3SOF

A small surge today to 16.55.  Any news?

UBS Investment Research
Smith Micro Software Inc.

Believe Music Essentials Kit Testing Complete; Expect Builds to Start & Ship

Believe Music Essentials Kit approvals granted
We believe Verizon Wireless (VZW) has finished testing for Music Essentials Kits for most handsets, which should now give the green light for builds to start and ship. Software could potentially be available online before retail boxes hit store shelves (kits are likely shipped to distribution centers first, similar to handsets, and then distributed to stores). SMSI records revenue on transfer to title.

Should quell investor concerns regarding further potential delays
We view recent share weakness as a reflection of investor concern over the potential impact of delayed shipments on Q2 revenue as well as fears of further delays. We believe completion of testing should now alleviate these fears and believe most Street estimate for Q2 adequately reflect the potential impact.

With better visibility to shipment timing, adjusting estimates
We are adjusting our Q2 revenue estimate to $15.5mn from $17.5mn and pro forma EPS to $0.15 from $0.18. We are adjusting our pro forma 2007 EPS estimate to $0.95 from $0.98 but still remain above Consensus of $0.85.

$23 target based on ~22x 2008 pro-forma EPS (ex. Options) of $1.02

Reiterate Buy-2 particularly w/VZW issue nearing completion & potential upside to Street Consensus given our expectation for strong Q3 guidance.

la-onda - I see.  So your statement was just that - a statement.  I was hoping for your own personal commentary on the matter, but what it amounts to is, that increasing short interest is still speculation on the part of longs AND shorts.  If the earnings call comes out positive, the momentum from shorts guessing wrong could make the stock go way up.  If the stock turns down, then they'll benefit from longs selling their shares.

Agreed - great analysis la-onda.  I'm new to the idea of shorting and how to use that information to understand market interest.  If by saying the shorts need to cover in about 4 days, does that mean they're speculating that the price will drop prior to the 1Q earnings but that it won't necessarily drop after May 2?  Clearly the short interest and your analysis of how long they need to cover are related, but I'm too dumb to understand why.