Without question Smith Micro Software, Inc. (NASDAQ: SMSI), a leading provider of wireless and mobility solutions, has had a rough go of it as of late having seen revenue for the three-month period ending September 30, 2011 fall to $12.6 million, a nearly 63% decline from the $34.0 million reported during the same three-month period in 2010. Unfortunately for SMSI the slide has been getting steeper rather than flattening out as evidenced by the revenue generated during the nine-month period ending September 30, 2011, $46.5 million, compared to $95.2 million during the same nine-month period in 2010, a 51.1% drop.
Now not all is bad news for SMSI as shares in the company that provides software solutions that simplify, secure and enhance the mobile experience and include in their portfolio of products and services Connectivity Management and Communications solutions, have been climbing. After sinking to a low of 1.14 last week SMSI has managed to hit a high of 1.65 on Monday and trading volume topped 1.7 million by mid-afternoon.
The spike has come following news that Sprint had selected SMSI’s “Mobile Network Director™ to provide traffic management between networks (3G/4G /WiFi) while maintaining a high-quality experience for its subscribers.” According to the press release “The precise, intelligent device controls provided by the solution can selectively manage data traffic in targeted locations during peak traffic periods. Mobile Network Director provides Sprint the ability to adjust network selection on subscribers’ devices as they move between coverage areas, enabling automated and seamless transitions between networks. Battery life on devices is increased since Mobile Network Director can turn on and off device radios as needed.”
Fared Adib, Sprint Vice President of Product Development, addressed the importance of SMSI’s Mobile Network Director as it relates to Sprint’s commitment to offering unlimited data plans to customers, saying “Our relationship with Smith Micro Software is instrumental in the execution of that strategy, helping us to optimize our network resources while ensuring the best possible user experience. We’re looking forward to rolling out Mobile Network Director.”
SMSI has struggled to slow the decline in their base connection management business, an issue brought on by, as described in their most recent quarterly filing, “the introduction and market acceptance of mobile hotspot devices, tablets and smartphones capable of functioning as a WWAN hotspot.” As a result the company’s “core connection management products are experiencing lower demand in our North American marketplace. While we have launched new wireless products that address this technology shift, they are new to the market and have not yet been adopted and thus there is a material uncertainty regarding our future wireless revenues.” The most recent deal with Sprint could play a significant role in steadying SMSI’s ship.
Steadying the ship doesn’t mean recouping everything and it will likely be some time, if ever, before SMSI sees share prices reach the 16.76 mark they hit last January but there are plenty of reasons to believe the company may be a bit undervalued at present.
As bad as their financial results have been over the past year SMSI has no debt. In addition to carrying no debt SMSI still holds patents as well as other assets that could still prove valuable and the company has stepped up and shown investors that they are willing to put their money where their mouth is, having announced on November 2, 2011 they had a share repurchase program of up to 5 million shares, approximately 14% of shares outstanding.
While SMSI is well below where shareholders would like to see them the reality is investors may find that the current level at which shares are trading is a perfect opportunity to get it. If SMSI can stop the bleeding in their wireless revenues and find some stability investors could be rewarded nicely as their new technology finds greater acceptance within the market.