On TruePosition
About three weeks ago I commented on a reported siginificant decline in results at TruePosition, the Berwyn wireless location-based services vendor which is 89% owned by John Malone's Liberty Media(and attributed to its Liberty Capital Group tracking stock). BTW, at the time I referred to its technology as "GPS based" but it really is not. Rather, it finds locations by calculating the distances between different cell towers.
So I looked into it and this is what I found in Liberty's 10-Q filing:
REVENUE. Our consolidated revenue increased $168 million or 8.3% and $390 million or 9.9% for the three and six months ended June 30, 2007, respectively, as compared to the corresponding prior year period. The three month increase is due primarily to a $63 million or 3.9% increase for QVC, $66 million generated by Starz Media, which we acquired in August 2006 and $50 million generated by the Atlanta Braves, which we acquired in May 2007. The six month increase is due to a $192 million or 6.0% increase for QVC, $127 million generated by Starz Media and $50 million generated by the Atlanta Braves. In addition, we recognized a full six months of revenue for Provide and FUN in 2007. These increases were partially offset by $27 million and $51 million decreases for TruePosition for the three and six months ended June 30, 2007, respectively. In November 2006, TruePosition signed an amendment to its existing services contract with Cingular Wireless that requires TruePosition to develop and deliver additional software features. Because vendor specific objective evidence related to the value of these additional features does not exist, TruePosition is required to defer revenue recognition until all of the features have been delivered. TruePosition estimates that these features will be delivered in the first quarter of 2008. Accordingly, absent any further contractual changes, TruePosition will not recognize any revenue under this contract until 2008. TruePosition's services contract with its other major customer, T-Mobile, Inc., has a similar provision which prevents TruePosition from recognizing revenue. It should be noted, however, that both Cingular Wireless and T-Mobile are paying currently for services they receive and that the aforementioned deferrals have normal gross profit margins included. See Operating Results by Business below for a more complete discussion of QVC's and Starz Entertainment's results of operations.
I'm not sure what this means. Is this simply a short-term blip caused by specific requirements for deliverables that is (virtually) guaranteed to be made up in 2008, or does this reflect some degree of client dissatisfaction with the performance of the product that could materially effect the long-term financial prospects of the business? I don't know. There may not be a big problem here, and I know there are legal limitations on what you can say and can't say, but if I was an investor in the company I would want a clearer explanation than that.
TruePosition's core application right now is to provide systems that enable wireless carriers meet FCC standards for E-911 coverage. This past week, The FCC considerably toughened those standards in ways that could help TruePosition. Accuracy requirements must be meet at local service area levels rather than on statewide average levels. The implications of this are obvious in a state such as Pennsylvania, with the large concentration of population in a few areas and the rest of the state being mostly rural. Benchmarks have been established toward ensuring full compliance by September 11, 2011. Many in the industry are very critical of the standards and timelines, believing that new technologies are being tested and developed that could provide better performance in the future. But if wireless carriers are forced to ramp up quickly, using existing technologies, TruePosition should be in a position to benefit, both in terms of business from their existing US customers(AT&T and T-Mobile), and also in the potential to pick up business from other carriers who might at the very least need TruePosition in order to achieve some kind of "hybrid" solution.
Lastly, on Friday TruePostion won a patent-infringement case against Andrew Corp in the amount of $45.3 million, after a two week trial in Delaware. The amount of the award could be potentially tripled, though in any case such as this at the Federal District Court level, it will probably be a long time before they see any money out of it.
