Fool's Eye View

[ September 28, 2000 ]

Geo Sneaks Into Profit

By Stuart Watson (TMFTiger)

Great Titchfield Street, London -- There are few companies that seem to have such a fanatical following as Geo Interactive Media (LSE: GIM), the video compression company. Today's interim results were brought forward to allay concerns after the recent fracas over the departure of its former chief executive. He has now been replaced by Eli Reifman, one of Geo's founders. I have to admit, that given Reifman's relentless barrage of PR, I always thought he was the chief executive anyway. So perhaps the recent management changes will have little impact on the group's strategy.

A tiny little profit

Much was made of Geo's move into profit. It's no mean feat considering that in the same six-month period last year Geo's sales were just £200,000. In the latest period these have risen to £8.6m due to upfront payments by licensees such as Samsung. Operating costs came in at £8.5m leaving a small profit of £0.1m for shareholders. Geo also earned interest of £9.7m on its cash pile, which currently amounts to £260m. However, moving into profit is hardly a momentous event. It's an absolute necessary for any company if it is to survive over the long term. Geo has done well to do it so soon, but it is only one small step on a very long journey.

More corporate activity on the way

Geo always seems to be busy on this front and this looks set to continue. There is talk that it will seek a listing on Nasdaq and float off its Webradio division. Both these moves should help the shares along.

3G's the key

The prospects for Geo appear to depend primarily on 3G mobile phones. These are still a couple of years away at least. So Geo's claim about a technological lead of 12 to 18 months needs to be put in perspective. And as we have seen before, technological superiority is not enough. In fact in the world of technology it often seems to be a disadvantage. Mass-market acceptance is the key. There is still time for the competition to catch up and Geo is far from sewing up the marketplace. Most of its deals to date have been with second-tier players and until one of the major mobile manufacturers signs on the dotted line, doubts will remain about whether the company can justify its £1.7b market value.

Where Next?

Geo discussion board | website