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Analysts Say Puma’s Best Days Are Ahead
by Hal Plotkin
Silicon Valley Correspondent
Analysts say Puma Technology Inc.’s {PUMA} best days are still ahead, despite the fact that the company’s stock has already moved up more than 400 percent since August.

“I like the stock very much and have for some time,” says John Todd, an analyst at C.E. Unterberg Towbin, an investment bank based in San Francisco.

Todd issued a “strong buy” rating on Puma’s stock in late September, setting a 12-month price target of $50 a share. At the time, the stock was trading at about $14. More recently, Puma shares have been changing hands at $37.

“I think it still has a way to go,” Todd says.
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San Jose, Calif.-based Puma Technology makes synchronization software that links PCs, hand-held devices, and Internet-based services. The company’s cross-platform software solutions have been embraced by a who’s who in the computing industry, including IBM {IBM}, Intel Corp. {INTC}, Microsoft Corp. {MSFT}, and Oracle Corp. {ORCL}.

“We teamed with Puma Technology and its Intellisync platform to handle synchronization for our sales application based on their leadership and expertise in the industry,” says Oracle’s vice president, Mark Barrenechea, in a testimonial that appears on the Puma Web site.

Intel, for its part, recently said it will incorporate Puma’s technology into its forthcoming Bluetooth software module, which is aimed at the mobile computing market.

In addition to linking corporate sales forces with their home offices, Puma’s synchronization software also works on both Palm Pilots and other hand-held devices that use the competing Microsoft Windows CE operating system.

“Puma has a clear lead in the synchronization area,” says Ken Dulaney, vice president of mobile computing at the Gartner Group, based in San Jose, Calif. “The company benefits from the fact that its technology is agnostic. It’s not tied to any one platform.”

Founded in 1995, Puma’s first products enabled the synchronization of data between hand-held devices and desktop computers. Initial applications included automatic updating and coordination of contact lists, address files, and scheduling software.

Puma’s stock tanked in August 1998, however, after the company missed analyst estimates. The disappointment was the result, at least in part, of slower-than-expected sales of some personal digital assistants, a market segment that was slowed down by the failure of Apple Computer Inc.’s {AAPL} hand-held Newton and several other similar first-generation PDAs.

“Back then, everyone was developing the next Palm Pilot,” Todd says. “Unfortunately for Puma, most of those products died.”

Enter the Internet, which has revived Puma’s hopes for rapid growth.

Those hopes are tied to expectations that consumers will flock to new Internet-based applications that require synchronization software, not only for the next generation of PDAs but also for other devices linked to the Internet, such as cell phones.

Puma’s plans to capture that market got a big boost from the company’s acquisition of Emeryville, Calif.-based Proxinet Inc., a deal that was completed late last week. The combined technologies of both firms are aimed at major Internet portals, enabling them to provide those registering at their sites with instantaneous updates on the PDAs or cell phones.

“That means additional eyeballs,” says Tom Hunt, Puma’s vice president of marketing. According to Hunt, several major portals have already signed up for the service, including AOL {AOL}, Amazon.com {AMZN}, and Microsoft’s MSN {MSFT}.

Hunt says one of the main advantages of his firm’s technology is that it allows Web-site operators to concentrate on generating quality material rather than worrying about creating a separate format for data they want to deliver to hand-held devices.

“Our software does all that automatically,” Hunt says. “We can deliver a richer experience for users [of hand-held devices] without the Web-site operator having to re-engineer their content.”

There are about six to eight million PDAs in circulation, a figure that is expected to jump to more than 25 million by 2003, according to the Gartner Group. In addition, the total number of cell phones is expected to grow to more than 600 million within four years from 300 million, also according to Gartner Group.

“The number of these devices could exceed the number of PCs,” Dulaney says. “What’s more important is that these are going to be real computers with the ability to get into the Web and into back-office data stores.”

As a result, consumers are expected to find the next generation of hand-held devices even more useful than those currently in circulation.

“The whole idea of portability is really striking a tone with consumers,” says Kurt Scherf, an analyst at Parks Associates based in New York.

Scherf says consumers appear to be more interested in obtaining Internet access through a mobile device than in many other ways that are receiving a lot of attention, such as through their televisions. According to a recent Parks Associates survey of 400 PC-owning consumers, 32 percent are interested in mobile Internet access as compared with 26 percent who are interested in Internet access via TV.

What’s more, 50 percent of the same consumers said they would be willing to pay up to $29 a month for such services.

“We have a strong sense there is a market wanting these products and willing to pay,” Scherf says.

Judging by the numbers, at least some of those companies that license Puma’s technology for use by their own customers, are already paying. On Aug. 26, Puma’s balance sheet bounced back into the black, with the company announcing fourth-quarter net income of $1.24 million on revenue of $5.7 million, as compared with a year-earlier loss of $4.2 million on sales of $4.6 million.

“They’ve been able to get back on a profitable growth trend,” Todd says. “The stock is trading on forward opportunity. But if they do what they should do over the next few months, the price should increase accordingly.”

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