Synchronoss Cloud Business Booms With Mobile Phones


Now that mobile phones have become the official documentarians of the 21st Century -- recording everything from important messages to civil unrest to your teenage r's 4,000th selfie -- you don't want to risk losing all that data by losing your phone.

That's become much less of a problem thanks to the cloud. It allows users to store photos, videos, music files and other content in a secure environment that doesn't get lost when your phone does.

As more wireless carriers provide Internet cloud-based services to customers, there is greater demand for companies that offer cloud-based storage solutions.

One of those companies isSynchronoss Technologies ( SNCR ). It provides a cloud platform to carriers and software-based activation for connected devices worldwide.

Most of Synchronoss' revenue comes from online activation services for mobile devices, such asApple 's ( AAPL ) iPhone.

Synchronoss' software allows mobile network operators to connect devices or plans into networks. The company, which serves large clients such asAT&T ( T ) andVerizon Communications ( VZ ), gets paid a transaction fee for each activation.

An increasing chunk of Synchronoss' business comes from the cloud side, where it gets paid every time a mobile operator's subscriber signs on to cloud services that are provided by Synchronoss.

CEO: It's About Content

The cloud service is important because of the value consumers place on mobile phone content, says Synchronoss CEO Steve Waldis.

"If anything gets stolen or lost, all that data is backed up for you," he told IBD in a phone interview. "These days people value the content on the phone almost as much as the phone itself."

Only a few years after launching its cloud business, Synchronoss now boasts more than 33 billion entities in its cloud, including 5 billion photos, 10 billion address book contacts, 125 million videos and more than 300 million music files.

Those numbers keep growing.

"Every week around the world we sign up more than 100,000 new subscribers," Waldis said.

The company's cloud products include Synchronoss Personal Cloud, which allows subscribers to back up content on their phones.

Personal Cloud comes embedded on most new smartphones and devices direct from the manufacturers, Stacie Hiras, Synchronoss' vice president of marketing and communications, said in an email.

"This is gaining more usage and adoption, as it's built into the flow to activate the phone," she said.

Other cloud products include Synchronoss WorkSpace, which lets business employees access and edit documents stored in the business cloud; and Integrated Life, an "Internet of Things" platform that lets users connect and activate smartphones and tablets, and provides services for connected homes, automobiles and health and wellness devices.

Recent wins include a deal, announced Aug. 5, in which Synchronoss will provide Integrated Life services forTime-Warner Cable 's ( TWC ) IntelligentHome brand.

This is TWC's entry "into the home automation market, which allows customers to control and automate lights, thermostats, security alarms, video surveillance cameras and more," Tavis McCourt, analyst at Raymond James, said in a research note.

A day later, Timex announced the launch of a cellular-connected GPS "smartwatch," called the Ironman One, that uses Synchronoss cloud-based services. Synchronoss also developed the watch's mobile applications and Web portal.

Cloud Builds Revenue

During the second quarter, Synchronoss' cloud revenue grew 74% from the prior year to $46.7 million, topping most analyst expectations. Cloud revenue represented 45% of the total, up from 31% the previous year.

"We believe SNCR has positioned itself nicely to help the tier 1-2 wireless carriers better position themselves in the evolving consumer and commercial cloud business," JPMorgan analyst Sterling Auty noted in a report.

Overall Q2 revenue climbed 22% from a year earlier to $103.6 million, continuing a years-long run of double-digit gains on the top line. Results also topped consensus estimates for $102.5 million.

Earnings for the quarter rose 32% to 41 cents a share, a penny above views.

Analysts surveyed by Thomson Reuters expect full-year earnings to rise 27% in 2014 and 18% in 2015.

Synchronoss' stock price shot up nearly 15% to 39.72 when Q2 results were reported on July 29. Shares have continued to rise since then, reaching a nearly seven-year high of 44.43 intraday Friday.

"Each quarter that SNCR continues to produce better-than-expected cloud revenue is helping convince investors that have been sitting on the fence," Auty said.

Working The World

One of Synchronoss' growth strategies is to continue expanding its international presence. More than 100 carriers worldwide use its full suite of products, Hiras says, and more than 30 use the Synchronoss Personal Cloud platform.

The company broadened its global footprint in July when it acquired France's Voxmobili, a provider of address book personal cloud solutions to leading mobile operators such as AT&T, Airtel and Orange.

The buyout allows Synchronoss "to move into new areas," CEO Waldis said. "Voxmobili combines our core technology and increases our distribution."

In addition to growth in Europe, he says Synchronoss has also seen "very strong growth rates in Asia."

The company's M&A strategy focuses on small deals.

"In the past we've done small tuck-in acquisitions that have been technology driven," Waldis said. "Most are small privately held tech companies. We are also looking for efficiencies. We haven't really done anything that has been transformational."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Investing Ideas

Referenced Stocks: SNCR , AAPL , T , VZ , TWC

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