After Solid Q4, iGO Expects Boost From Texas Instruments Partnership

| About: iGo, Inc. (IGOI)

Last night, iGo (OTCPK:IGOI), reported its results for the fourth quarter ended December 31, 2010. Revenues came in at $13.2M, up 33% from $9.9M in Q4 of last year. Even more impressive, its Q4 sales exceeded the $12.2M it posted in Q3. Earnings came in at 1-cent per share, up from breakeven results a year ago, despite legal expenses stemming from its acquisition of AERIAL7 and Adapt Mobile.

There were no Wall Street estimates to match up against, but President and CEO, Michael D. Heil, was clearly pleased with the results.

“Our strong revenue growth in the fourth quarter reflects the impact of our expanded product portfolio and the expansion of key retail relationships,” he said.

By “key retail relationships”, he was clearly referring to Wal-Mart (NYSE:WMT). During the fourth quarter, iGo recognized $1.6 million of deferred revenue, reflecting sales of the company’s products at the retail giant’s stores. Its growing relationship was underscored by the addition of a second iGo product at Wal-Mart earlier in the quarter. After a 500-store test, Wal-Mart agreed to enable distribution to 1,200 of its 2,450 outlets.

As for guidance, management set expectations for continued sales and profit growth in 2011, despite rising costs and unrelenting strain in its relationship with Radio Shack (NYSE:RSH). Sales to this customer declined by 33% in 2010 and could decline by another 33% in 2011. That said, the decline will come off a smaller base, so Radio Shack’s negative impact on iGo’s results should lessen as the year wears on.

Looking at the business holistically, iGo will likely encounter typical retail seasonality in Q1. Accordingly, March-quarter sales are expected to be down versus Q4, as is usual. However, if management fulfills its promises, year-over-year comparisons will remain positive. Further, results should demonstrate strong acceleration in the back half of the year.

Perhaps most importantly, management provided a positive update on its co-development and marketing relationship with Texas Instruments (NYSE:TXN). This partnership was first announced on November 4, 2010, with expectations that an integrated chip (based on iGo’s recently-patented “iGo Green” technology) could be completed by the end of 2011. Though many such relationships encounter significant delays, iGo announced that the chip is “progressing on schedule” for Q4 completion. In fact, the company has already begun marketing the upcoming product to electronics OEMs. It's too soon for management to discuss revenue metrics, but based on iGo's competitive advantage in the charger market, we can expect the company's unit potential to be denominated in dollars, not pennies. When multiplied across the billions of electronic devices shipped annually, iGo's penetration rate doesn't likely need to exceed 1% to justify a substantial increase in its market valuation.

A second-generation chip is expected to follow soon after, targeting commercial and residential wall plates. In other words, the company believes its technology may enable entire homes and buildings to save money by incorporating its technology into electrical sockets. As is the case for its initial chip, it’s far too soon for the company to discuss wall-plate revenue metrics. That being said, something on the order of 100M electrical outlets are installed every year in the U.S. alone. Even with a royalty of less than $1 per outlet, iGo’s annual royalty stream could exceed its entire market cap…and that’s before calculating its international opportunity. Considering the rise in oil prices and the Obama-administration’s emphasis on energy independence, iGo stands a good chance to reap a staggering windfall from this initiative.

Summing it all up, iGo's core business continues to make solid progress in the field, arguably justifying its current valuation. Meanwhile, its relationship with Texas Instruments continue to proceed according to plan. The potential in this regard is still a few a quarters away, but offers several ways to reward patient investors with a several-fold return on investment. Indeed, shares of IGOI remain poised to triple.

Disclosure: I am long OTCPK:IGOI.