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SignalSoft: Keeping Tabs on the Consumer

Very soon, your cell phone will know where you are - anytime, anywhere. This does sound kind of scary, like a Big Brother nightmare. But, of course, there are benefits. First of all, in an emergency, an ambulance or police car will know where to find you. Or, suppose you need to get a cab or find the nearest gas station. It will be at your fingertips.

A company called SignalSoft is a leader in the location mobile industry. It is a recent IPO and yes, has undergone extreme volatility (the company raised $79 million in its offering in August 2000). The 52-week range is 8 11/16 - 50 7/8 and the market cap is $202 million. The current stock price is $8-5/8.

Actually, the company has a big lead in location-based 911 services. In fact, the FCC is mandating these types of services from wireless carriers. Unfortunately, this will not be a huge business for SignalSoft. Then again, it should lead to spin-off revenue streams - such as mobile commerce applications.

The company is early stage, but it is showing lots of traction. In the past quarter, revenues were $3.8 million, which was a 333% increase from the same period a year ago. But like other early-stage companies, SignalSoft is burning lots of cash. Last quarter, the company had a net loss of $2.5 million.

But expect the growth to accelerate. The company has been signing a myriad of key deals. AT&T Wireless has signed agreements for upgrade and expansion orders for SignalSoft's Location Manager and Wireless 911 products. There are also distribution deals with Siemens, Telcordia Technologies, Vodafone, Compaq, Lucent and SigmaOne Communications.

But the risk factors are large. There is a high concentration of revenues with a few customers. What's more, profitability is not expected until the middle of 2002. In light of this, the stock has taken a beating. But assuming the location-based services market does surge - which there is evidence supporting this case - then SignalSoft will be in an enviable position.