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Why Smith Micro Software (SMSI) Is Jumping Today

NEW YORK (TheStreet) -- Smith Micro Software (SMSI) was jumping 34.2% to $2.35 Friday after posting a smaller-than-expected loss in the fourth quarter.

For the fourth quarter the software maker posted a loss of 1 cent a share, beating analysts' estimates of a loss of 3 cents a share by 2 cents. Revenue fell 1.6% from the year-ago quarter to $11.84 million, while analysts surveyed by Thomson Reuters expected revenue of $11.77 million.

"We achieved a 35 percent sequential increase in fourth quarter revenues, primarily due to new revenues from a leading chipset manufacturer and a strong holiday season for our productivity and graphics products," president and CEO William W. Smith Jr. said in a press release. "Fourth quarter revenues were down approximately 2 percent from the same quarter last year, but we saw a total year-over-year increase in our CommSuite, NetWise, and Productivity & Graphics product lines totaling $4.6 million. In addition, fourth quarter non-GAAP loss per share improved from $0.06 in 2012 to $0.01 loss per share in 2013, reflecting the positive impact of our third quarter restructuring."

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TheStreet Ratings team rates SMITH MICRO SOFTWARE INC as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:

"We rate SMITH MICRO SOFTWARE INC (SMSI) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, disappointing return on equity and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 171.1% when compared to the same quarter one year ago, falling from -$4.81 million to -$13.05 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Software industry and the overall market, SMITH MICRO SOFTWARE INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to -$4.74 million or 17.52% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The gross profit margin for SMITH MICRO SOFTWARE INC is currently very high, coming in at 82.84%. Regardless of SMSI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SMSI's net profit margin of -149.19% significantly underperformed when compared to the industry average.
  • The revenue fell significantly faster than the industry average of 10.2%. Since the same quarter one year prior, revenues fell by 20.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • You can view the full analysis from the report here: SMSI Ratings Report

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