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No. of Recommendations: 3
Hi Chad (jayseae):

This wireless infrastructure software game is very far away from being played out. that's why the safer strategy is to buy that basket containing INSP, PHCM, AETH and PUMA.

AETH and PHCM are really very strong competition for PUMA.

Let me try to offer an opinion on some fo the stuff your wrote.

"PUMA obviously has a lot of deals with PIM-type applications, though from what I've seen (we've recently been working on an enterprise Palm app that needs to sync information with databases, not going to work with just a PIM sync), they are a bit weak on the enterprise side. Need stuff from Outlook, fine. Need to sync to a database, it's a slightly different story."

Yes, database support is weak. Satellite Forms™ though supports Oracle Lite (although as you pointed out it only works for PALM OS, but this is bound to change). This PUMA software is designed more for developers making their own custom applications. PUMA's Intellisynch flavors work with Microsoft Exchange and Lotus Domino, it's probably a matter of time until full support for databse formats can be achieved. I do believe that PUMA is moving in the right direction here.

"While the PIM integration may not be as strong in ScoutSync, it seems adequate - and the apparent availability of these enterprise functions, along with the backing of Palm for the HotSync Server product, seems to be a slight advantage for AETH."

Yes, those enterprise functions are impressive, but as I understand it a great deal of Aether's software requires a good deal of customization for each client. PUMA's products aim to provide off the shelf solutions with little or no customization needed. (Listen to me, I sound like a Pumatech sales rep.)

I bet that the higher degree of customization required by Aether's products is what makes their gross margins a lot lower than PUMA's. PUMA's strategy is to attack the low side of the market and offer solutions for consumers and enterprise customers (from free services, to low end software, to premium services; during the last CC they say they are taking pages from the Microsoft playbook in this regard, marketshare is the goal).

"You've mentioned PUMA's Browse-It™. Well, AETH has a similar product, ScoutWeb, which dynamically translates (their words is "transcodes") HTML for display on HTML and WML devices."

As far as I understand it, ScoutWeb requires you to pre-select the web pages you want translated into WML, while Browse-It™ translates any page on the web on demand. I believe that both approaches have advantages and disadvantages, but personally I'd like to have access to the full web.

PUMA still has a long way to go with their software offerings, they have a lot of stuff in development, and they are developing all of their products to work with non-PALM OS platforms: iMode, PocketPC, Symbian, etc. AETH is very strong in enterprise markets, but they do throw a lot of resources in customizing their software to get there.

The market seems to like AETH more than PUMA (although AETH is involved in a lot more areas than just the software, PUMA is more of a pure play here):

AETH has a market cap of $5.5 Billion while PUMA has a market cap of only $1 Billion. PUMA has a lot more upside (and risk) than AETH.

"Financially speaking, neither company seems able to earn money, though PUMA does do a bit better job of controlling their balance sheet. PUMA also seems to have a better model, turning in gross margins around 87% last quarter (AETH's were 47%). Revenue-wise, AETH had essentially a 100% increase in revenues for the last quarter reported (April, I think it was), from ~$5M to nearly $11M. PUMA's last quarter was $8.5M, up 20% or so over the prior quarter."

I really like PUMA's financials, it is really running a very tight ship. It has outstanding gross margins and a very low flowie.

AETH is growing very quickly, but the biggest chunk of revenues is in service revenues, not software (although the growth in software revenue is very impressive, but it does start from a very small base).
Aether Systems, Inc. (Nasdaq:AETH - news), a leading provider of wireless data products and services, reported a 24-fold increase in second-quarter revenue to $10.8 million, compared with $447,000 in the same period in 1999. The results include recurring services revenue of $6.7 million, engineering services revenue of $1.6 million and software product revenue of $2.4 million. In the same period last year, recurring services (subscriber revenue) accounted for $331,000, engineering services revenue was $116,000 and the company did not have software product revenue.

My feeling is that AETH concentrates very heavily in particular market segments (such as pocket Trader for Schwab), while PUMA is developing general solutions that will resonate with a larger market.

Chad, keep in mind that I don't use any of these wireless products, so all I can go by is from studying these companies from the point of view of an investor, relying on conference calls and news items for PUMA, AETH and their competitors. I'm not an expert by any means, I'm just someone who's done their DD on PUMA. Will AETH prevail and crush PUMA?, well that's a possibility and a risk I'm willing to take. I still think that AETH is primarily involved in a Godzilla game, grabbing market share like crazy in a variety of enterprise vertical markets. I don't think they have a discontinuous innovation, but then again I might be wrong.

The game is still very early and there might be more than one winner, as far as PUMA's gorilla game, it would be in an application sector, and that does not preclude a number of strong chimps. PUMA may end as a Gorilla (big win) or as a chimp (moderate win).

I posted this earlier today looking at PUMA as a Gorilla:

As I've said before the GG-way to play this is to buy a basket of players: PUMA, AETH, PHCM and INSP. As time goes by you can consolidate on the winners and sell the losers.

"Would be curious if you have any opinions."

Yeah, big fat ones (LOL). I hope the above was enough. Maybe somebody else can chime in.


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