“WiMax — the Quadruple Play”

By Travis Johnson, Stock Gumshoe, April 8, 2007

This is one I’ve been coming back to for a little while because I didn’t get a quick and easy answer … but I’ve finally got it.

The ad came from Louis Navellier’s Emerging Growth Newsletter, and it proclaimed that he could provide the name of the company that was enabling the quadruple play, which he called the “triple play — only better!” for wireless connectivity.

The news was even connected to a trade show — CTIA, as Navellier writes: “And this week, Emerging Growth’s top Wi-Max recommendation is wowing tens of thousands at the big CTIA WIRELESS 2007 trade show in Orlando. The buzz from Orlando is that our Wi-Max company is the key to what is being called The Quadruple Play!”

And then it gets a bit poetic — claiming that this company weaves the “golden thread” that stitches the wireless world together.

What else are we told about this company?

“A new Verizon contract it recently won will provide CITY-WIDE hot spots all over the country. This is a ten-year license to PRINT MONEY and it hasn’t been factored into the stock price!”

They provide the connectivity for Sprint’s new cell phone 99 cent music service — or at least, they sell the device that lets you download music from your computer to a cell phone. That has nothing to do with WiMax, but it’s a nice little clue.

Some info on the stock price: “In the last year, the company’s cash flow soared 499%. Sales rose a staggering 169%. Following last quarter’s earnings, the stock jumped 42%.”

And “This amazing stock is up 3,000% in four years.”

And finally, it’s still run by the husband and wife team that founded it (as an aside, it turns out that there are a huge number of husband and wife teams in the tech space in general — I came up with quite few red herrings before I found this one). In Navellier’s words, “it’s still run by the original rain-makers. The husband-and-wife team that created this company still own it. We love that—the vision, the original innovative spirit, still drives this company.”

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So what’s the company that’s going to be the behind-the-scenes enabler of the WiMax revolution, according to Navellier?

Well finally, after several days in the cognitationizer machine, the Stock Gumshoe can tell you that this company is …

Smith Micro Software (SMSI)

This small Aliso Viejo, CA firm is a communication software company, as you may have guessed, and they sell all kinds of different software products that might be relevant to WiMax rollout — from security software for consumers to the Stuffit compression software to their QuickLink Mobile connection manager for wireless equipment manufacturers.

They do sell software for both VCAST from Verizon and the Sprint phone music service which enables cell phone to computer connections, and they announced the QuickLink Media service at CTIA which is supposed to streamline multimedia access on cell phones. I have no idea how well (or even if) any of this stuff works, or if it will indeed be the golden thread Navellier waxes poetic about. I also don’t know what the “buzz” as at CTIA, or if that’s just exaggeration.

But I do know that this is the company being teased here. The numbers match exactly, too — the revenue of $54.5 million in 2006 was indeed 169% above 2005’s number. And cash flow from operations of 14.8 million really was up 499% from 2005’s $2.5 million. The share price remains close to the “up 42%” level Navellier cited that it climbed to following the earnings release at the end of February.

And after taking an incredible beating in the tech meltdown, and hitting a low of about fifty cents almost exactly four years ago, the shares indeed have staged a remarkable recovery of roughly 3,000%. But that’s certainly picking the absolute bottom for your comparison.

Smith Micro was founded by a (formerly) husband and wife couple, Rhonda and William Smith. William Smith is still an officer in the company, though the website doesn’t have any recent mention of Rhonda and they are no longer married. The two of them together own about 4.5 million shares still either directly or in various trusts (that’s between 10-15% of the company, I didn’t do the math). Rhonda Smith’s two kids also work for the company, though I believe she officially resigned in 2004. Technically, it’s still run by some of the original rainmakers, but not all, though it is, as Navellier said, still owned by the couple.

The company has no debt, about three bucks a share in cash, and decent margins to go along with a good growth rate make the high trailing PE in the 50s more palatable … and the forward PE is estimated at a more reasonable 19. I don’t know much about their business mix or the success of their products, other than the fact that a huge percentage of their sales come from Verizon contracts.

And from here you’re on your own — whether or not Navellier’s WiMax Quadruple Play company is a good buy is for you to decide … but at least, thanks to your friendly Stock Gumshoe, you know the name of the company to research. Let me know if you find out anything else about them that piques your interest. This goes in the spreadsheet with a price of $19.32 on March 27th, the date of the oldest email I’ve got from Navellier touting the company.

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Navalier’s funds own a bunch of SMSI and have for a while. Either a recommendation, because he’s invested OPM in it or a Conflict of Interest, b/c he wants to get the price driven up to benefit his fund holders.???


Farmer John, AOD is terrific. Management specializes in the “dividend capture” technique, and that’s a good, systematic way to get superior dividend returns. Only big downside I see to AOD now is that it’s trading at a large premium to NAV. According to http://www.cefa.com, AOD’s NAV as of 15-Jan-2010 is $7.21, so it’s currently trading at a premium over 25% above NAV. Just a red flag, not something to panic over. Some closed-end funds trade at a NAV premium “forever”, others at a discount forever. But most eventually do both, so I certainly prefer to buy more when it’s trading… Read More »

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Amazing! Louis is selling it again as a ten-bagger, but rates it himself as just a “C”. SMSI posts earnings tomorrow, so we’ll see if the stock jumps. You guys are real sleuths – took me 2 hours to get here! Keep it up.

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John Mattingly,farmer John
John Mattingly,farmer John

Thanks for the helpful thoughts.
With the dividend, though, now at .12 a share (was .18 when I bought) in a year or so, would you consider it to have made up the premium?


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looks like louis is selling it