This one comes in on a “ChangeWave Rant” from Toby Smith — for the “Google of business software.”
Now before I get started, can I rant a little? I think we need some new benchmarks, if only to save the Gumshoe from boredom. Can someone please bring us the “next” something and NOT claim that it’s either the next Berkshire Hathaway or the next Google? Navellier did this a while ago, too, calling some little smiley-face-making company (MAIL, if memory serves) in Israel the next Google. It’s getting a little old … and hopefully, it’s building thick enough skins in our brains to prevent us from rushing out to buy the “next” whatever it is.
This particular company serves up software updates for other companies, essentially. Man, that sounds pretty boring for the “next Google” — but Smith tells us that this is an extremely scalable and automated process, which means margins climb as sales go up.
So it’s comparable to Google in that way, apparently, since Google is the ultimate scalable business (though they have some margin trouble on occasion, since they’re doing so much hiring to try to expand products and services, and to expand geographically).
This company does that strange stuff to your phone that updates the software for you or adds new services, and it’s paid by the phone company to do it. And according to Toby they do it at half the cost the company had to pay before, and with much better performance and more automation.
They’ve had 19 consecutive quarters of rising revenues and rising EPS.
WiMax, iPhone, cell phone companies, they serve them all. They’ve got 50 cents earnings per share now, will be $2 in a couple years.
Gross margins have improved from 19% to 55%.
This is one of the “easier doubles” they’ve ever seen at ChangeWave. So … what is it?
Well, a few minutes on “pulverize” in the Thinkolator and I think this one is almost certainly …
Synchronoss Technologies (SNCR)
This company has been around for quite some time, but I’ve never heard of them until now. They do handle essentially the “back office” kind of stuff for lots of telecom-y companies, primarily in wireless and VOIP. They do handle iPhone stuff for AT&T, as teased by Toby.
And, more importantly, the numbers match. Current PE is about 85, based on 50 cents in earnings (the share price is in the low $40s at the moment). Analysts are guessing that they’ll earn 94 cents next year, so the forward PE is about 45. Not bad for roughly 100% earnings growth, I suppose.
Their gross margin is somewhere near 55%, as teased — they had $31 million in sales and nearly $17 million in gross profit last quarter, so that matches. As does the 19 consecutive quarters of revenue and earnings growth, which I’ll agree is pretty impressive.
I’ll have to take Tobin’s word for it that their business is as scaleable as he says it is, though with the analysts projecting 100% earnings growth I assume they’re on more or less the same train of thought. I don’t know their business well, or know what kind of competition they have. And with seven analysts, this is definitely not a totally undiscovered gem … but aside from the fact that you’re buying growth and you better be confident that said growth will materialize, I don’t know of any bad news about the company.
The company has only been public on the Nasdaq since the summer of 2006, and is currently valued at around a billion bucks. The shares have been very volatile this summer, apparently moving with the iPhone news to some degree — they’ve traded between $25 and $40 for most of the last few months, with some big swings … and as you’ll note when you do your research, if you’re so inclined, right now they’re just a couple dollars short of their all-time high.
If you have an opinion to share about this “next Google”, I’m all ears. For full disclosure, I own both Berkshire Hathaway (and one of the “next” Berkshires, Markel) and Google, but don’t own any other stocks mentioned here.
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What makes Google so great is their ability to deliver relevant advertising next/inside search queries on the Net.
The “Next Google” is the Pipe Gatekeeper.
The Next Google will be able to analyze all content coming in and out of our “pipe”, from ALL devices, whether it is used actively or passively.
They will be able to deliver timely and relevant advertising across ALL Internet connected devices.
You and your readers have great investigative skills, I will let you figure out what company this is.
The next Google is google, from the clues above.
next google….not quite but MAIL is very promising
I feel the next Google is vmw.
Google can’t analyze content being delivered to your TV, or a GameBoy, or VoIP.
Think about the “pipe” that comes into your home, and the other PC that produces dynamic information for advertisers.
The next Google is software that can monitor your TV, Net, VoIP actions and deliver targeted ads. This software sits inside your set top box.
Your set top box is becoming the gatekeeper of all of your content and being able to analyze your TV (linear and nonlinear), Net and VoIP activity and deliver targeted ads will be the Next Google.
There is software that sits inside approx 75% of all set top boxes and is doing this in trials with the major cable cos.
Think of them as a Dynamic Digital Nielsen for every device connected to the Net.
p.s. Google invited them to their tech developer conference.
Open TV (OPTV)
I’ll give you a hint
My subscription has run out on ChangeWave but I have a note on my TCNet chart that Toby said to sell SNCR on 5/7/08, the day it dived 43.06%.