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Business Observer Thursday, May 21, 2009 12 years ago

Fractions of Pennies

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Tony Holcombe leads Syniverse Technologies into a global marketplace that is becoming increasingly wireless.

Tony Holcombe leads Syniverse Technologies into a global marketplace that is becoming increasingly wireless.


Like other Gulf Coast companies, Tampa's Syniverse Technologies has seen revenues slip in the slower economy.

Syniverse collects, captures and protects voice and data information when a cellular telephone caller travels out of one cell network and into another, an activity also called roaming. Cell companies need the information for billing. But if people travel less, there is less roaming.

“If you don't travel, you don't roam, so the economy has affected our business,” says Tony Holcombe, president and chief executive officer of Syniverse Technologies.

Verizon's purchase of Alltel this year also cut into revenues, because there is one less cell network to track and one less company to sell voice and data to.

But there is one large piece of its business that hasn't slowed. In fact, it is exploding. And that is the growth of cell phones and wireless devices in the “BRIC” countries, or Brazil, Russia, India and China.

Those countries are not only buying phones, but they are bypassing the digital subscriber line or ethernet cable that plugs into a wall jack and to a computer. Instead, they are skipping that step and going entirely wireless. And the transfer of data wirelessly is something Syniverse measures and sells to different companies. In 2008, total revenue increased $128.8 million, or 34.1%, to $506.4 million.

“These countries are growing like crazy, their populations are increasing and all are going to wireless devices,” Holcombe says.

Syniverse captures the cell phone roaming information because carriers need to know for billing customers. So if a Verizon customer is roaming, Syniverse picks up the roaming information from the Sprint network, or whatever network the customer is on, and relayts it to Verizon.

It is clearly a volume business. Syniverse charges “fractions of a penny” to retrieve the voice and data, Holcombe says.

Holcombe sees growth in many new small wireless devices, even from the cellular telephone service companies, that will eventually replace desktop and laptop computers. That should mean more business for Syniverse if people are mobile and doing new things with the devices.

For example, the Japanese are using their Blackberry handheld devices to scan and pay for things like beverages and gasoline.

“People aren't taking their laptop when they travel overseas,” Holcombe says. “They take their Blackberry. It actually shrinks the world.”

Plus, another trend is in Syniverse's favor. The Blackberry and cell phones started as business or work-related devices. Today, they are fast becoming more social-networking and consumer devices, in Europe and North America as well as in other countries and continents, Holcombe says. That's a data capture opportunity for Syniverse.

“You're going to see a lot more wireless devices because people want to have their information and be mobile,” Holcombe says. “They are in research and development.”

While voice traffic on wireless devices has slowed, data movement has jumped, according to Syniverse tracking data.

GTE origins
Syniverse was originally part of GTE, as GTE Telecommunications Services Inc., before Verizon Information Services bought it in 2000. A private investment group bought the company in 2002. It changed its name to Syniverse Technologies in 2004 and went public in 2005.

Holcombe, an Atlanta native, was originally a company board member who the board asked to step in and become president and CEO.

Syniverse now does business in 140 countries and is getting into other new markets, such as Africa. It has set up a data center in India to capture wireless information for clients.

It has 700 people in its gleaming six-story stone and glass building in New Tampa off Bruce B. Downs Boulevard and has staff in places such as Hong Kong, Beijing, London, Moscow, Paris and Dubai.

Holcombe's biggest CEO lesson has been taking Syniverse from being a Tampa-centric company to being global. Four years ago, about 5% of the company's revenue was global. Today it is 30%. In two to three years, Holcombe expects it to be half of all revenues.

Diane Rose, Syniverse senior public relations manager, rises at 4:30 a.m. and signs on to her computer to communicate with Syniverse staff around the world.

“We talked about how to think differently,” he says. “About how to make that work. Europe is five to six hours ahead. You have to change your whole perspective.”

The company has its corporate headquarters in Tampa and has regional headquarters in Utrecht, The Netherlands; Hong Kong; and Buenos Aires, Argentina. It works with more than 650 communications companies in more than 140 countries.

