724 Solutions takes off in debut

3 min read

724 Solutions (Nasdaq: SVNX) stormed up 7, or 180.7 percent, to 73 Friday after pricing its shares at $26 a whack.

The handheld wireless banking software company had already doubled its expected range from $11-$13 a share to $20-$22 per share.

"This is interesting because its going beyond PCs to hand-held devices" said Kenan Pollock, money editor for IPO Central at Hoovers Online.

724 licenses software to financial companies, allowing them to offer services through handheld devices such as the Palm Pilot. It is also starting to provide application host services and software for cable set top boxes. Though the company is young and it has yet to launch its products, the success of its IPO seems assured.

The deal is expected to do well, based on comparison to Aether Systems (Nasdaq: AETH), its only "real front and center competitor" according to Randall Roth of Renaissance Capital, and the strength of its backers. "It's in a sweet spot, and its client roster is A-grade" Roth said. Sonera Corp (Nasdaq: SNRA) is a pioneer in wireless applications, and Citibank has always been a pioneer in advanced services, so their backing gives 724 extra credibility, he said.

"Citibank and Bank of Montreal and Banc of America own sizeable shares of the company -- that's a strong sign," said David Menlow of IPOfinancial.com. Citigroup has 18 percent of the company, Sonera has another 18 percent, and Bank of Montreal has 12 percent.

All its customers currently hold shares in the company, 724 said in its regulatory filings. Since its inception, sales to one financial institution have accounted for more than 81 percent of its total revenue, the Bank of Montreal, the company also conceded.

724's revenue for the nine months ended September 30 was $2.1 million, as opposed to $1.3 million for the same period of 1998. Net loss for the period was $6.2 million, much steeper than the $33 000 lost in 1998's nine month-period.

724's current competitors include financial institutions with in-house solutions, such as Fidelity, DLJ Direct (NYSE: DIR), Fimatex in France, and Barclays in the U.K. Software vendors which focus on Financial institutions, such as Aether Systems and w-Trade are also edging into 724's space, as are network service providers such as Sprint (NYSE: FON) and BellSouth in the U.S. and NTT DoCoMo in Japan.

Ericsson (Nasdaq: ERICY), Motorola (NYSE: MOT), Nokia (NYSE: NOK) and Matsushita are pursuing wireless data services and may also compete. Nokia said recently it is working with Deutsche Bank's direct banking unit on a wireless banking application, and that it plans to work with TD Waterhouse to develop a wireless trading service. Phone.com (Nasdaq: PHCM) and Microsoft MSN (Nasdaq: MSFT), are positioning themselves for the dramatic growth of wireless data services, 724 said in its SEC filings.

724 currently works with Bell Mobility and Sprint to provide broad geographic coverage, and has deals with Ericsson, Motorola, Neopoint, Nokia, Palm Computing, Qualcomm (Nasdaq: QCOM) and Research In Motion to support a wide range of Internet-enabled devices.