Despite a Mobile Boom, Motricity's IPO Gets Investor Static

The mobile industry is in the midst of a boom. Just look at this week's preorders of Apple's (AAPL) iPhone 4. Of course, the overwhelming demand crashed AT&T's (T) servers.

Apple is not the only beneficiary. Google (GOOG) continues to get traction with Android, and RIMM (RIMM) remains a growth play.

Will all this activity boost early-stage mobile companies too? Not necessarily. Look at the public offering of Motricity (MOTR.O), a top player in the mobile data area. The original price range was $14 to $16, but the company had to slash it to $10 to $11 as the number of shares to be issued fell from 6.8 million to 5 million. After a one-day delay, Motricity was able to get the deal done at $10 per share. And so far in today's trading, the shares are off about 1%.

Motricity's Comprehensive Mobile Platform

Back in 2001, Ryan Wuerch founded Motricity. At the time, he thought that mobile phones would eventually morph into Internet devices and that there would be a need to manage the complex technologies.

It was certainly a prescient vision. But it also took lots of time and capital. In fact, a key part of the strategy was the purchase of InfoSpace Mobile for $135 million in 2007.

Now, Motricity has a comprehensive platform -- called mCore -- of hosted mobile services. These allow for things like distribution of content and applications, messaging, billing and settlement.

For mobile carriers, Motricity's services are a big help. They provide personalized experiences that attract and retain new customers, helping to improve the average revenue per customer. Since 2005, Motricity has generated more than $2.5 billion in gross revenues for its customers and delivered over 50 billion page views.

So far, Motricity's customers include four of the top 10 global wireless carriers, with AT&T and Verizon Wireless (VZ) accounting for a whopping 79% of revenues. However, the company is making strides in diversifying its client base. For example, the company recently struck a key deal with XL Axiata in Indonesia.

Continuing Growth

Motricity has had a strong growth ramp, with revenues going from $13.1 million in 2007 to $113.6 million in 2009. In the first quarter, revenues increased from $23.2 million to $29 million.

And the growth should continue. A recent study from the Yankee Group estimates that the mobile data services market in the U.S. will grow from $40 billion in 2009 to $48 billion in 2013.

Yet, to achieve its growth targets, Motricity needs to continue to invest in its mCore platform as well as make acquisitions. However, the lackluster IPO will make this more difficult. The company may eventually come back to the market for a follow-on offering, when investors get more bullish. But so far, it looks like this will take some time.