Spyglass, a developer of Internet browsers and other
technology, saw its stock soar 22 percent today after announcing that its
software has been licensed by Sony.
Today's spike comes amid a stunning stock price rise for a company that,
for most of its existence, has been trying to establish a spot as one of
the top names in Internet software. It was one of the browser companies to
emerge with technology originated at the University of Illinois in the '90s.
The other was Netscape.
research analyst with Frost Securities, said the stock's surge is due in
part to Spyglass' recent strong earnings report. Revenues from software
royalties showed a strong upturn.
"Since there are much higher margins to the software side, the company was
seen as less of a service 'body shop,' so people started comparing them
more directly to their peers such as Liberate, OpenTV and Phone.com,"
Spyglass stock has gained more than 110 percent this week alone, and has
nearly doubled since Feb. 22 when the stock closed at slightly less than $40
Sony licensed Spyglass' Web browser and email software and will pay for
consulting services from the Spyglass Professional Services group to help
incorporate the software into Sony's cable set-top. Spyglass said today's
agreement is in addition to a licensing deal signed last year for digital
television products being developed by Sony, including set-top boxes.
In September, Sony announced a
$1 billion deal to supply Cablevision around 3 million advanced set-top
boxes starting in 2000. These set-tops will be able to connect to the
Internet and let consumers shop online and communicate via email services.
Spyglass will be targeting its development work on these devices, according
to industry sources.
With Spyglass set to receive more royalties from products shipping this
year and the additional revenue from engineering services afforded by the
new agreement, investors bid up the company's stock by as much as $20.38
today, or about 30 percent, to a new 52-week high of $87.38. The stock has
since fallen back slightly to $ 82.25 in closing trading.
The extension of the company's deal with Sony serves to validate Spyglass'
business, and subsequently investors are starting to place bets on this
company being able to show strong earnings reports starting in 2001 because
of it, according to Chandler.
Spyglass co-founders were among those who developed Mosaic, one of the first Web browsers. After middling success in establishing its own brand name,
Spyglass struck a deal with Microsoft, and Spyglass technology became the
basis for Microsoft's Internet Explorer Web browser. The company, however,
was overshadowed by Netscape's rapid rise.
Spyglass ultimately shifted its focus to making customized browsers for the
device market in the last few years. Spyglass' embedded browsers and server
software allow users to access Internet and graphics content on
single-purpose Internet appliances.
The notion of interactive television programming has been touted for years,
but the boost in Spyglass' stock price can be taken as an indication of
growing confidence that companies really are finally on the cusp of
offering Net content, commerce and services and television
programming via TVs.
"This is the year where Spyglass is starting to see products move from
the development lab into consumers' hands," said Anup Murarka, vice
president of interactive television at Spyglass.
"Certainly, we are not
going to get the bulk of the deployments this year, but the industry as a
whole is finally starting to see (interactive TV) move out of the labs,"
with 2000 being the start of that process, Murarka said.
Liberate Technologies, another provider of software for interactive TVs and
information appliances, is another example of this investor optimism.
Liberate has seen its share price rise over 1400 percent since last year's
initial public offering on optimism that cable companies that have signed
deals with the company are getting ready to deploy the technology starting
Still, these are emerging markets and it remains to be seen what sort of
profits and revenues these software companies will eventually generate. It
also remains unclear which of the software companies will emerge on top. As
with browsers, much of the technology that goes inside set-top boxes and
Internet devices can be fairly basic and interchangeable.
Frost's Chandler said that Spyglass' offerings for wireless devices such as
cell phones and handhelds will be a bigger factor in the near term for the
investor enthusiasm because there is less risk in assessing the potential
of the market.
"When are people going to accept and actively use and engage the TV?" he
asked. Investors are certain it will be a huge market, but the question
nobody is sure of yet is when, he noted.