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SMITH MICRO ANNOUNCES 1999 FOURTH QUARTER AND YEAR END RESULTS

Feb 08, 2000
New Chief Financial Officer Appointed

Aliso Viejo, CA -- Smith Micro Software, Inc. (Nasdaq: SMSI), a developer and marketer of software for the eCommerce, Internet and Macintosh markets, today announced net revenues of $2.5 million for the fourth quarter ended December 31, 1999, compared with net revenues of $2.7 million for the fourth quarter ended December 31, 1998.

Smith Micro recorded a net loss for the 1999 fourth quarter of $980,000, or a loss of $0.06 per share, compared with a net loss of $679,000, or a loss of $0.05 per share, for the 1998 fourth quarter.

At December 31, 1999, the company had no long-term debt, cash of approximately $8.7 million and working capital of $10.9 million.

"We are pleased with the progress we made in the fourth quarter, due in part to our focus on the eCommerce market. Although the company's results declined slightly from the year ago quarter, we realized improvement from the third quarter of 1999. This is an important measure for us, as our results in the fourth quarter of 1998 did not take into account our expanded emphasis on the eCommerce, Internet and Macintosh markets," said William W. Smith, Jr., President and Chief Executive Officer of Smith Micro. "In the fourth quarter of 1999, the company reported a more than 33% gain in net revenues from the third quarter of 1999, which we attribute to increases in each of the company's eCommerce, Internet communications and Macintosh product lines. Revenue from our retail product lines, and sales of our legacy Windows fax product to modem manufactures, remained relatively constant in the 1999 fourth quarter when compared to the 1999 third quarter."

Mr. Smith continued, "We also reported a smaller loss in the fourth quarter of 1999, compared to the third quarter of 1999, as net revenues and gross margins increased while we significantly reduced expense levels.

"During the quarter we continued to integrate Pacific Coast Software into our Internet Solutions Division and should be able to gain leverage from the combination. For example, we plan to apply our existing Internet telephony and teleconferencing technology to enhance the eCommerce sites that we help develop," said Mr. Smith.

"eCommerce products and services are now beginning to make a nice contribution to Smith Micro's overall results, and we except these markets to become very substantial contributors to the company by the end of 2000. New business bookings in our Internet Solutions Division have grown significantly since we acquired Pacific Coast and committed resources to grow our eCommerce business," said Mr. Smith.

1999 Results

In 1999, Smith Micro reported net revenues of $10.7 million, compared with net revenues of $10.2 million in 1998. The company recorded a net loss of $6.1 million, or a loss of $0.40 per share, in 1999, compared with a net loss of $1.9 million, or a loss of $0.13 per share, in 1998. 1999 results included the one-time, non-cash tax charge of $1.2 million, or $0.08 per share, related to the company's decision to increase the valuation allowance for deferred tax assets.

Although Smith Micro experienced a 30% decline in its analog modem legacy business during 1999, the decline was offset by revenue increases from the company's retail, Macintosh and eCommerce products, resulting in a 5% overall increase in revenues for the year.

"1999 was a year of transformation, as we moved from being primarily a manufacturer of modem software to a provider of software to the eCommerce, Mac and Internet markets," commented Mr. Smith. "We believe these are the most promising segments of our business in terms of their growth potential.

"We are aggressively recruiting new talent to drive our eCommerce business to higher levels, especially in the area of consulting. On-line retailers are continually adding new products and features to their websites to increase their sites' appeal, and this offers us exciting opportunities for revenue growth," said Mr. Smith. "Another potential area for expansion is in providing hosting services for eCommerce websites built with our WebCatalog Builder retail product. We hope to capture a significant percent of these sites."

"To round out our diversification efforts, there are several initiatives underway to support our Mac and other Internet product and service offerings. We plan the addition of new products in both areas, expanding on our current conexs.com product line," said Mr. Smith. "We also plan to expand our presence in several new markets, including the wireless market, which we feel provides the company with a strong growth opportunity. Our technology fits quite nicely with helping promote the connection of hand held cellular devices to mobile computers.

"Moving into the current century, our eye is on emerging technologies and trends that relate to our overall vision of providing cutting-edge, high-quality products and services to businesses and consumers. We will develop new products, enhance current ones and work diligently to bring greater value to our customers and shareholders," said Mr. Smith.

Appointment of New Chief Financial Officer

Separately, Smith Micro today announced that Richard C. Bjorkman has been appointed to the position of Vice President - Finance and Chief Financial Officer. Mr. Bjorkman, 50, replaces Mark Nelson who left the company for health-related reasons.

