By Lynn Cowan
Of DOW JONES NEWSWIRES
Telecom services provider Synacor Inc. (SYNC) made good early
trading gains Friday, its first day as a public company.
Its stock opened at $5.75 a share on the Nasdaq, up 15% from its
initial public offering price of $5. The deal priced at the bottom
of a revised $5 to $6 price range, which was lowered earlier this
week from its original plans of $10 to $12 a share. It sold 6.8
million shares, which were changing hands recently at $6.22, up
24.4%.
Synacor withdrew a plan for an IPO in 2008 during a time of
rough market upheaval, then re-filed again in November.
Based in Buffalo, N.Y., Synacor helps cable and telecom service
providers and consumer electronics manufacturers provide online
content and services to their customers. It provides authentication
and aggregation services to its clients, who can then package
online content and services with their high-speed Internet,
television and other services. Its clients offer their subscribers
those services under their own brands on computers, smartphones and
tablets, allowing them the ability to use one sign-on to view
online content, email, games, television and music.
As of Dec. 31, Synacor said its high-speed Internet service
provider clients used its products to provide service to more than
25% of the estimated 79 million U.S. high-speed Internet
households. Charter Communications Inc. (CHTR) and CenturyLink
Inc.(CTL) are its two largest customers, accounting for 60% of its
revenue in 2010.
Synacor makes its money off subscriber-based revenue from its
clients, as well as its share of advertising revenue based on
traffic generated from search and display advertising on its
clients' websites. Search and display advertising uses text-based
links to advertisers' websites as a result of Internet
searches.
It claims that the high cost of switching from its platform to
another has resulted in very low levels of turnover in its clients.
Its software is created so that it can integrate with its clients'
billing and subscriber management systems
For the first three quarters of 2011, Synacor's revenue rose 29%
to $62.1 million, and it had net income of $2.2 million, compared
to a net loss of $3.2 million in the same period in 2010. The
company was also profitable in 2009, but warns that it has incurred
"significant losses" in each year of operation other than 2009. It
expects that its expenses will increase in future periods as it
works to grow its business.
The company warns that a growing number of consumers are using
mobile devices instead of computers and software applications other
than Internet browsers-such as smartphone apps--to access the
Internet, which could hurt its search-and-display advertising.
Synacor says it is developing solutions to these alternative means
of accessing the Internet, including an acquisition of mobile
device software and technology last month. But it does not
currently offer clients and their subscribers a wide variety of
apps and other non-browser solutions.
Bank of America Merrill Lynch and Citigroup Inc. (C) managed
Synacor's offering.
-By Lynn Cowan; 301-270-0323; lynn.cowan@dowjones.com