First let’s talk about the good things. MobiTV hopes to raise $75 million from an IPO. That’s a decent chunk of change it can use to land new partnerships, acquire competitors, pay down debt and license new content. The company’s been in business since 1999 (which makes it ancient in the tech world), so its already proven its got some measure of staying power. If it can forge the right partnerships or develop a standalone product that’s less dependent on smartphone operators, it might be able to stay afloat.
MobiTV’s in one of the tech-world’s fastest-growing sectors. Just 10 percent of mobile users in the U.S. stream video, according to Nielsen. As more and more subscribers opt for smartphones, MobiTV doesn’t have to grab them all to make money. A decent slice of the fast-growing market should make it profitable in the years to come.
And now the not-so-good: 3 reasons NOT to invest in the MobiTV IPO
1) Heavyweight competition. MobiTV has an impressive client list – from Verizon Communications (NYSE:VZ) to AT&T (NYSE:T) and Sprint (NYSE:S) – but it also counts the likes of Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX) and Amazon.com (NASDAQ:AMZN) among its competitors. That means they’d better have some deep pockets or a distinct competitive advantage. And I’m not convinced MobiTV’s offerings are unique enough for the company to emerge as the leading player in the mobile video market.
Rather than offering video itself, MobiTV serves more as a plug-and-play platform that smartphone data providers can use to offer value-added video services. Who really needs additional video services, though, when you can buy exactly what you want when you want it? On my own iPhone, I tap into my existing Netflix account or purchase video directly from iTunes. During March Madness last year, I shelled out $20 and bought streaming rights for an NCAA app that allowed me to watch all 65 tournament games. I access content when I want it, and – in the process – sidestep the compulsory additional monthly charges MobiTV users are subject to.
2) Slow growth. Investors give the benefit of the doubt to tech IPOs that are losing money so long as a company’s growth rate is impressive. Between 2009 and 2010, revenue at MobiTV grew by a mediocre 6.8 percent. On top of that, losses actually climbed from $14.6 million to $14.7 million. That bumped up the company’s total debt obligations to $116.3 million.
3) Diversification wanted. That fact that MobiTV relies on three companies (Sprint, AT&T and T-Mobile) for the bulk of its revenue should give investors pause. Sprint alone accounted for 54 percent of the company’s revenues in 2010. And that partnership isn’t set in stone. A year from now, MobiTV’s deal with Sprint converts from an annual to a month-by-month contract. With an AT&T and T-Mobile merger on the horizon, they could be down to two primary revenue sources.
“If we are unable to renew our agreements with these customers on favorable terms, or at all, or if any of these customers were to terminate our agreement for any reason, our revenue would decline and our operating results and financial condition would be harmed,” MobiTV states in its S-1 filing.
MobiTV seem to see the writing on the wall: they’d best diversify their client base if they hope to keep the electricity flowing to their servers. That’s exactly where this IPO comes in. It’ll give them a fighting chance at forging new partnerships abroad, but it’s yet to be seen if that will be enough to give the company long-term viability.
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Tags: aapl, AMZN, mobile stocks, mobile web, MobiTV, NFLX, S, T, VZ
