right now. Gartner research just released data showing that worldwide mobile phone sales totaled 269.1 million units during the quarter, a 8.6% decrease from the first quarter of 2008 but the smartphone segment of the market surpassed 36.4 million units, a 12.7% increase from the same period last year.

The company you need to know about is Artificial Life, Inc.(OTCPK:ALIF)

I love finding new companies who show the ability to innovate in a growing sector of the market. Artificial Life fits the bill. These guys develop 2D and 3D multi and single player rich media applications for 3G and 4G network enabled mobile phones. They claim to be the worlds first full service broadband mobile content and technology provider. They have formed relationships with BMW, Linkin Park, Red Bull, professional sports teams, and Starz Media to develop their apps in 2009.

The earnings numbers Artificial Life reported on May 13th were stellar. They grew revenue at 70%, they sold 3,443,000 mobile 3G and Java games, they launched their first seven iPhone/iPod touch games and generated 1.2 million downloads, and they produced their seventh consecutive profitable quarter. CEO of Artificial Life, Eberhard Schoneburg said on the conference call,

As a result of the many TOP 10 rankings we achieved for our games in many countries we got very positive feedback from partners and clients and are now experiencing even more interest from global brands to work with us to launch more iPhone apps.

Going forward we are especially excited about the opportunity to work with Linkin Park on a first music community iPhone game which we anticipate to release end of Q3, 2009. Other upcoming highlights for our iPhone gamers will be the BMW F1 racing game in 3D which is scheduled for release at end of Q2 and the imminent release of our new and very funny iDroids(TM) series.

The iPhone apps are just one part of Artificial Life’s exciting future. Part two is China.

On May 18th the company was chosen by China Telecom (NYSE:CHA) as a subcontractor to develop, host and maintain its new 3G WAP portal. 3G is just now being implemented in China and this deal gives Artificial Life a chance to provide network subscribers with their apps, games, and mobile broadband entertainment.

Mr. Schoneburg commented,

It is an honor for us to be chosen as one of the key content providers for the newly-launched 3G networks in China by China Telecom. With our extensive and unique global experience with 3G networks and 3G mobile content, we are able to offer highest quality 3G content and services to this market with the biggest growth potential of all 3G markets in the world. We are now looking forward to a successful expansion of our business into China.

Rumors are also circulating that Apple will be releasing a 10 inch touchscreen Media Tablet in the second half of 2009. If this happens, the relevance of applications will only be enhanced as the larger screen caters to gaming.

Artificial Life appears to be the right company at the right time. The stock price is only at 1.05 because investors are unsure if the company can keep up their momentum and fear that future growth capital needs may present dilution to shareholders.

Investing in a company with a market cap of $49 million is a risk, but these concerns are not enough to keep me out of this stock. Apple + High Quality Gaming Brands + China 3G = A high probability of future success.

DISCLOSURE: LONG ALIF

Source: Artificial Life: A New Stock for Apple's App Store Dominance