Savvian Wireless Newsletter Q108 Final
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WIRELESS DATA SERVICES SECTOR REPORT GCA SAVVIAN, LLC 150 CALIFORNIA STREET, SAN FRANCISCO, CA 94111 | www.gcasavvian.com |415.318.3600 MARKETMARKET HIGHLIGHTSHIGHLIGHTS Inside this issue The 1 st quarter of 2008 saw a number of important events in the mobile data sector, including results of the 700 MHz spectrum auction, company announcements around the CES, Mobile World Congress and CTIA tradeshows, Market Highlights Microsoft’s acquisition of Danger rumored at $500MM and $100MM private capital raises from Modu and SpinVox. Summary Performance In general, GCA Savvian’s wireless indices reflected the broader markets’ struggles in Q1: our wireless carrier index was off 31% while our mobile content and integrated wireless / wireline indices were in line with the Nasdaq, Observations down 13% and 10%, respectively; our infrastructure universe (up 3%) was the only index in positive territory. Trading Data The domino effect following Verizon’s announcement of a $99 per month unlimited calling plan contributed to stock Transaction Activity price declines for service providers as investors fear carriers have started down a slippery slope with respect to their longer-term pricing strategy and risk becoming simply raw bandwidth providers. GCA Savvian Update In Q1, we tracked 21 M&A transactions within our wireless universe representing $335MM in disclosed value and 59 private companies that raised $480MM in venture capital. SUMMARY PERFORMANCE AV / Revenue AV / EBITDA Price / EPS CY 08E CY 09E CY 08E CY 09E CY 08E CY 09E San Francisco Office Mobile Content 1.5x 1.2x 15.2x 9.6x 31.0x 15.0x Infrastructure Providers 1.9x 2.2x 15.1x 12.8x 16.5x 14.8x 150 California Street Wireless Carriers 1.9x 1.6x 5.0x 4.9x 23.9x 18.0x Integrated Wireless / Wireline Carriers 1.8x 1.8x 5.0x 4.7x 12.9x 12.8x San Francisco, CA 94111 *Median Multiples 125 Phone: (415) 318-3600 3% 100 (10%) New York Office (13%) (13%) 7 Times Square 75 New York, NY 10036 (31%) Phone: (212) 999-7090 Indexed Price 50 25 Chicago Office 1/01/08 1/11/08 1/25/08 2/08/08 2/21/08 3/05/08 3/18/08 3/31/08 71 S Wacker Drive Chicago, IL 60606 NASDAQ Composite Wireless Carriers Integrated Wireless / Wireline Infrastructure Providers Mobile Content Phone: (312) 212-8210 OBSERVATIONS Tokyo Office The completion of the 700 MHz spectrum auction and expiration of its associated quiet period restrictions on 11-1 Marunouchi 1-chome carrier communications generated interesting news flow near the end of the quarter: Chiyoda-ku, Tokyo − AT&T (who acknowledged opening up to Google’s Android platform) and Verizon were the big winners and intend to deliver 4G services over the newly acquired B- and C-Block spectrum utilizing LTE technology. 100-6230 Japan − Qualcomm spent >$500MM on 8 E-Block licenses to augment its MediaFLO network; stay tuned for adoption data Phone: +81-3-6212-7100 once AT&T launches this service next month with exclusive content from Sony Pictures Television and CNN. − EchoStar’s Dish Network was a surprise winner of E-Block spectrum, fueling speculation it also intends to offer broadcast mobile TV service, potentially leveraging SlingPlayer Mobile to differentiate the service. For further information, − Google acknowledged it had expected Verizon to outbid it for the C-Block and provided some insight into its bidding strategy that helped drive the spectrum price past the $4.6Bn hurdle that triggered the open applications and handsets please contact: license conditions it had lobbied for earlier in the process. Some general observations pointing to continued mobile data momentum: Jim Avery − iPhone developments : T-Mobile reported average Internet usage of 100MB by iPhone users (>30x its typical Managing Director consumer subscriber); Apple released the iPhone SDK to help drive enterprise adoption; Kleiner Perkins launched a $100MM “iFund” dedicated to investing in iPhone applications; look for a 3G iPhone to launch in the coming months. Phone: (415) 318-3660 − Pricing