Knobias ClipReport (7-2-2007)

Submitted from Knobias ClipReport

Friday’s action was dominated with news regarding hand held devices. The session, termed ‘Device Day’ by many saw the introduction of Apple’s iPhone and Research in Motion’s superb earnings release. Both stocks performed well while Palm Inc.’s Treo was the loser.

RIMM noted Thursday that its fiscal first-quarter earnings grew 73% due to increased sales and subscriber additions. The Company also announced a 3 for 1 stock split while rival Palm reported a 43% plunge in fiscal fourth-quarter profit amid sharply rising costs.

The new entrant has some worried, namely Palm, but they’ve noted that they won’t dwell on Apple iPhone sales figures. Reasearch in Motion’s Blackberry is more of a corporate device rather than a consumer product and is available in a multitude of countries under many carriers. The iPhone will only be available in the U.S. for now and has a 5 year exclusive agreement with AT&T. It will certainly allow for the carrier to take customers from others, but Blackberry users aren’t expected to switch to the iPhone at a rate as high as other smartphone users.

The initial response from consumers could be to raise awareness of music capable phones. The awareness will evolve into other phone makers developing music solutions for wireless handsets.

The real winner from the introduction of the iPhone could be a different company all together. Smith Micro Software, Incorporated (SMSI) is a developer of innovative communications software for the wireless industry. Their leading-edge mobility products simplify communications access over both Wireless Wide Area Networks (WWANs) and Wireless Local Area Networks (WLANs), and their compression technologies such as StuffIt have been established as industry standards.

One of the Company’s main products is software that sounds familiar to anyone who has ever heard of the iPod. The Music Essentials program allows people to download music from the Internet onto their PCs and then zip those tunes over to a handheld device. The difference is that the device is a phone and not an iPod.

The Company already has a deal with Verizon Wireless with the company being the first to release phones with SMSI software. Following that deal in November, the Music Essentials product became the largest for SMSI.

The Company has a multitude of analysts covering the name with 8 having a buy or strong buy rating. The latest, JP Morgan, noted that the iPhone would spur Verizon and Sprint to release competitive phones and ramp up orders for the Company’s media solutions.

With the huge amount of attention the iPhone has received, other carriers are expected to release more phones with the music playing capability in the second half of the year. With that in mind following the Company’s second earnings in the latter part of July, the Company could become a name to follow with the product offering of cellular makers expanding. Investors would be wise to watch.


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