Rings Up Revenues

Last summer I wrote about the prospects for , the company
that makes software allowing wireless telephones to connect to the Internet.

Back then I observed that “investor enthusiasm for is premature”
because the wireless market was nascent and formidable competitors lurked in
the mists. I also wrote that PHCM “may be the most overvalued of all
Internet stocks,” trading back then at up to 2,000 times trailing 12 months’

Things are a little less premature now. After years of delays and empty
promises, wireless Internet connectivity is beginning to reach the mass

And PHCM is forecasting higher-than-expected Q4 revenues and says it expects
to become profitable by December of next year, or six months ahead of the
original projection of profitability by June 2002. officials also said annual revenues could reach $170 million, well
above their previous estimate of $140 million to $145 million. This compares
to the $13.4 million in revenues for the fiscal year ended in June 1999, and
$2.2 million for the FY ended in June 1998.

If PHCM hits its revised sales estimate, it would carry a valuation of 35x
TTM revenues; not a bargain, but considerably less expensive than it was
nine months ago. has been rapidly building its user base, which soared to 2 million
by the end of March from 700,000 through last year and 280,000 through
September 1999. You can’t expect the company to nearly triple its user base
each quarter, but if it did, would have about 50 million users by
the end of 2000. Even half that would be impressive.

PHCM also has cut deals with companies such as Sprint, whose PCS division
sells wireless phones featuring’s software.

Of course, aggressively courting customers is an expensive business for an
Internet company, and PHCM saw Q3 losses more than double to $1.05 per share
from 50 cents per share in the year-ago period.

Those losses include costs for amortization of goodwill and
acquisition-related deferral of stock compensation. Exclude those, and the
net loss in Q3 was only 8 cents per share. appears to be coming off a bottom, having closed at 61 < on May 10. If you are bullish on wireless Internet, this is a company to seriously consider adding to your portfolio.

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