Backed By Investors Behind Twitter, Yelp And eBay, Emerging Tech Company Starting To Ring Up Deals

Feb.27.12 | About: FORM Holdings (FH)

It's turning out to be quite an exciting time for Vringo (VRNG), the New York-based company that provides software platforms for mobile social and video applications. The company may be getting ready to have its best year yet with several new initiatives resulting in the company being tapped as one of the tech stocks to watch in 2012.

Last week, Vringo signed an agreement with Facebook (NASDAQ:FB), which covers Vringo's official use of the Facetones™ Mark and Domain Name.

Already on deck for Vringo is the arrangement with ZTE Corp. putting Vringo 's Facetones app on all Android handsets manufactured by ZTE, the largest handset maker in China. Announced in November, 2011, this deal puts Vringo in the hands of a very eager mobile audience excited to experience Facetones, an App that integrates with Facebook. Vringo's app is one of the first ZTE has decided to embed on its mobile Android handsets.

Facetones displays a full screen photo of a user's Facebook friends whenever the user is called or the user makes an outgoing call. Facetones generates an exciting slideshow of photos and social content each time a user communicates with friends via their mobile device. Building on their success, Vringo has plans to expand past Facebook and integrate with other social networks and photo sites.

Vringo also recently announced the inclusion of Facetones in the Apple App Store. All together, the app has just surpassed one million downloads in less than six months, making it a very successful venture for the company. Initially launched in beta version, Vringo has already updated the app to include enhanced text messaging, putting Facetones squarely on the radar for the enormous mobile messaging market. Originally designed for mobile calls, the exciting Facetones dynamic is now being replicated when text messages are received.

Additionally, the demand for Facetones has been so large that Vringo has launched a new version that has been customized for the latest Nokia Mobile devices, the world's largest manufacturer of mobile handsets. The app is fully optimized for Nokia's (NYSE:NOK) Symbian ^3 operating system, including Anna and Belle, the latest extensions, which provide the sleekest interface and richest on-screen media for the very best user experience.

With Facebook's $100 Billion valuation and upcoming IPO, investors are paying extra-close attention to specialized stocks such as Vringo. There is tremendous enthusiasm for companies that have built out their business on Facebook that shows no sign of dissipating.

Vringo, which was founded in 2006, has a strong financial outlook, bringing in $3 million in a warrant exercise. The company's investors include Benchmark Capital, whose investments consist of Twitter, Yelp, eBay (NASDAQ:EBAY), GrubHub, ofoto and more. Vringo has $4 million in cash and no debt, remaining solvent and competitive.

Vringo has smartly tapped in to a market that desires a social experience before, during and after a phone call, which Facetones provides. Attention-grabbing photos, events and stories can now be shared verbally and digitally at the same time. As mobile continues to grow with a seeming unstoppable momentum, Vringo has secured a tight and successful grip on the landscape and there are several reasons why this looks like an intriguing investment now:

As we are well aware, given the media coverage, one of the biggest stories on Wall Street now is Facebook. It just filed to go public and we haven't seen this type of attention for a tech play since Google (NASDAQ:GOOG). If you have brokers calling you saying they can get you Facebook chances are, you're not really getting any. Institutions are in line to get most of it.

Next thing happens is people start looking around the sector and the hottest industry with dozens of IPOs is Social Media.

VRNG combines two of the hottest themes in the Market. Smartphones and Facebook. Up until a couple weeks ago it was a video ringtone company that had an app for Facebook called Facetones that allows you to see a friend's Facebook pictures when they call you. Even though it was in the right spot with smart venture capital money behind it Vringo was only trading 50 - 100k shares a day. Once Facebook announced its IPO, Vringo's Facetones app grew to over 1 million downloads that week. More importantly now the stock is trading 10 x its average daily volume. Something is definitely going on here.

Some quick stats

13 Million out 6 float.

  • 300% revenue growth
  • Cash-flow breakeven by Q 3-4
  • First company to monetize mobile
  • 20 patents

Top 5 reasons to VRGN steal at these levels

1. Facebook IPO publicity causing Facetones downloads to go through the roof.

2. Can get premium mobile ad rates once they get to over 1 million ad impressions per day, which may be happening now that the number of Facetones users has increased so much over the last couple weeks.

3. There are only 6 million shares in the float, most of VRNG shares are owned by insiders and big VC firms like Benchmark and DAG Ventures (which are investors not sellers)

4. The largest smartphone maker in China (ZTE) just started shipping phones with Facetones preloaded last week

5. Last but not even close to least - the IP portfolio. 20 Patent applications outstanding and 3 issued … covering "click to call" transactions might be worth more that 10x today's entire market cap.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.