I dug up TS's going away note from three years ago.
Tobin Smith did not do the analysis 8 years ago. He did it 5 years ago. He then jumped ship in the fall 2006. . He was correct on just about everything. The zig zag strategy, odd businesses, dilution etc. I think that things have changed for the better albeit with another 1,500,000,000 shares outstanding.
Here was his going away advisory:
Dear MicroCap Investor subscribers,
We've reached the tipping point for NeoMedia.
Numerous Depressors were allowed to fester too long and have grown big enough to outweigh any potential major Catalysts that we foresee.
From every fundamental perspective -- management and strategy, patent position, marketing prowess, capital structure, and more -- we believe that NEOM's future has become too tenuous for us to maintain a buy rating on the stock at its current valuation.
We first recommended NeoMedia in February 2004 and many subscribers reaped some big rewards when it ran up to more than 70 cents, as the market began to recognize the same potential we had identified. But recently, several aspects of the NEOM story have become increasingly troubling. Issues about the company's addiction to dilution, its zig-zag strategy of acquisitions, and its inability to articulate a clear strategy for both its core (PaperClick) and non-core (Auto Paint) technologies brought us to the point where we started to scratch our heads.
Given so many concerns, we determined that we needed answers to our questions to better understand the direction of this company. It hasn't been easy, but finally after talking with a number of people in and around NEOM we have concluded that:
1) People in the mobile search and advertising space are simply getting around the NEOM patents. They are using closed-system searches to end-run NEOM's patents and that's a development that is clearly not good for the company.
2) The big players in the mobile business are just not responding to the NEOM "patent litigation" threat and are side-stepping NEOM in their route to mobile search and advertising gold. For example, Australian competitor Shock Code has its technology on 40 million Sprint bottles in a promotion that should have been a NeoMedia promotion. The fact that it's not speaks volumes about the lack of execution on NEOM's part.
3) The massive number of shares outstanding (and we've articulated this issue for a long time) is just too big a hurdle for the business to overcome. Additionally, it appears that NEOM is not getting any real value for the sale of its auto paint business, so all we can see is more and more serial dilution ahead.
We had a great ride on NEOM last year and we know many of you took our advice to capture profits ranging from 100% to 1,000% in the stock. For those subscribers positioned at a high average cost, we think it's best to cut your losses now and apply the proceeds to one of our more promising microcaps with a positive Catalyst-Depressor balance.
So it's time to say goodbye to NeoMedia. We will continue to keep our eye on this company to see if a much-needed major change in management and capital structure ever materializes. In the meantime, we recommend selling NEOM at market and moving on to better (and bigger) things.
See You Next Tuesday
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