Synchronoss' Promotional Management: Not a Good Sign

Goldman Sachs has some interesting comments on Synchronoss Technologies (NASDAQ:SNCR) after the co announced it will provide order management support for Cingular/Apple's launch of the iPhone in June 2007, further expanding its long-standing relationship with Cingular (~65% of 2006 revenue). Importantly, the new relationship provides for support beyond just the e-commerce channel and into retail locations.

The company also updated its 4Q outlook, coming in about $1mn below its previous revenue range, but $0.01 above its original EPS range (now $0.11-$0.12 ex-ESOs vs. our $0.11 ex-ESOs). The 2007 outlook was reaffirmed, and the firm remains in-line with the top-end of the range at $100mn in revenue and $0.45 in EPS ($0.48 ex-ESOs). The revision to 4Q2006 guidance highlights the sensitivity in both revenue and margins to new transaction volumes coming onto the platform, but the ability to beat EPS expectations despite modest revenue slippage demonstrates very strong execution and automation rates.

Following a 9% rally yesterday in the shares off of the initial announcement of the Apple/Cingular partnership, the firm believes the stock has already captured much of the upside from this announcement.

Notablecalls: SNCR looks to have a highly promotional management. That's never a good sign. Considering VoIP accounts for large part of their revs/growth I'm somewhat cautious. Especially as it looks like they get paid per transaction. I'm skeptical regarding VoIP growth in general. Not even going to mention the miss on the revenue side and the fact the stock was up almost 10% yesterday. Expect to see a fade.

Comments

[Chimin Sang:]

The fade is not going to be away soon. Without apple boost, the stock was undervalued below its fair value of $15. The apple boost is sending it into imagination zone. It is not going to fad away soon until market allocate a proper apple boost value to it.

2007 Jan 10 09:57 AM