M Partners upgrades Sandvine, but says doubts persist

COO Tom Donnelly said, “Sandvine’s products are helping these two mobile customers develop new revenue streams through services that capitalize on data growth while maintaining high-touch communications with their subscribers.”

M Partners analyst Ron Shuttleworth says conditions appear to be improving for Sandvine as the new year approaches. Although he says the Waterloo company’s performance metrics are among the lowest of its peer group, and he does not think it deserves the same multiple as its direct peer, Allot Communications, he does believe Sandvine’s progress amongst Tier Ones in North America and AsiaPac is encouraging. In a research update to clients yesterday, Shuttleworth upgraded Sandvine from a SELL to a HOLD, and raised his target price on the stock to $1.20 from $1.00

Shuttleworth says the core culpit in Sandvine’s performance is recurring revenue. Because less than a fifth of its revenue is recurring, its business is highly sensitive to market conditions and individual deals, as several recent quarters have illustrated.

In 2010 the issue of “Bill Shock” reached the FCC, It was estimated that more than thirty million Americans had experienced a bill more than $50 larger than what they anticipated, but were not alerted to beforehand. Under new rules the FCC is proposing, consumers would have access to simple alerts and easy to find tools to manage their accounts better. It would also, says the FCC “…require wireless phone companies to obtain customer consent before charging for services that are not covered by their regular monthly service plan.”

By April 17, 2013, all US carriers must comply with Bill Shock regulations, a move the FCC says will protect more than 97% of US wireless customers.

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