Redefining boundaries

PENNY WISE

A booming smartphone market and focus on leveraging its technological expertise puts Geodesic Information Systems on a high growth trajectory.

The entire media marketplace is in a state of seeming constant upheaval as innovative technologies continue to fly at us with increasing regularity.

The old analog world (print, TV and radio) of media scarcity has given way to a media cornucopia of unprecedented abundance - Internet, blogs, e-mail, iPods, mobile phones, VoIP, play stations, or social networking and much more.

These are exciting time for software solution companies like Geodesic Information Systems, focused on information, communication and entertainment (ICE) for mobile phones and computers.

More than a 'messenger' company
Geodesic Information Systems, which operates under the 'Mundu' brand, is widely recognized for its pioneering interoperable instant messaging that successfully combines Google Talk, ICQ, MSN and Yahoo across the Internet, wireless devices and platforms.

Geodesic primarily services companies, by making and maintaining websites, portals and publishers by helping them increase the online traffic on their websites and create solutions that increase productivity and profitability, and lastly, retail customers by way of its Mundu suite of products.

The company generates its revenue in the form of license/subscription fee, customization charges, share in ad-revenue and charges for support and maintenance.

The company's net profit rose 70 per cent to Rs 155 crore on 88 per cent rise in revenue to Rs 316.8 crore in FY08, compared with FY07. Notably, given the potential in various segments that the company operates in, the high growth period for Geodesic may have just begun.

Information
Internet is the fastest growing media advertising channel today and most large organizations have started allocating to the tune of 15-20 per cent of the total ad-budgets to online advertising.

Here, Geodesic has developed a context based advertising product called 'ADePT', which helps companies in user acquisition and thus gives a boost to the ad-revenue generated on their website.

Another product, Mundu 'Remote Desktop' allows users on the move to log to their office and home systems from mobile phones and manipulate information as per their convenience.

The company also offers a customer relationship management (CRM) software called Spyder that enables companies to conduct targeted marketing and keep a check on service misalignments.

The knowledge acquired during developing, the low cost computer "� Simputer, was used to develop 'OLAI' "� Open Learning with Autonomy and Interactivity, a web based outdoor computing platform that allows students to read e-books, write notes and tag them with e-books and relevant content on the internet. Targeted at the worldwide education market, OLAI is expected to be priced in the range of $450-600 and launched in the third quarter of FY09.

Communication
Mundu's IM not only lets you communicate with all the major IM service providers through a single user interface but also facilitates in multi-network conferencing.

Geodesic charges $11 as a one-time subscription fee to download the IM, whether desktop computer or mobile phone. Daily downloads of IM in FY08 have been in the range of 1,800 to 5,000, which give us an idea about the popularity of this product worldwide.

In the mobile phone segment, the smartphone users are the prime target audience of the Mundu package, which includes services of instant messaging (IM), voice-over-internet-protocol (VoIP) and internet radio.

Geodesic licenses its instant messaging platform to mobile handset manufacturers and telecom operators, thus providing it with sustainable revenue streams. The company has already launched its messaging services in Nokia and Sony Ericsson smartphone handsets and has an agreement with players like BenQ.

As these companies increase their smartphone presence in rapidly growing markets such as India and rest of Asia, Geodesic stands to gain from their expanding presence.

Geodesic' Mundu IM is already being used by more than 4 lakh iPhone users through the internet, which could get a huge boost once Apple allows third party software platforms on its phones. Its VoIP product, Mundu Speak, allows users to make calls around the globe for charges as low as 1.5 cents per minute (USA), with zero installation charges as of now.

It is the 'cost-cutting' feature of Mundu Speak that has tempted the company to work out a subscription model, which it plans to roll out in a couple of months, as the company is very upbeat about this product. 
 

MARGIN COMFORT
Rs crore	FY 08	FY 09E	FY 10E
Net sales	317	501	706
Operating profit	192	312	425
Net profit	155	229	271
EPS (Rs)	16.8	24.6	28.8
PE (x)	11.9	8.1	6.9
FY09 & FY10 are analysts estimates

Entertainment
Geodesic provides access to 1.5 lakh radio channels worldwide through its mobile internet radio service Mundu Radio, which is bundled along with the IM.

In association with Geodesic, Idea Cellular recently launched a GPRS and internet radio package, giving access to over 40 digital channels to its users for Rs 149 per month, wherein Geodesic will earn 30 per cent of the subscription charges.

Geodesic entered the publishing business last year by acquiring the 60-year old iconic children's magazine, Chandamama for Rs 10 crores, which is currently a small revenue contributor.

With an archive of more than 5,000 stories, the company plans to make tools available for people to create online communities, stream audio and video content and produce animation and graphic sequences.

Growth prospects
According to a recent study by In-Stat, a primary research company, there are about 450 million smartphones worldwide at present and its market is expected to grow at over 30 per cent CAGR for the next five years.

Mobile phones users are showing a clear preference to have all their utilities on one single device. Geodesic has integrated its base Mundu platform with CRM solutions and various mobile phone applications (e.g. radio on mobile and desktop management).

With this, Mundu user's choice of music, news, communication and other content explodes without the need to carry separate devices. The wider application base has resulted in strong client addition in FY08.

It also proposes to extend its VoIP suite with launch of VoIP hardware phones priced below Rs 1,500 (in FY09), which could be a huge market in itself going forward.

Investment rationale
The inherent value addition of the products allows Geodesic to combat fears of currency fluctuation and a slowdown that are faced by other IT players. The company's products have been well-accepted internationally.

Analysts expect Geodesic's revenue and earnings to grow at a CAGR of 49 per cent and 31 per cent over FY08-10. At Rs 200, it trades at a PE of 8.1 times its estimated FY09 earnings. Geodesic's valuations are attractive and one can expect a return of 35 per cent over a year.