Before joining Smith Micro, Mr. Bjorkman was the Vice President - Finance for Zland.com, a company that offers business software solutions to help companies automate business processes via the Internet. Prior to Zland.com, Mr. Bjorkman was Vice President - Finance for Contain-A-Way, the largest "convenience zone" beverage container recycler in California. Mr. Bjorkman has also held financial positions with Iovision, Inc., where he was the company's Chief Financial Officer, and Libbey-Owens-Ford, where he was Controller - U.S. Retail Operations. Mr. Bjorkman earned his Bachelor of Science degree at California State University, Long Beach and attended the Management Policy Institute at the USC Graduate School of Business. Mr. Bjorkman is a CPA.

"We are so sorry to lose Mark, but understand that in the wake of his health problems he wishes to spend as much time as possible managing his health and with his family. Everyone at Smith Micro wishes Mark well and extends our appreciation for his great contribution to the company," said Mr. Smith.

"At the same time, we are happy to welcome Rich to the company. He brings a wealth of financial and senior level management experience to Smith Micro, including demonstrated effectiveness in reducing costs, improving productivity and enhancing bottom line results."

Smith Micro will be holding an investor conference call to discuss the company's financial and operational results at 4:30 p.m. EDT on February 8, 2000. Investors will have the opportunity to listen to the conference call over the Internet through Vcall at http://www.vcall.com. To listen to the live call, please go to the web site at least fifteen minutes early to register, download, and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call.

About Smith Micro Software

Smith Micro Software, headquartered in Aliso Viejo, CA, is a leading developer and marketer of eCommerce and communication software products and services. The company designs integrated, cross platform, easy-to-use software for personal computing and business solutions around the world. With a focus on the Internet and broadband technologies, products enable eCommerce, Internet communications (voice-over-IP), video conferencing, wireless communications, and network fax along with traditional computer telephony.

Smith Micro's complete line of products is available through direct sales, retail stores, value-added resellers (VARs) and original equipment manufacturers (OEMs). Smith Micro's common stock trades on The Nasdaq Stock Market® under the symbol SMSI). For more information, contact Smith Micro at (949) 362-5800.

This release contains forward-looking statements that involve risks and uncertainties and actual results may differ from those suggested by the forward-looking statements. Similarly, while it appears to the company that on-line retailers are expanding their products and services and that offers the company opportunities for growth, if that trend reverses itself or if the company's competition proves more adept at obtaining the benefits of that trend, the anticipated revenue growth will not occur. Among other things, the company's attempt to develop new markets in eCommerce, Mac and wireless markets involves the development of new products for markets where the company has relatively little experience and where competition is keen. Although the company anticipates that these new markets will generate revenue growth compared to prior years, if the company's product line takes longer to develop then currently anticipated and/or if the company's competition develops products that gain market acceptance quicker, that opportunity will be lost or delayed. Other important factors which could cause actual results to differ materially from those in the forward-looking statements are economic, competitive, governmental and technological factors affecting the company's operations, markets, products, services and prices, as well as other factors detailed in the company's filings with the Securities and Exchange Commission including its recent filings on Forms 10-K and 10-Q.

Smith Micro and the Smith Micro logo are trademarks or registered trademarks of Smith Micro Software, Inc. All other trademarks and product names are the property of their respective companies.

For more information on Smith Micro Software, Inc., via fax at no charge, please call
1-800-PRO-INFO and enter ticker symbol SMSI).

FINANCIAL TABLES FOLLOW

SMITH MICRO SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS *
(in thousands, except share and per-share amounts)

 Fourth Quarter Ended
December 31
(unaudited)
Twelve Months Ended
December 30
(unaudited)
 19991998
restated
19991998
restated
Net revenues$2,457$2,714$10,700$10,151
Cost of revenue5127652,4762,911

Gross profit1,9451,9498,2247,240

Operating expenses:
   Selling and marketing1,2251,2766,1353,984
   Research and development8888643,8263,416
   General and administrative8521,0013,9233,556

Total operating expenses2,9653,14113,88410,956

Operating loss(1,020)(1,192)(5,660)(3,716)

Interest income, net97156447708
Loss before income taxes(923)(1,036)(5,213)(3,008)
Income tax expense (benefit)57(357)888(1,112)
Net Loss$(980)$(679)$(6,101)$(1,896)

Net loss per basic and diluted share$(0.06)$(0.05)$(0.40)$(0.13)

Weighted average shares outstanding, basic and diluted15,55815,07515,29215,075

*Includes the results of Pacific Coast Software for all periods presented. Pacific Coast Software, acquired by Smith Micro in September, 1999, was accounted for as a pooling of interests.
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