Geodesic Information: Buy

Investments with a 12-18 month horizon may be considered in the stock of Geodesic Information Systems, considering its moderate valuations and reasonable growth prospects. At Rs 227, the stock trades at 16 times and 11 times the estimated current and next year earnings respectively.

Geodesic operates in a niche segment within the technology space. The company derives a bulk of its revenues from developing instant messaging platforms/services and licensing them under the ‘Mundu’ brand. Instant messaging is a rapidly expanding mode of communication across the world and is a dynamic field.

Geodesic’s product (Mundu ICE stack) caters to clients ranging from portals and publishers to telecom operators, mobile handset manufacturers, system integrators and even end-consumers. The company has managed a compounded annual revenue growth of 62 per cent and profit growth of 74 per cent over the past 3 years.

Geodesic licenses its instant messaging platform to mobile handset manufacturers and telecom operators, thus providing it with sustainable revenue streams, with scope for expanding margins. The inter-operability with public messaging services such as Google Talk, Yahoo and MSN has been a major selling point to drive sales.

A recently won deal from Nordisk Mobiltelefon, a European telecom and ISP operator, for providing messaging and Internet radio on the mobile phone, is a typical example of its engagements. 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. The company has launched an instant messaging platform for the hugely successful iPhone and may be well placed to capture a share as and when Apple allows third party software platforms on its phones.

This apart, the company has also developed VoIP products to work with Windows mobile and Symbian-based phones and desktops, for PC-to-PC calls. VoIP is also an ever expanding market providing for cheap communications. The launch of Amida Simputer, a wireless data processing and communication device, is seeing trial runs with the government and e-learning clients.

The company has recently forayed into publishing by acquiring the Chandamama brand; subscriptions have witnessed an increase after the acquisition. The risks to this recommendation are rupee appreciation against the dollar (though the company has withstood appreciation well in recent quarters), scalability challenges in executing any multi-million dollar deals, and technological obsolescence.