NeoMedia Technologies, Inc (NEOM)

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MUST READ DD From naplesnews.com: NeoMedia buys companies in plan to grow

Five deals made by the company based in Fort Myers have positioned it to lead in mobile communications, say executives with the company

By Riddhi Trivedi-St. Clair

Wednesday, March 8, 2006

http://www.naplesnews.com/news/2006/mar/08/neomedia_buys_companies_plan_grow/?business

Top executives of locally based NeoMedia Technologies Inc. have been doing a lot of traveling. They also have been doing a lot of shopping.

First to Boston, where they acquired Mobot, then to London to buy Sponge and then to Munich to close on 12snap.

The spree didn’t end there. After 12snap, they bought Gavitec and signed an agreement to acquire HipCricket.

With a total price tag of $51.1 million — in cash and shares — it was no everyday spree. But while most consumers may not have heard of most of these companies, the acquisitions have positioned Fort Myers-based NeoMedia to be an industry leader in the mobile communications industry.

The acquisitions were the results of months of work, a decision to pursue an aggressive growth strategy and the company’s return from a downturn created by the dotcom bust, CEO Charles Jensen said.

“This is an exploding industry. It is an industry that is beginning to grow and the time to consolidate is now,” Jensen said. “So we picked the best and the brightest, put their names on the board and went fishing.”

The buyouts were anything but sudden. It took 10 months of careful planning and strategizing, said Martin Copus, chief operating officer and chief executive for NeoMedia in London.

The idea was to position the company to launch its proprietary product, PaperClick, into the market.

“The technology behind PaperClick is as simple as using a remote control, except it’s the remote control to the real world,” Copus said. “PaperClick does the same thing as the Internet on your home computer or your laptop, but with the advantage of mobility.”

PaperClick has three primary applications. The first is to be able to access any Web site on the mobile Internet by keying in a “smart code” from any enabled machine or product. The second is a Go Window or GW — a search-engine type window. The consumer can put in a keyword that has been registered in a keyword registry and access any Web site, Copus explained.

The third is CW, or Code Window, through which the digits from a bar code take the user to a specific Web site.

“It has the power to ‘turn on’ every brand name or slogan, and even bar code, in the world,” Copus said. “The way the whole world of where mobile telephone is going is toward data. And data is media available through your mobile phone. PaperClick makes accessing this data — and utilizing it — that much easier.”

What makes this the right time is the numbers, said Alex Meisl, chief executive of Sponge, one of the companies acquired by NeoMedia. Sponge develops mobile services for brands, media groups and carriers for mass market campaigns.

It has developed a platform with a suite of tools that allows a wide range of mobile services, such as votes, sweepstakes, subscription services, games and auctions, for companies like Coca-Cola, Frito Lay, Audi, Hyundai and Vodafone.

The European market is about 18 months ahead of the U.S. market in the use of mobile technology, Meisl said, and a recent survey in the United Kingdom shows that about 25 percent of the population there never switch off their cell phones.

The uses of cell phones are getting more varied and prevalent. About 14 percent of the population in UK admitted to answering their phones while having sex. When it comes to breaking off a relationship, the survey said 34 percent of men under 21 and 23 percent of women under 21 chose to do it via text messaging.

“The volumes of text being sent on cell phones today are really quite incredible,” Meisl said.

About 53 percent of adults today use their cell phones for some kind of promotion, he said.

The stream of acquisitions has allowed NeoMedia to gain a much better geographic reach and access to a much wider portfolio of products and technology, Meisl said.

“This might sound arrogant, but what they have done is brought together the best players in the mobile marketing space,” he said. “And they have done it in a way that gives them a very wide audience with almost no overlap between the different markets.”

It was time for the company to make a comeback from the drastic cutbacks following the dotcom boom and bust, Jensen said.

In the mid-90s, NeoMedia went public in order to be able to grow. When the crash occurred, Jensen said, the company had been filing lots of patents, had just created PaperClick and wasn’t yet turning a profit.

“We were still investing heavily in the market and in the software,” he said.

They had to cut costs. The company went from a 150-strong staff of employees worldwide to 13 people. Revenues slumped from as high as $25 million at one point to $9.39 million in 2002 and continued sliding for the next two years. The company’s turnover in 2003 was $2.4 million and only $1.7 million in 2004.

Last year’s earnings haven’t yet been released, but the company is firmly on the return path now, Jensen said.

With the recent acquisitions, the work force is back up to 165 people in more than a dozen cities including London, Milan, Dusseldorf, Vienna, Stockholm, China and Munich, in addition to several U.S. locations.

The company also has new lines of credit through Cornell Capital and is using equity financing to pay for the acquisition.

“We are in great shape. We have a $100 million line of credit that we haven’t even tapped yet,” Jensen said.

The PaperClick platform isn’t the only one where the company is making progress. The company’s other arm is the micro paint business. The company has developed and is marketing specialty paint for interior and exterior refinishing in automobiles.

Late last week it announced a 10-year contract with Automart, a Beijing-based joint venture that specializes in automobile sales, financing, insurance and repair.

In the last three months NeoMedia’s orders in China have grown to more than $1 million. And with the automotive market in China expected to be the largest in the world within two decades, according to a 2005 Tuck School of Business at Dartmouth survey, the company is positioning itself to be a leader in the automotive “after-market” segment.

The exclusive 10-year agreement will give Automart sole distributorship of NeoMedia products in China, Hong Kong and Taiwan. NeoMedia will also supply 70 percent of non-specialty paint sales at all Automart facilities.

With all the pieces of the puzzle in place, for the coming year the push is going to be on launching PaperClick into the marketplace on both sides of the Atlantic, Copus said.

The company isn’t letting any details out yet, but the mood is one of barely suppressed excitement.

“We are looking for partners that will help educate the market and adopt the technology themselves as part of their own marketing,” Copus said. “I have spent 15 years in the mobile marketing industry, and the launch of PaperClick is a challenge I haven’t encountered in my career.

“What I hope happens is adoption across a range of different groups and demographics.”

© 2006 Naples Daily News and NDN Productions. Published in Naples, Florida, USA by the E.W. Scripps Co.

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