freakyguy666

Smith Micro: Profit from a Fallen Wall Street Story

Interesting that you failed to mention arguably their most exciting division: Device Solutions Group. This division is focused solely on marketing products to the HANDSET MANUFACTURERS. Products include Mobile Device Management (acquired from Insiginia--allows over-the-air updating of firmware without having to physically take the handset to the carrier), IMS (acquired from PCTel), and StuffitWireless (compression of the handset resources by up to 70% allowing the OEMs to fit more data on the handset without increasing the amount of flash memory). The potential here is higher than any of the other divisions simply due to the fact that, if successful, the software would be sold on a per unit basis and included on the handset itself. Given over 1.1 Billion handsets are sold per year, it is not hard to see how quickly revenues (and indeed earnings, as this is virtually a 100% gross margin product) could explode. Again, why you would choose to ignore this is strange...

Also, it is worth noting that although SMSI will have to pay a higher tax rate in 2008, it is unlikely that it will be higher than 25-30% given the options expenses. So a reasonable guess would be 28%, which should increase your EPS estimates.