Smith Micro Software, Inc. (NASDAQ:SMSI)

SaintCroix (98.34) Submitted: 1/13/2011 4:26:50 PM

Recs: 1

A macro-trend going forward is this one: people are abandoning software for cloud computing. Buying software is so 20th century. It's buggy, it's do-it-yourself, it's upgrades, it's installation headaches, it's a distraction from your business. In a decade we will look back at the days when people bought software and installed it as some sort of weird prehistoric activity.

When you're talking about smart phones and people downloading apps off the internet, it's a huge hassle for the carrier to deal with all the connectivity issues. It's far easier to use a platform like Synchronoss Technology. I think Smith Micro smacked into the wall. What I suspect--and I don't know this, but it makes sense to me--that as Verizon has gotten deeper into smart phones from Google, and now Apple, that they really, really don't want to screw around with all the connectivity hassle.

In other words, they're increasing their relationship with Synchronoss. And it's bye bye Smith Micro.

Now, I'm a shareholder in SNCR, so I'm biased. But I think that negative 14% is a sign of somebody dumping hard. It's not a buying opportunity, but a warning sign. My two cents.

TheBlindCat (29.45) Submitted: 1/14/2011 1:32:17 AM

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Thanks for the insight. I'll investigate further.

TheBlindCat (29.45) Submitted: 1/14/2011 2:53:55 AM

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@SaintCroix - I would really like to hear more details on SNCR. I see how a recent acquisition gives them access to Verizon and they have a legitimate shot at boosting the use of their activation software.

My take is that Enterprise adoption of mobile devices (tablets and smart phones) is going to skyrocket and Smith's security and connectivity expertise will be in high demand.

I view any substantial dip as a buying opportunity (much as I did when NVDA dropped to 9 before blowing past 20, same for ARM which has jumped 50% since it was started at sell by analysts recently), I can wait a year or two for my thesis to pan out ;-)

SaintCroix (98.34) Submitted: 1/15/2011 12:44:33 AM

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I know cloud computing is the big buzzword now, but as a value proposition it's hard to beat. I just remember back in the day companies missing their earnings because they had some sort of installation nightmare with their software. It must be wonderful to skip all that.

Basically cloud computing is just a fancy way of saying "internet" all over again. I mean, I don't buy software anymore. I have software that comes with my computer (windows, word), but most of what I do, I do online. It's the difference between doing stock research at the Motley Fool and installing stock software on your computer. You can imagine the pain in the ass it would be to buy stock software and install it and then continually upgrade it. And even if you do all that religiously you are still going to be hopelessly behind the learning curve. Going online to a platform (where other people already are) is cheaper, faster, smarter. And that's cloud computing in a nutshell. You don't buy software. You don't install software. You get what you need online, when you need it.

Synchronoss is the enterprise version of this for carriers, OEMs, e-tailers. They have a platform, and as more and more people get on the platform, the networking effect kicks in. All your connectivity headaches go out the window.

Here is a guy from Google talking about all the issues they had with their Nexus smart phone. Rubin stated, “Google’s big problem with the Nexus One was one of scale. For each wireless operator it worked with, it had to do things like set people up with phone numbers, perform credit checks and more. The process was time consuming, and given that there are more than 150 carriers worldwide, it seemed like a better idea to focus on things like building newer versions of Android.”

The Synchronoss guys (I read this on their blog) go on to write: "Nexus One was Google’s entry into the space and it was evident early on, as Rubin pointed out, that the company did not consider the challenges associated with the orchestration of several back-end processes across a range of disparate systems. In addition to the front-end implications of device activation, customer service and support must also be addressed. As connected devices require multiple services providers, it is paramount that the company that owns the customer relationship has the capability to address technical issues from these disparate systems."

Mobility itself, and connectivity, will drive all the carriers to a platform option (Synchronoss) and away from software options (Smith Micro).

I read somewhere, I can't remember where, that in the future we may very well be buying minutes from a phone service provider, and we can take those minutes with us to any device. Wouldn't that be amazing? And you just can't do that with Smith Micro. You can't go from Verizon to AT&T to Google to Apple. You got software trying to connect with software trying to connect with software. It's a mess. But with Synchronoss, it's easy. It's a platform, and anybody can step on to it. (No installation required).

http://www.pcworld.com/businesscenter/article/200666/synchronoss_fusionone_buy_puts_spotlight_on_mobile_sync.html

http://online.barrons.com/article/SB50001424052970203427104575538511362496900.html

Of course, Smith Micro may have large revenue streams that don’t compete with Synchronoss at all right now. But as the Synchronoss platform gets stronger, I think it would be easier for Synchronoss to expand into their markets, and not vice versa. In the Barrons article it mentions Smith Micro offering a cloud product. Too late!