Smith Micro Software Inc. still is one of OC’s best turnaround stories.
Just two years ago the Aliso Viejo-based company was mired in red ink and ranked No. 49 out of 50 on this list.
This year, Smith Micro held its ground among the top 10 and rose a spot to No. 7.
The company, which makes software that connects laptops to wireless networks hosted by cellular services providers, reported three-year growth of 648% with sales of $65 million for the year ended June 30.
The company sells to wireless carriers, which integrate Smith Micro’s software into their mobile devices and services.
It has Verizon Wireless, a unit of New York’s Verizon Communications Inc., to thank for its rapid ascent.
In 2004, Smith Micro landed a contract with Verizon to link its cell phone to citywide wireless networks.
Following that, Verizon later tapped Smith Micro for software to run its V-Cast music service.
The offering is like a mobile iTunes that allows users to buy songs on the go and have them downloaded to their phones.
Earlier this year, Smith Micro landed a similar contract with Sprint Nextel Corp. to make and service the software that runs Sprint’s version of a mobile music store.
Shopping Spree
This year, Smith Micro’s gone on a shopping spree,snatching up smaller companies to add to its portfolio.
In January, the company bought Washington, D.C.-based Ecutel Systems Inc., which makes software that provides security and authentication for wireless networks.
Ecutel was folded into Smith Micro’s connectivity and security group, which does about $6 million in sales a quarter, Smith said.
In February, Smith Micro scooped up Spain’s Insignia Solutions PLC, which makes software that updates wireless devices remotely.
As part of the deal, Smith Micro got about 30 new customers,mostly wireless carriers in Europe and Asia.
In July, it bought Australia’s BusineSMS Software, which makes software that allows people to send photos, songs and videos from their computers to their mobile phones.
The company also makes software development kits that allow programmers to add messaging and other features to Web sites.
Analysts are looking for Smith Micro to increase its sales to about $100 million by the end of next year.
Industry watchers say one of its most promising offerings is “Quicklink Media Mobile,” which converts files into formats that can be viewed on handheld devices with Microsoft Corp. software, such as portable music players, personal digital assistants and other gadgets.
The software can make a Windows-based handheld device have the same capabilities as Apple Inc.’s iPhone, according to Anton Wahlman, an analyst with ThinkEquity Partners LLC in San Francisco.
Smith Micro wasn’t always a rising star.
Founded in 1983, the company has its origins in making fax software. It saw growth during the tech boom years in the 1990s, when its software helped modems communicate with computers.
Smith Micro was nearly wiped out a few years later with the rise of Microsoft’s all-encompassing operating system. Computer makers had no reason to go to another software maker.
Bad Bets
Toward the end of the decade, Smith Micro made some bad bets on the Internet economy.
By 2003, the company sold wireless software exclusively, reworking its old modem software for laptops, phones and other wireless networking gear.
Smith Micro’s biggest challenge now is diversifying its customers, industry watchers say.
Verizon makes up more than 60% of sales, which worries some investors.
Still, that’s down from 75% a year ago.
The company’s recent buys are expected to go a ways toward diversification, according to Chief Executive William Smith.
THE NUMBERS
Three-year growth: 648%
Yearly sales through June 30: $65.1 million
Yearly profit: $8 million
Market value: $430 million
Employees: 205, 85 in OC
Company: wireless software
