Mobile Net Stocks - Brief Article

Kiplinger's Personal Finance Magazine, May, 2000 by Manuel Schiffres

Four plays on finding the Web wirelessly.

In three years, predicts Dennis McKechnie, manaqer of Pimco Innovation (800-227-7337), more people will connect to the Internet from their cell phones than from their desktop PCs. So among his favorite stocks are companies that facilitate connection to the Internet from wireless phones. His picks are all rapid growers that are richly valued and hence best suited for risk-takers.

* Phone.com (PHCM, Nasdaq, recent price $170). Phone.com provides software that allows a wireless-phone user to check e-mail and obtain stock quotes, weather and other information from the Internet. Phone.com sells its software to such carriers as AT&T and Nextel and receives money for each subscriber who signs up for Internet service. The company, which went public last June, generated sales of $21 million in the second half of 1999. Assuming one billion wireless customers around the world in three years, with 10% hooked to the Internet, Phone.com's annual sales could hit $350 million. In that light, the stock's market value of $11 billion "doesn't look that scary," adds McKechnie. Still, no profits are in sight.

* Portal Software (PRSF, Nasdaq, $77). Portal develops customer-management and billing software for Internet service providers. "When the Internet goes to the cell phone, that will be a major billing challenge," says McKechnie. "Portal's software is so sophisticated it can bill people based on how quickly data is delivered and how much data people demand." The company's growth has been explosive. According to First Call/ Thomson Financial, analysts on average expect Portal to earn 1 cent per share in the year ending next January, and 11 cents the following year.

* RF Micro Devices (RFMD, Nasdaq, $158). For a change of pace, here's a company that already makes money-an expected 58 cents per share for the year ended March 2000, says McKechnie, and 80 cents for the March 2001 year. RF makes gallium arsenide semiconductors used in wireless phones. Compared with the more commonplace silicon chips, "gallium arsenide makes the phone smaller and the battery last longer, two things that are pretty important for wireless users," says McKechnie. "This is a winner in wireless data because battery life is even more important when you're trying to send e-mail from your mobile phone." Customers such as Nokia and Motorola are "banging down the doors for parts."

* Research in Motion (RIMM, Nasdaq, $128). Another already-profitable company, Canada-based Research in Motion, manufactures two-way pagers. "The beauty of these devices is that they integrate quite well with your e-mail system," says McKechnie. "An e-mail can follow me from my desktop to my pager and I can get the e-mail no matter where I am in the country. Even more important, I can reply to it." The company has sold about 100,000 of the devices, and McKechnie says it could sell 600,000 this year. Research in Motion earned 10 cents per share (U.S.) in the year ended February 1999. Analysts looked for 15 cents for the February 2000 year and 44 cents the following year.