The third quarter was close to our estimates and above consensus. Total revenue was $34 million ($32 million estimate) and the EPS was $0.23 ($0.21 est.). GAAP gross margins were slightly higher than estimated and slightly above the second quarter number due to the higher proportion of wireless related revenue. Operating expenses of $24.4 million were above our estimate of $24.3 million. Although our estimate GAAP net income was low the non-GAAP adjustment was also below our estimate
The growth drivers continue to be the expansion of 3G data devices, while the coming deployments of 4G networks in North America and the rest of the world will drive greater demand for intelligent mobility solutions provided by Smith Micro.
The wireless segment reported record revenues for the quarter of $31.3 million, an increase of 38.3%, a decline from the 40% gain shown in the first quarter but above the gain of the second quarter. Within the wireless segment, connectivity and security posted revenues of $27.4 million. Offsetting overall gains in the wireless sector, the productivity and graphics group posted revenues of $2.6 million a decrease from the $5 million recorded a year ago. Total deferred revenue at March 31, 2010 was approximately $2.1 million, a decline from the $2.7 million at the end of the second quarter.
Outlook for 2010:
Smith Micro ( SMSI ) expects to announce several new deals in the fourth quarter and again in the beginning of 2011. These will impact 2011 revenue and earnings. Revenue in 2011 will be driven by the adoption of LTE, 4G and WiMaxx services, starting with the LTE roll-out by Verizon.
Written by Ian Gilson, CFA
