Tangoe Helps Companies Manage Telecom Systems


Mobile phones are not just a staple of everyday living. They have rapidly taken over the world of business and communication.

It's whatTangoe ( TNGO ) President and CEO Albert Subbloie calls the "mobile revolution." With that comes an increased responsibility to manage the calling plans efficiently and to control associated costs.

"Mobile devices have proliferated," he says. "And when you have thousands of employees carrying mobile devices and needing access to the corporate systems, and with all the changing plans and the many carrier relationships throughout the world, add tablets to the mix, (it) complicates it even further."

Businesses need a company like Tangoe to manage their corporate communication spending. The Orange, Conn.-based firm makes software to help with the lifecycle management of the communications assets of those businesses. Services include planning, sourcing, inventory and use management, accounting as well as procurement and asset disposal.

Competitive Edge

"The requirement to manage the asset, the expenses and the usage on those devices is something that most companies have a very difficult time doing," Subbloie added. "And as a result of that, they spend too much money. And if you consider the employee needing to be connected to the enterprise, without that connection you're not productive today. Not having the right device, the right time, the right plan, the corporate access to applications, makes for a company not as competitive as another."

While in the past, companies would contend with quick, simple solutions to their mobile problems, the market is transitioning to where they need an overall solution that helps them manage the entire mobile environment.

The industry has coined the term Managed Mobility Solutions, or MMS, for that.

"MMS is a total solution (for when) a CIO of a large corporation . .. says, 'Oh my God, mobile has become my new IT infrastructure overnight, and I don't really have a good handle on it,'" he said. "I think the world is moving toward a total solution."

Tangoe's MMS is composed of advising clients on various aspects of their communication needs and helping them make strategic decisions. It also includes activating and managing the mobile devices of the employees as well as real-time use and expense management and 24/7 support.

Out of the total global enterprise telecom spending of $425 billion, $24 billion are managed by Tangoe. As a result, there is plenty of room to grow, especially since it operates in a fragmented industry.

"The market is still quite underpenetrated with Tangoe as the only large independent vendor," wrote Barclays Capital analyst Raimo Lenschow in a research report. "There is still plenty of room for growth in acquiring both new customers and further cross-selling as the solution represents a compelling ROI for customers."

That's why Tangoe has been significantly expanding its sales force, in the U.S. as well as internationally. The company is already reaping results from this increased capacity. It reported 39 new customer wins in the first quarter, outpacing its own guidance of 25 to 35 logo additions per quarter.

In the Asia-Pacific region, it now has offices in Australia, China and India. It is further planning to expand into Hong Kong and Japan. In Europe, the company maintains offices in the U.K., Netherlands and Germany, fully staffed with a sales and support team. It also has presence in Latin America.

About $6 billion, or 25% of the mobile IT spending it manages, comes from the outside of the U.S. Recently, the company gained a new client,Nokia ( NOK ).

It currently has 750 customers in the fields of health care, finance, technology, consumer and consulting services worldwide.

Reaching about $155 million in sales in 2012, Tangoe generates 35% of its revenue from direct sales, while 25% comes from its alliance partners. One of the partners isAT&T ( T ), where Tangoe is a white-label provider of its services.

After going public in July 2011, the stock had an incredible run for about a year. However, in August 2012, several short reports sent the stock tumbling as investors questioned the integration of several acquisitions Tangoe made.

Going Organic

When acquiring a new company, it takes 12 to 18 months for Tangoe to transition it to its own systems and to start seeing results. Most of the revenue is recurring, however, and therefore predictable. As Tangoe is integrating its latest buy, Symphony, it is starting to shift its focus to organic growth.

"I am less open to acquisitions," said Subbloie. "We didn't plan on being that active. We're opportunistic, as we should be. But now that the company has scaled as large as we have become, and when you look at the scale choices that are left, in terms of the independent companies that are left, there is really nobody. There might be 10 companies between $8 million and $12 million in sales, because we've more or less consolidated a lot of the market."

Analysts are predicting that expanded capacity and results from acquired companies will continue to drive revenue growth in the second half of 2013. It has also been cross-selling products to its existing clients.

"The strong new logo adds the past several quarters will only start impacting revenue in the second half of 2013, which makes us more confident in the organic growth acceleration that management is calling for," wrote Lenschow.

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: NOK , T , TNGO

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