Tuesday, August 18, 2009

Telular and the Smartphone Revolution

If you're looking for a smartphone stock that's not on everyone's radar with a big runup already, look at Telular (WRLS). If you haven't noticed, smartphones are becoming one of the best investing areas, climbing related stocks up through this difficult year, right past the February/March debacle like it didn't even happen. I wrote a post back on July 1 on this mobile internet wave; it includes the traditional laptop and the newer netbook computers. But as the post points out, everything gadgety is migrating onto the smartphone. You will one day be able to wax your truck from your mobile smartphone.

In-Stat did a growth projection back in 2007 where they predicted 30% annual smartphone growth over the next 5 years compared to single digit growth for cell phones in general. You'd think that the brutal recession that came after that prediction would have really messed with it, but Gartner reports that Q2 global smartphone results were up 27% from Q2 '08 ! Can you think of any significant consumer discretionary expense that's up 27% over that time? So it's about the best defensive play; and no telling what it does if we ever get to play offense.

Jim Cramer has put together what he calls a smartphone stock index of 21 prime names. In case you missed it, they are: ADCT, STAR, CIEN, TLAB, TKLC, CTV, QCOM, BRCM, NETL, XLNX, SWKS, RFMD, ONNN, CY, TSRA, SNDK, CSCO, GOOG, RIMM, PALM, APPLE. The trouble with many of these stocks is that they are general tech companies not very levered to just smartphones, and they are high profile. WRLS is low profile but in a position to benefit from the massive move of all our chores onto the 3G wireless platform. They have proprietary technology for what they call M2M (machine-to-machine) connectivity to the airwaves. They call some of their breadbox size products "office in a box" because they let you access fax machines and a wide varity of home or office data from any remote location as long as you have your smartphone handy. No added infrastructure is needed to put all this info into the wireless relm. Verizon and others are deploying Telular's added features in their plans.

The stock has been erratic in the past. The gripe has always been that they have great products but poor results. Well, that has been changing lately. They have turned earnings positive just before the recession and have stayed positive in the face of the downturn logging a current price/cash flow of 6.2, price/sales of 1.1, and PE of 33 and no debt. They have repurchased 23% of their stock since July '08 citing it as a good investment.

Technically, the stock looks like it could be ready to rumble: (click to enlarge charts)

It showed extreme stronghanded ownership over the February/March event and appears to be in launch mode from the two dollar area. The RSI is being pushed over the "normal" limit, which is typically viewed as a bad thing (sell point). But when an unusually strong climb is forming, it can be a good thing (buy point) as, for example, with FUQI:

A transition from normal oscillation to an energetic climb can push oscillator indicators like RSI and Bollinger Bands to sell signals just when you should be buying. How it will work out with WRLS we'll just have to wait and see, but if it is joining the smartphone tsunami, odds are a climb is forming.


  1. Hello Bruce,
    I've followed Telular for many years and after the 8/6/09 earnings and conference call am more bullish on them then I've been in many years but it has nothing to do with the "smartphone" technology or in Telular's lingo FWT's (fixed wireless terminals). This part of their business segment has seen sales decline to the lowest point in years and this past qtr was no exception, so why am I bullish. Telular has an alarm business then generates subscribers (recurring revenue) that pay monthly fees so the call centers will send the police, help, etc., if something happens. Margins here are about 55% and they are now adding subscribers at about 30,000 to 35,000 per qtr. For anyone interested in seeing the details I have a model summarizing past results by segment and projections at:
    A writeup I posted on several boards to try and generate opinions at:
    and more detail at:

  2. Dave,
    They are indeed having about all their success so far with Telguard, the wireless security alarm segment. It accounts for 75% of total revenue. That subscriber growth chart you show is eye popping, nearly a five fold growth since '06, and with such fat margins. The move to cut the cord is crowding the gigantic alarm user base into Telguard - kind of a nice pin action for them from the cellular revolution. Now if they can just get all those other connectivity items to take off like the dang alarm thing has! There is a big trend to put everything on your smartphone and their new SX7 products for 3G may capture a lot of new applications.