Smith Micro Shares Hit Stratosphere, Then Settle
Apparently swept up in market demand for all things Linux, Smith Micro Software Inc. shares continued to rocket Friday, more than doubling before settling back down to $6.50 a share, a 12% increase.
“I have to look at a collection of items” to explain the surge in price, said William Smith, the company’s president.
He pointed to the Aliso Viejo company’s entry in the electronic-commerce arena in September, the launch of its Linux product in November and its strong position in the Macintosh segment.
“All three of these areas are very hot right now,” Smith said. “We were at $1.62 [per share] before all of this happened, and clearly the market pays more than that for companies in these areas.”
The second day of the trading frenzy sent the stock to its 52-week high of $11.75 a share during the day, before closing with a gain of 69 cents. The stock had been in the doldrums for months, closing Wednesday at $1.75.
More than 8.3 million shares traded hands Friday, a bit lower than Thursday’s volume of 9.4 million shares. Its three-month average daily volume before then was less than 80,000 shares.
According to various investor-chat room postings, day traders were looking at Smith Micro for its connection with VA Linux Systems Inc. Smith Micro offers its Internet commerce software, WebCatalog, in versions for Linux, Sun Solaris and Mac OS X versions of Unix.
The software previously was available on WindowsNT and Macintosh operating systems. Linux, which can be used as an alternative to Microsoft Corp.’s WindowsNT operating system and is distributed free over the Internet, has been a hot commodity in the market lately.
On Thursday, Linux posted the best-ever first-day gain for an initial public offering when it closed in regular trading at $250 a share, compared with its $30 offering price. The Sunnyvale company makes systems and software designed around the Linux operating system.
Smith wouldn’t attribute the increase in his company’s stock solely to its Linux product or the Internet chatter, saying of the postings, “I try not to pay too much attention to those.”
Day traders posted copies of Smith Micro’s Nov. 10 press release at chat room sites to show the company’s commitment to Linux product. Ironically, when the announcement was made a month ago, Smith Micro shares blipped up 36% to $2, only to give back much of their gain the following day.
Smith would not disclose what percentage of the company’s revenue is derived from its electronic commerce software. The company, which also sells fax and communications software, lost $5 million in the first nine months this year on revenue of $7.9 million.
Smith, who with his wife owns about 60% of the company, said he did not sell any stock Thursday or Friday.
