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.
George Chandler, 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," Chandler said.
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 per share.
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 at a glance|
HQ: Naperville, IL
CEO: Douglas Colbeth
Annual sales: $29.6 Million
Annual income: ($1.9 Million)
Market cap: $1.4 Billion
Date of IPO: June 1995
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 in 2000.
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.