"Six years ago, they asked what we wanted to be when we were big, and I said that we wanted to be Amdocs or Comverse," says Mati Broudo, co-founder and chairman of cellular software developer m-Wise Inc. (Bulletin Board: MWIS.OB), smiling. "We still hope to be a big company, and we have no intention of remaining small."
m-Wise, which was founded in 2000, develops value-added services for cellular operators, wireless companies, and media providers. Despite Broudo's hopes to see it become a large company, it has actually faced numerous difficulties over the years, and its current market cap is only around $17 million. Broudo, and company CEO Zach Zivan are nevertheless optimistic. m-Wise ended 2006 with revenue of $2.2 million, and posted an operating profit, although it still recorded a net loss of $196,000.
Broudo describes the process m-Wise has undergone so far as "long and tortuous." The company was founded at a difficult time for the high-tech industry, and it raised $6 million from Syntec Capital Group, and the DEP Fund - a joint Discount Investment Corporation (TASE: DISI) and Elron Electronic Industries Ltd. (Nasdaq: ELRN; TASE: ELRN) venture, as well as a number of venture capital funds. It received its first investment from Micha Anghel.
"The interactive mobile field was only just beginning back in 2002, and no significant achievements had yet been made," says Sivan. "Investors lost confidence." Broudo talks of the 'dry years' during which he and his co-founder of m-Wise, Shay Ben-Asulin, decided to continue operating despite the difficulties, although on one occasion, the company had to fire 38 of 45 employees in one day.
m-Wise has endeavored, until now, to 'live on revenue' as they put it, and not fall back on the $10 million credit line they were given by investment house Dutchess Capital Management LLC. Broudo admits to a reluctance to take on new employees over and above the 18 people that m-Wise currently employs because of the bitter experience of having to make job cuts, but Sivan, on the other hand, feels that the company will not have to fire people again.
m-Wise currently operates in two fields. One is the transfer and management of content such as music, pictures, ringtones and video, and the other is Mobile Marketing - managing MMS and SMS applications for commercial companies. The company is, in effect, targeting both cellular operators and other commercial companies interested in making their advertising campaigns more effective by making direct pitches to customers through cellular networks. m-Wise also works with advertising and marketing companies, and in April it announced a follow-on contract with New York-based content services provider Thumbplay.
Another significant agreement that m-Wise signed recently was with an unnamed technology company headquartered in Israel, to which it will supply content management and transfer systems. As a result, m-Wise will partner with the company in any tender issued by a cellular operator seeking such a system.
Globes: Why should the company not be interested in acquiring m-Wise itself rather than just buying your system?
Sivan: "One might assume that there would be an interest in acquiring m-Wise, but we have no interest in asking them."
Have you received any acquisition offers?
Broudo: "There have been offers but the figures were very low. We don't just give a flat no, it's not a case of ego. At this point in time, there's no reason to sell. We believe that the value for shareholders will be higher in future."
m-Wise itself may not be up for sale at present, but it has expressed an interest in making acquisitions of its own. "Our position, as a public company, allows us to make acquisitions of small companies or ones of our size," says Sivan. "We've been looking at several opportunities that could strengthen our product portfolio and business base. There are a number of factors that we look for - the suitable company should have revenue of one to two million dollars, it should not be posting losses, and it should also be synergetic to our business activity. It could be either a content company, or one with a complementary technology."
Does m-Wise's current share price, of about $0.11, reflect the company's situation?
Broudo: "I don't think so. Our goal is to see the share price reach $1. There are other companies with less advanced technology, which are worth much more."
Sivan: "Mobilitec was acquired last year by Lucent for $75 million, and it had a very similar profile to us."
Although m-Wise is traded on the Bulletin Board, it has generated a fair amount of interest, with the average volume reaching 775,000 shares. "Essentially, we're not in the business of promoting the stock," says Broudo. "The volume is genuine, there's interest in the company. Investors see in us a company with a lot of potential, which is operating in a hot market and which has a mature and functioning technology."
So how is it that your revenue amounts to a few million dollars, and not tens or hundreds of millions of dollars?
Broudo: "I feel that picture is now changing. Our field is becoming essential, strategic, and part of every day life, and this will also bring about a rise in service costs. The entry by big companies to the field could also lift the price to an entirely different level."
Published by Globes [online], Israel business news - www.globes.co.il - on July 2, 2007
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