Fastest-Growing Public Companies 2005 to 2008

Orange County Business Journal, Oct 20-Oct 26, 2008

Smith Micro Software Inc. is set to pass a turning point this year.

The Aliso Viejo-based maker of software for cell phones is on track to hit $100 million in sales and maintain a well-diversified stable of customers.

Smith Micro gobbled up its top competitor in January, Chicago's PCTEL Inc., in its largest deal to date.

It paid $60 million in cash for a unit of PCTEL, a move that brought six major customers and helped Smith Micro diversify its revenue source away from just its previous best customer, Verizon Wireless, a unit of New York's Verizon Communications Inc.

"One of the biggest single growth drivers was the acquisition of PCTEL. It was a significant market consolidation play," said founder and Chief Executive William Smith. "Effectively our customers are now virtually all the major carriers."

In addition to Verizon, the lineup now includes Cingular, which is owned by AT&T Inc., and T-Mobile USA Inc., a unit of Germany's Deutsche Telekom AG, among others.

Smith Micro reported three-year growth of 556% with sales of $86 million for the year ended June 30.

It was only a few years ago that the company lingered at the bottom of this list.

This year, Smith Micro gained ground among the top 10, jumping two spots to No. 5, up from No. 7 a year ago.

It's one of two companies in the top 10 that's profitable. The other is No. 10 medical device maker Masimo Corp.

"We are looking to grow in one of the most challenging economic environments you can imagine," Smith said. "This one might take the cake."

Shares are down about 60% in the past year on a recent market value of about $180 million.

The company is barreling through by "being very prudent and thoughtful."

"I think it's still possible to grow in a meaningful way and that's what we are really focused on right now," he said.

During the first part of the year Smith was focused on integrating PCTEL.

"Getting the deal done is the easy part it's getting it integrated that's hard," Smith said. "There are always challenges and issues to work out. It has gone pretty much according to plan and we have done a great deal of the heavy lifting now but there is still fine tuning."

The company made four other acquisitions last year and has since been taking a breather.

In the meanwhile, it's opened a sales office in Stockholm, Sweden, as its European headquarters.

It's set to be a base to target cell phone makers Sony Ericsson Mobile Communications AB and Nokia Corp.

The company is pursuing new deals with international wireless carriers, including Japan's NTT DoCoMo Inc., Britain's Vodafone Group PLC and Switzerland's Orange Communications SA, which is part of Paris-based France Telecom.

Sales from abroad make up about 10% of its total, Smith said in a conference call with analysts.

The company is focused on a fast growing part of its software lineup - so-called "connection manager" software that runs on a PC or mobile device and allows for a wireless connection to the Internet through the carriers' network.

It allows for Smith Micro to go after a new customer subset: big PC manufacturers.