Communicating with employees means quarterly town hall meetings at the Tampa headquarters and monthly conference calls with the executive team which is spread throughout the world. Holcombe is traveling to Berlin in May and Syniverse does employee satisfaction surveys.

Syniverse is in the process of putting a health clinic in the headquarters building with a licensed nurse practitioner so employees can quickly get professional health care at work. Holcombe heard of the practice at another company.

“It is one way to help the work-life balance,” he says.

SYNIVERSE TIMELINE


1987: Established as a GTE business unit.
1995: Launched industry's first international roaming service.2000: Became subsidiary of Verizon Information Services Inc.
2001: Changed name to TSI Telecommunications Services Inc.2002: Became independent company after private investors buy it.
2004: Changed corporate name to Syniverse Technologies.
2005: Became a public company, trading on the New York Stock Exchange under the symbol SVR.
2006: Acquired Interactive Technology Holdings Limited, expanding the company's presence in Asia Pacific.
2007: Launched wireless clearing house solution for Canadian mobile operators. Acquired the wireless data and financial clearing business of Billing Services Group Ltd., growing the company's overseas reach.

Syniverse
Technologies Inc.
Headquarters: Tampa
Market capitalization: $ 1 billion
Stock symbol: SVR (NYSE)
Recent stock price: $14.45
52-week stock price range: $6.80 to $22.93
Price-earnings ratio (trailing 12 months): 8.9
Source: Syniverse Technologies

BY THE NUMBERS

SYNIVERSE TECHNOGIES

BALANCE SHEET
(Amounts in thousands, except share data)

ASSETS 12/31/07 12/31/08 % change
Current assets
Cash $49,086 $165,605 237
Accounts receivable, net 79,378 88,782 11.8
Prepaid and other current assets 12,240 20,971 71.3
Total current assets 140,704 275,358 95.7
Property and equipment net 43,856 50,251 14.5
Capitalized software, net 62,651 60,184 - 3.9
Defered costs, net 10,786 7,288 -32.4
Goodwill 616,304 596,662 -3.1
Indentifiable intangibles, net 232,023 208,518 -10.1
Other assets 1,262 1,573 24.6
Total assets 1,107,550 1,199,834 8.3

LIABILITIES & STOCKHOLDERS EQUITY
Current liabilities
Accounts payable 5,006 7,311 46
Accrued payroll and related benefits 12,016 20,111 67.3
Accrued interest 5,910 5,160 -12.6
Accrued income taxes 121 9,891 807
Deferred revenues 5,327 4,260 20
Other accrued liabilities 34,668 28,975 -16.4
Total current liabilities 66,507 79,139 18.9
Total liabilities 636,758 663,992 4.2

STOCKHOLDERS EQUITY
Common stock, $0.001 par value 68 68 0
Additional paid-in capital 463,711 471,524 1.6
Retained earnings 4,851 83,315 161.7
Accumulated other comprehensive (loss) income 2,191 (19,035) -768
Common stock held in treasury, at cost (29) (30) 3.4
Total stockholders equity 470,792 535,482 13.7
Total liabilities and stockholders equity 1,107,550 1,199,834 8.3

INCOME STATEMENT 12/31/07 12/31/08 % change
Revenues $377,524 $506,356 34.1
Costs and expenses
Cost of operations 137,520 165,336 20.2
Sales and marketing 30,637 45,549 48.6
General and administrative 56,937 79,241 39.1
Depreciation and amoritization 42,867 55,344 29.1
Restructuring 2,211 (29) 98.6

Operating income
Other incomes (expense) net
Interest income 2,049 1,894 -7.5
Interest expense (25,603) (37,246) 45.4
Other (69) (402) 482
Income before income taxes 83,729 125,261 49.6
Provision for income taxes 31,310 46,797 49.4
Net income 52,419 78,464 49.6
Net income per common share
Basic $0.78 $1.16 48.7
Diluted $0.78 $1.15 47.4
Source: Edgar Online

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