Knobias ClipReport (7-13-2007)

Submitted from Knobias ClipReport

Retail sales numbers put the market on its back and carried the Dow to a gain of over 290 points in the face of what some technicians were labeling a variation of the dreaded triple top. Wal-Mart’s same store sales and the merger and acquisition news of Rio Tinto’s $38 billion offer for Alcan, Inc. were the main drivers for the day. The only sector lagging seemed to be the airlines but the day saw the highest gain of the year and reached all time highs.

In other news, just when you thought the iPhone’s luster was wearing off, a rumor began to surface that Apple was planning on releasing a smaller version of the iPhone similar to what the Nano iPod is to the regular size iPod.

The handset mania may never end and with that in mind, one name that has a fairly decent product could begin to gain some attention over the next few weeks.

Mobility Electronics Inc (MOBE) designs, develops, manufactures and distributes power products for high-power mobile electronic devices, power products for low-power mobile electronic devices and MP3 players; connectivity products; expansion products; and docking and accessory products.

The Company’s universal power products for high power mobile electronic devices include laptops and portable computers. Their universal power adaptors for low-power mobile electronic devices include mobile phones, PDAs, MP3 players and digital cameras.

The Company had an agreement in place to supply Dell with its high power adapters. That contract has since expired and the Company also expects the contract with Lenovo to expire during the third quarter of 2007.

Even with two of the Company’s largest customers using other suppliers, the Company’s earnings guidance is still not as bad as one would think. In early May, the Company reported revenue excluding revenue related to business lines divested during and subsequent to the end of the first quarter of 2007 (Handheld and Expansion/Docking) of $17.5 million in the first quarter of 2007, compared with $16.7 million in the first quarter of 2006. This also compares with revenue of $16.2 million in the fourth quarter of 2006, excluding revenues related to the divested businesses. Non-Gaap net loss excluding the divested business was $600,000, or ($0.02) per diluted share, in the first quarter of 2007, compared with a net loss of $1.5 million, or ($0.05) per diluted share, in the same quarter of the prior year.

Charlie Mollo, President and Chief Executive Officer, commented in the earnings press release, "Our first quarter revenues reflect increasing sales to Targus and RadioShack, as these two customers return to more normalized ordering patterns, and the initial sales to our new distributors in the wireless carrier market. Most significantly, we secured a national roll-out for our low-power adapters with a major wireless carrier following the completion of a trial program that was initiated last year. With this planned roll-out and a trial program already in place with another major wireless carrier, we are making excellent progress in expanding the distribution for our products and diversifying our customer base."

In mid June, the Company announced that one of the largest wireless carriers in the US was now carrying the Company’s universal charger for mobile electronic devices. It was noted that the chargers would be available in 102 retail stores and kiosks throughout the country.

While 102 stores isn’t many, the device provides unparalleled convenience and functionality to consumers by enabling one charger to power/charge hundreds of brands and thousands of models of ME devices (cell phones, PDAs, smartphones, digital cameras, portable computers, etc.) through the use of interchangeable tips.

The product line, named iGo, includes an auto charger, a wall charger, a power splitter and a variety of interchangeable power tips that that can be utilized on any iGo product.

The universal power cords make too much sense in all reality, which could be the reason they’re only available in 102 retail outlets and not tens of thousands which would have happened if they’d enacted a deal with a top 4 carrier. Carrier’s make a nice profit on selling car and home chargers when customers upgrade their handsets. The exclusive chargers will normally range in the $30 range and easily add top line revenue to the carriers’ income statements. The loss of that revenue is not something the carriers would likely be willing to let happen even though each of their customers would most likely buy the product, but would only have to buy it once.

The Company does seem optimistic about the future of the product and its guidance displays the fact. In the first quarter earnings statement, the Company noted expectations for the second quarter of excluding any revenue or expenses from divested businesses, the Company believes that total revenue will range from $16.0 million to $17.0 million, and fully diluted loss per share (excluding charges related to non-cash equity compensation and CEO retirement severance) will range from ($0.04) to ($0.05).

With the loss of Dell and Lenovo, the Company is expecting to replace the revenue from those contracts with additional iGo sales but with only 20% of total revenue derived from the product line in the first quarter, the sales jump would certainly have to be fairly large. If the Company can succeed in this area and possibly add some larger retailers besides Radio Shack, the name could become one to follow in these handset mania days. Investors would be wise to watch.


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