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Portal Software gains on Vodafone win

    Portal Software shot up 13 percent Tuesday on news that Vodafone UK will use its Infranet software. Analysts said the deal validates Portal Software's technology and should boost revenue.

    Portal Software (Nasdaq: PRSF) makes customer care and billing software for Internet-based service providers and telecommunications firms. Its Infranet software is a real-time program for billing and customer management.

    Shares were up $1.19 to $10.38.

    Vodafone will use Infranet in its rollout of GPRS (General Packet Radio Service), an improvement to the GSM mobile communications system that supports data packets. The large mobile operator, with more than 11 million customers in the UK, adds to the company's already strong list of service providers, including America Online (NYSE: AOL), Deutsche Telekom, British Telecom and Sprint (NYSE: FON).

    The "Vodafone win demonstrates Portal's ability to play in the big leagues as this is the second large tier one carrier win in (the) past several weeks," said Credit Suisse First Boston analyst Susan Passoni, who reiterated a "buy" rating Tuesday.

    CIBC Oppenheimer analyst Hampton Adams reiterated a "strong buy."

    "We see the selection of a significant endorsement," Adams wrote in a research note.

    Vodafone plans to roll out GPRS services in the first half of 2001, and while specific details are not known, analysts expect Portal Software to see license and services revenue beginning in the April quarter.

    The revenue implications of the deal are "potentially large," Adams said. Though the initial license fee is not likely to be as much as what the company received from AOL, it should be significant. Vodafone's expectation for data revenue to make up 20 percent to 25 percent of its total over the next 3 years, should also ensure that revenues grow in the future. Since the industry is still only in the early stages of the GPRS network upgrade cycle, Portal also has opportunity to use this win with other Vodafone affiliates, Adams noted.

    Analysts were also optimistic about the company's fourth-quarter report, due tomorrow. First Call is expecting earnings of 3 cents a share and revenue of $81.75 million.

    Adams said that with the combination of AOL as a 10 percent customer and some other substantial repeat orders, Portal Software should post solid results.

    "While there has been much speculation and concern over the company's ability to post strong sequential revenue growth in line with guidance, we remain comfortable with our estimates," he added.