Handheld wireless service provider OmniSky (Nasdaq: OMNY) priced its 9.1 million share offering at $12 a share, the top of its $10-12 range Thursday. The fledgling company is in a promising sector, but may have trouble keeping up with innovations in handheld devices.
In April, OmniSky formed a joint venture with Australian media mogul Rupert Murdoch's News Corp. Ltd. (NYSE: NWS) to expand its operations beyond the United States. The Palo Alto, Calif.-based company previously applied to trade under the symbol "SKYY."
The company has hardly had a chance to prove its financials; for the six months ended June 30, the company had $2.1 million in revenue and a net loss of $40.8 million. From its inception date of May 7, 1999 through December 31 of that year, the company recorded no revenue, and had $6.9 million in losses. Though the company was founded in May 1999, it only formally launched its wireless service nationally in May 2000.
Omnisky relies on wireless carriers to transmit its service to subscribers and purchases airtime from them. The company warned in its SEC filing that its ability to grow and achieve profitability depends partly on its ability to obtain sufficient capacity, at reasonable prices, on the networks of those carriers, including AT&T Wireless Services (NYSE: T) and Verizon Wireless (NYSE: VZ), and on the reliability, compatibility and security of their systems.
The company also relies on the popularity of Palm (Nasdaq: PALM) -- in order to use its wireless service, subscribers must attach their handheld mobile device to a wireless modem. At this time, Omnisky's wireless modem is compatible only with the Palm V and Palm Vx devices.
"If we are unsuccessful in our efforts to become compatible with handheld mobile devices introduced in the future, our business may fail," the company said in its SEC filing. It also has to keep up with Palm, which it has no formal agreement with; since the Palm V and Palm Vx, Palm has introduced the Palm VII and the m100 series, which OmniSky's services are not compatible with.
OmniSky said many of its agreements with wireless network carriers and content providers, and its agreement with Palm, are non-exclusive. Competitors including Research in Motion, a provider of wireless e-mail; GoAmerica (Nasdaq: GOAM), a wireless Internet service provider; and wireless and other network service providers, such as Sprint PCS (NYSE: FON). The company also competes with Palm.Net, a service provided by Palm.
The shares are being offered through an underwriting syndicate led by Credit Suisse First Boston Corporation, Chase Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation, Salomon Smith Barney, Inc. and DLJdirect Inc.
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