Boston Communications Group Fights For Its Life (BCGI)

Boston Communications Group (NASD:BCGI) makes billing and payment solutions for the wireless phone industry. Three of the company's largest customers (Verizon, Cingular, and Alltel) are migrating off the company's platform to alternative companies. This has been very bad news for investors. Two years ago, the company's stock was well above $10. It has a current 52-week high of $6.25 and now trades for $2.35.

Boston Communication's market cap is about $42 million, or about half the current annual revenue run rate. The company has $28 million in cash. The company has $64.3 million reserved for a lawsuit with Freedom Wireless, which is in the U.S. Court of Appeals. However, the company says that the cost of the suit could be more than the current judgment against it, which is $165 million.

The migration of large customers has really hurt. In both 2003 and 2004, the company's revenues were over $100 million and operating income in each year was around $25 million. Revenue for Q1 06 was $24.7 million, down 6% from the immediately previous quarter and the Q1 05 number. The company had an operating loss of $755,000. During the quarter the company lost 340,000 subscribers, taking its total down to 3.75 million.

The company guided downward for revenue in Q2 06 because Verizon and Cingular are still in the process of moving their business. Sprint is becoming a larger customer for Boston Communications and this could help offset the loss of business from the other large clients.

Unfortunately, the fact of the matter is, if the ruling against the company in the Freedom Wireless patent suit is upheld, the Sprint business won't be enough to save the company.

BCGI 1-yr chart:

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at [e-mail].