plans : Responding to Verizon Wireless’ announcement of unlimited voice calling for $99 per month, T-Mobile [email protected] threw in unlimited text, MMS and instant messaging for the same rate and Sprint further upped the ante by promoting unlimited voice and data for $99; continued movement toward flat rate plans bode well for mobile data growth. − Search : Yahoo! led Vlingo’s $20MM financing round and signed an exclusive licensing deal for the startup’s technology to differentiate its oneSearch offering by incorporating voice functionality to enhance its end user’s search Dick Filippini experience; Yahoo! is also opening up the oneSearch application to allow publishers to integrate relevant content, with Vice President a goal of providing “answers, not just Web links.” Phone: (415) 318-3688 − Gaming : Nokia finally launched its N-Gage Internet services platform for videogames, through which it intends to [email protected] differentiate its handsets by offering more rich graphics than games built on Java; N-Gage is also expected to drive mobile gaming growth by reducing the number of SKUs to which developers will need to port games. − Music : Nokia announced “Comes with Music,” a one year, unlimited music download service bundled with select phones for which it has initially partnered with Universal Music; Sony Ericsson announced PlayNow, a music portal with support from Sony BMG, EMI and Warner. WIRELESS UNIVERSE PERFORMANCE 10% 6% 5% 3% 1% (0%) 0% (1%) (4%) (3%) (10%) (6%) (7%) (10%) (13%) (13%) (20%) (30%) (31%) Last Month YTD 1 Year (40%) (43%) (50%) NASDAQ Composite Integrated Wireless / Wireless Carriers Infrastructure Mobile Content Wireline Providers Best Performers – Last Month Best Performers – 1 Quarter Best Performers – 1 Year Openwave 19% Opera Software 18% Verisign 32% THQ 17% Clearwire 8% NTELOS Holdings 26% NTELOS Holdings 14% Qualcomm 4% Opera Software 23% Opera Software 13% Sybase 1% Sybase 4% WIRELESS COMPARABLE COMPANY UNIVERSE $MM, Except Per Share Data Stock LTM EPS Price Price Range Equity Cash & Net Aggregate AV / Revenue AV / EBITDA Price / EPS Long Term Revenue Growth 3/31/08 Low High Value Equiv. Debt Value CY 08E CY 09E CY 08E CY 09E CY 08E CY 09E Growth PEG 09E/08E Y/Y MRQ Mobile Content Electronic Arts Inc. $49.92 $43.62 $61.62 $15,814 $3,420 ($3,420) $12,394 2.9 x 2.5 x 19.1 x 14.1 x 31.7 x 22.6 x 19.0% 1.2 13.7% 17.3% THQ Inc. 21.80 16.36 36.76 1,450 325 (325) 1,125 1.0 0.9 15.2 8.8 23.2 15.0 17.6% 0.9 9.9% 7.1% RealNetworks Inc. 5.73 5.07 8.76 816 557 (443) 373 0.6 0.5 5.5 4.9 NM NM 22.7% NM 11.0% 24.9% GameLoft 4.34 3.76 10.54 317 28 (27) 289 1.5 1.2 14.6 9.6 31.0 14.5 3.5% 4.1 22.0% NA Glu Mobile Inc. 4.49 3.75 14.80 409 60 (60) 349 3.7 3.0 85.9 29.7 NM NM 25.0% NM 24.1% 26.8% Mean 1.9NM x 1.6NM x 28.1NM x 13.4NM x 28.7NM x 17.4NM x 17.6%NM NM2.1 16.1%NM 19.1% Median 1.5NM 1.2NM 15.2NM 9.6NM 31.0NM 15.0NM 19.0%NM NM1.2 13.7%NM 21.1% Infrastructure Providers QUALCOMM Inc. $41.00 $35.17 $47.72 $66,104 $7,068 ($7,068) $59,036 5.8 x 5.3 x 15.1 x 13.5 x 19.1 x 17.3 x 19.0% 0.9 10.1% 20.9% Amdocs Ltd. 28.36 27.18 40.36 5,903 1,167 (715) 5,188 1.6 1.5 7.2 6.5 11.7 10.4 13.4% 0.8 10.5% 7.4% VeriSign Inc. 33.24 24.71 41.96 7,093 1,378 (112) 6,981 7.5 6.3 15.9 12.8 31.7 20.5 15.4% 1.3 18.9% (5.4%) Comverse Technology Inc. 15.40 13.42 28.95 3,111 2,325 (1,809) 1,302 0.6 0.6 3.6 NA 12.8 10.6 21.7% 0.5 11.0% 21.8% Sybase Inc. 26.30 21.80 28.70 2,345 698 (238) 2,107 1.9 1.8 6.5 6.1 13.9 12.3 11.0% 1.1 6.7% 15.1% Openwave Systems Inc. 2.45 1.20 10.58 204 232 (82) 122 0.5 NA 17.0 NA NM NA 15.0% NA NA (16.5%) Opera Software ASA 3.11 1.88 3.21 372 85 (85) 287 3.4 2.6 29.2 15.1 44.4 25.9 NA NA 32.1% NA Mean 3.0 x 3.0 x 13.5 x 10.8 x 22.3 x 16.2 x 15.9% 0.9 14.9% 7.2% Median 1.9 2.2 15.1 12.8 16.5 14.8 15.2% 0.9 10.7% 11.3% Wireless Carriers Sprint Nextel Corp. $6.69 $5.48 $23.42 $18,559 $2,246 $19,884 $38,443 1.0 x 1.1 x 4.8 x 4.9 x 40.1 x 47.3 x 8.1% 5.9 (2.8%) (5.7%) MetroPCS Communications Inc. 17.00 13.68 40.87 5,918 1,470 1,557 7,476 2.6 2.0 9.5 7.1 31.9 22.4 39.1% 0.6 32.0% 30.5% U.S.