‘Smart-Phone’ Maker Dials for Big Dollars
Can a cool phone translate into cold, hard cash? NeoPoint Inc., a San Diego start-up, is about to find out.
The maker of wireless “smart phones” plans an initial public offering of its stock, tentatively set for the week of March 27.
Then-unknown NeoPoint burst on the scene in August with a sleek, silver-colored wireless phone packed with features and the ability to browse stripped-down Web sites using simple commands and a relatively large 11-line screen.
It was among the first consumer-friendly Web phones available in the U.S., and it helped fuel the frenzy over the potential for mobile Internet access. Sprint PCS Group, NeoPoint’s largest customer, launched sales of the phone last fall under a contract worth as much as $90 million.
NeoPoint has yet to set the proposed share price or other key details of its offering. But in preliminary paperwork filed with securities regulators in mid-January, NeoPoint said it will seek to raise as much as $75 million.
Analysts appear to be bullish on NeoPoint’s market debut because it comes after a string of successful stock offerings in the red-hot wireless industry.
Recent market hits include mobile network engineering firm Wireless Facilities Inc., software maker Phone.com Inc. and others targeting the mobile Internet market. Analysts expect an enthusiastic greeting on Wall Street for AT&T; Corp.’s wireless tracking stock, which could be one of the largest initial offerings ever by dollar volume.
NeoPoint, however, will be among the first to test the reception for new phone makers in an industry that has for years been dominated by global leaders Nokia Corp., Motorola Inc. and Ericsson.
The task is all the more daunting for NeoPoint since nearby wireless giant Qualcomm Inc. lost millions of dollars and bailed out of the mobile-phone-making business last year--even though it captured about 12% of the U.S. market for handsets in 1999.
“It’s going to be very tough for them to compete against the giants,” said Sylvia Panayi, an analyst for the Strategis Group. “NeoPoint was among the first with an Internet phone, but most of the other carriers have since come out with some very innovative phones that would do the same things, and they’re cheaper.”
IPO experts appear unfazed by the stiff competition NeoPoint faces.
“We think the market is going to absorb this stock very readily,” said David Menlow, president of IPOFinancial.com, a research firm in Millburn, N.J. “It doesn’t matter whether they are wireless software or wireless hardware. Wireless Tootsie Rolls would sell well right now.”
NeoPoint was founded in late 1997 by William Son, who helped launch the world’s first wireless network using Qualcomm’s code division multiple access technology as the company’s regional director in Korea.
NeoPoint has grown to more than 160 employees, with nearly 40% of the staff holding engineering degrees.
Still, the promising company has yet to make a profit and has collected the majority of its revenue from just one customer--Sprint PCS.
For the nine months ended Sept. 30, NeoPoint lost $15.5 million, compared with a loss of $4.8 million for the same period in 1998. Sales jumped to $23.6 million for the nine-month period, up from $232,000 a year earlier.
Sales to Sprint PCS accounted for 94% of the revenue booked through that 1999 period under a supply contract that expired Jan. 31. A new contract has not been signed, though Sprint PCS is still featuring the phone in stores and advertisements, and Sprint officials said they plan to make additional purchases from NeoPoint.
NeoPoint’s most visible product is its emerging line of high-end “smart” wireless phones, which allow users to retrieve text-only data from the Internet and also include a built-in organizer, calendar and other features that can be synchronized with similar functions on a PC.
The phones are being sold in this country by Sprint PCS and in Canada by Bell Mobility. AirTouch Cellular, a unit of Vodafone AirTouch, will soon begin selling a NeoPoint phone in its U.S. service areas.
The phones are manufactured by Korea’s LG InfoComm, which is a major shareholder and through a long-term agreement holds exclusive manufacturing rights for NeoPoint’s first three phones using CDMA technology.
NeoPoint also contracts with companies to provide systems engineering and consulting services and is creating its own wireless portal called MyAladdin.com.
MyAladdin.com, which has yet to launch, is described by NeoPoint as a wireless information service that will be available through a range of devices that work with the emerging wireless application protocol standard--including pagers, phones and personal digital assistants such as those made by Palm.
Using location-tracking and other technologies, NeoPoint’s MyAladdin.com will anticipate the needs of its users and send personalized information to the user’s device without the customer having to ask for it, the company said in its filing.
NeoPoint plans to license MyAladdin.com to wireless service and other consumer-oriented companies, as well as to banks and brokerage firms. The company said MyAladdin.com revenue will stem from subscription fees, user transaction fees and online advertising.
The service will compete against heavy hitters such as InfoSpace.com Inc., Phone.com and Amazon.com Inc., most of whom have already clinched customer-service deals with wireless service companies.
NeoPoint’s largest shareholders are Transpac Capital (31%), LG InfoComm (26%), and Siemens (19.7%), according to figures from Dec. 31. Son, NeoPoint’s founder, owns 10.7% of the stock.
NeoPoint plans to trade on Nasdaq under the symbol NEOI, and its underwriting team includes leader Merrill Lynch & Co. as well as Chase H&Q; Donaldson, Lufkin & Jenrette Securities; and U.S. Bancorp Piper Jaffray Inc.
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Times staff writer Elizabeth Douglass, who covers the telecom industry, can be reached at elizabeth.douglass@latimes.com.
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At a Glance
* Company: NeoPoint Inc.
* Headquarters: San Diego
* Founded: 1997
* Chairman/CEO: William Son
* Nine-month sales (through Sept. 30): $23.6 million
* Net loss (same period): $15.5 million
* Employees: More than 160
* Products: Web-browsing wireless phones, myAladdin.com mobile information service, contract systems engineering
* Customers: Sprint PCS, AirTouch Cellular, Canada’s Bell Mobility
