Redefining boundaries
PENNY WISE
Dhiren Shah / New Delhi May 12, 2008


A booming smartphone market and focus on leveraging its technological
expertise puts Geodesic Information Systems on a high growth trajectory. The
entire media marketplace is in a state of seeming constant upheaval as
innovative technologies continue to fly at us with increasing regularity. The
old analog world (print, TV and radio) of media scarcity has given way to a
media cornucopia of unprecedented abundance - Internet, blogs, e-mail,
iPods, mobile phones, VoIP, play stations, or social networking and much
more. These are exciting time for software solution companies like Geodesic
Information Systems, focused on information, communication and entertainment
(ICE) for mobile phones and computers. *More than a 'messenger' company*
Geodesic Information Systems, which operates under the 'Mundu' brand, is
widely recognized for its pioneering interoperable instant messaging that
successfully combines Google Talk, ICQ, MSN and Yahoo across the Internet,
wireless devices and platforms. Geodesic primarily services companies, by
making and maintaining websites, portals and publishers by helping them
increase the online traffic on their websites and create solutions that
increase productivity and profitability, and lastly, retail customers by way
of its Mundu suite of products. The company generates its revenue in the
form of license/subscription fee, customization charges, share in ad-revenue
and charges for support and maintenance. The company's net profit rose 70
per cent to Rs 155 crore on 88 per cent rise in revenue to Rs 316.8 crore in
FY08, compared with FY07. Notably, given the potential in various segments
that the company operates in, the high growth period for Geodesic may have
just begun. *Information*
Internet is the fastest growing media advertising channel today and most
large organizations have started allocating to the tune of 15-20 per cent of
the total ad-budgets to online advertising. Here, Geodesic has developed a
context based advertising product called 'ADePT', which helps companies in
user acquisition and thus gives a boost to the ad-revenue generated on their
website. Another product, Mundu 'Remote Desktop' allows users on the move
to log to their office and home systems from mobile phones and manipulate
information as per their convenience. The company also offers a customer
relationship management (CRM) software called Spyder that enables companies
to conduct targeted marketing and keep a check on service misalignments. The
knowledge acquired during developing, the low cost computer – Simputer, was
used to develop 'OLAI' – Open Learning with Autonomy and Interactivity, a
web based outdoor computing platform that allows students to read e-books,
write notes and tag them with e-books and relevant content on the internet.
Targeted at the worldwide education market, OLAI is expected to be priced in
the range of $450-600 and launched in the third quarter of FY09.
*Communication
*
Mundu's IM not only lets you communicate with all the major IM service
providers through a single user interface but also facilitates in
multi-network conferencing. Geodesic charges $11 as a one-time subscription
fee to download the IM, whether desktop computer or mobile phone. Daily
downloads of IM in FY08 have been in the range of 1,800 to 5,000, which give
us an idea about the popularity of this product worldwide. In the mobile
phone segment, the smartphone users are the prime target audience of the
Mundu package, which includes services of instant messaging (IM),
voice-over-internet-protocol (VoIP) and internet radio. Geodesic licenses
its instant messaging platform to mobile handset manufacturers and telecom
operators, thus providing it with sustainable revenue streams. The company
has already launched its messaging services in Nokia and Sony Ericsson
smartphone handsets and has an agreement with players like BenQ. As these
companies increase their smartphone presence in rapidly growing markets such
as India and rest of Asia, Geodesic stands to gain from their expanding
presence. Geodesic' Mundu IM is already being used by more than 4 lakh
iPhone users through the internet, which could get a huge boost once Apple
allows third party software platforms on its phones. Its VoIP product, Mundu
Speak, allows users to make calls around the globe for charges as low as 1.5
cents per minute (USA), with zero installation charges as of now. It is the
'cost-cutting' feature of Mundu Speak that has tempted the company to work
out a subscription model, which it plans to roll out in a couple of months,
as the company is very upbeat about this product.
*MARGIN COMFORT* *Rs crore*

FY 08

FY 09E

FY 10E
Net sales 317

501
706 Operating profit 192 312 425 Net profit 155 229 271 EPS (Rs) 16.8 24.6
28.8 PE (x) 11.9 8.1 6.9 *FY09 & FY10 are analysts estimates* *
Entertainment*
Geodesic provides access to 1.5 lakh radio channels worldwide through its
mobile internet radio service Mundu Radio, which is bundled along with the
IM. In association with Geodesic, Idea Cellular recently launched a GPRS
and internet radio package, giving access to over 40 digital channels to its
users for Rs 149 per month, wherein Geodesic will earn 30 per cent of the
subscription charges. Geodesic entered the publishing business last year by
acquiring the 60-year old iconic children's magazine, Chandamama for Rs 10
crores, which is currently a small revenue contributor. With an archive of
more than 5,000 stories, the company plans to make tools available for
people to create online communities, stream audio and video content and
produce animation and graphic sequences. *Growth prospects*
According to a recent study by In-Stat, a primary research company, there
are about 450 million smartphones worldwide at present and its market is
expected to grow at over 30 per cent CAGR for the next five years. Mobile
phones users are showing a clear preference to have all their utilities on
one single device. Geodesic has integrated its base Mundu platform with CRM
solutions and various mobile phone applications (e.g. radio on mobile and
desktop management). With this, Mundu user's choice of music, news,
communication and other content explodes without the need to carry separate
devices. The wider application base has resulted in strong client addition
in FY08. It also proposes to extend its VoIP suite with launch of VoIP
hardware phones priced below Rs 1,500 (in FY09), which could be a huge
market in itself going forward. *Investment rationale *
The inherent value addition of the products allows Geodesic to combat fears
of currency fluctuation and a slowdown that are faced by other IT players.
The company's products have been well-accepted internationally. Analysts
expect Geodesic's revenue and earnings to grow at a CAGR of 49 per cent and
31 per cent over FY08-10. At Rs 200, it trades at a PE of 8.1 times its
estimated FY09 earnings. Geodesic's valuations are attractive and one can
expect a return of 35 per cent over a year.
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--
Frederick FN Noronha * Independent Journalist
http://fn.goa-india.org * Phone +91-832-2409490
Cell +91-9970157402 (sometimes out of range)
http://www.youtube.com/user/fredericknoronha


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