Incorporating cloud-computing capabilities into businesses' overall information-technology framework has become essential in today's tech world, and companies large and small have aimed at taking advantage of the opportunities that cloud computing has to offer. Synchronoss Technologies (NASDAQ:SNCR) is hardly a household name, but it performs the increasingly valuable service of ensuring that users can access content on platforms wherever they go.
As the Internet of Things becomes a bigger part of the technology infrastructure worldwide, Synchronoss will likely play an even more pivotal role, and investors wanted to see signs of its success in its first-quarter financial report Wednesday morning. Synchronoss' results showed considerable strength, once again proving the promise that the company has within the budding industry. Let's look more closely at what Synchronoss Technologies had to say and what it means for the future.
Synchronoss steers clear of storm clouds
Synchronoss Technologies continued to grow at an enviable pace during the first quarter. Revenue jumped 35% to $132.9 million, and adjusted net income grew at an even faster pace of 40% to $22.3 million. Even after adding back certain revenue items to reflect acquisition-related adjustments, sales still posted a gain of more than a third from year-ago levels. On an adjusted basis, earnings per share came in at $0.49, a penny above consensus estimates.
A closer look at Synchronoss shows just how important the cloud is to the company's overall success. Cloud Services sales soared by 63%, and with $71.3 million in sales, that division now represents the majority of the company's overall revenue. Activation Services revenue also posted gains, but more modest 12% growth left the division behind.
CEO Stephen Waldis was pleased with the company's results, highlighting the contribution that Cloud Services made to its overall success. "Mobile operators around the world are capitalizing on the success of how personal cloud can drive important benefits to their valuable subscribers," Waldis said, and "we are pleased with our successful formula for helping our customers gain adoption and success with our personal cloud platform."
Can Synchronoss soar into the clouds?
The big question for any small company of Synchronoss Technologies' size is whether it can sustain its past growth. For its part, Synchronoss sounds optimistic. CFO Karen Rosenberger noted that "we continue to see positive trends across both our cloud and activation business offerings," and she believes that shareholders should be confident that future growth in sustainable and will lead to even greater profitability in time.
New products and services will be crucial to Synchronoss' success. At the same time as its earnings release, the company announced that it had integrated its Personal Cloud and Mobile Content Transfer products, creating a way for service providers to allow users to transfer content through the cloud from one device to another nearly seamlessly. With its clients offering their customers the ability to upgrade to new mobile devices on a regular basis, Synchronoss wants to ensure that service providers can give their end-users the ability to transfer data and information from old devices to new ones with a minimum of effort. In turn, Synchronoss hopes that its customers will be able to pass on costs to their end users, ensuring a recurring revenue stream for the cloud services company going forward.
The real question Synchronoss faces is whether mobile carriers will remain committed to the services that the company offers them. One argument in its favor is that once end users develop a cloud relationship with a carrier, they're less likely to jump ship and switch. Yet with a huge concentration of business from the two biggest U.S. wireless network carriers, Synchronoss always faces the possibility of a catastrophic competitive loss if those companies take their business elsewhere.
Synchronoss stock initially climbed following the earnings announcement but then gave up those gains and was at a small loss near the end of the trading day. Despite its impressive past, Synchronoss has a lot of work to do before it can cement its place in the mobile technology world. Nevertheless, investors should keep an eye on Synchronoss to see whether it can live up to its full potential in the long run.
Dan Caplinger owns shares of Apple. The Motley Fool recommends Apple and Synchronoss Technologies. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.