Needham & Company Downgrades Smith Micro Software (SMSI) to Hold; Lack of Visibility to A Rebound and Sharply Reduced EPS Leaves Little to Stay Positive

Needham & Company downgraded Smith Micro Software (NASDAQ: SMSI) from Buy to Hold.

Needham analyst says, "We’ve been wrong on SMSI, having maintained our Buy in the wake of the company’s massive 1Q11 miss as we looked to see if Connection Manager could rebound in the back half of 2011. Now, as the company backs away from its previous 2H11 expectations and with a number of issues facing the company--including: 1) sluggish ramp of VZ LTE subs; 2) loss of Connection manager on VZ’s LTE Mi-Fi device; 3) potential cannibalization of USB dongles by tablets and 3G/4G smartphones with hotspots; and 4) competitive threats from lower cost competitors (though we don’t think they have played a meaningful role in recent weakness)—we feel we can no longer retain our Buy rating and as such are downgrading to Hold. With that said, it remains possible that over time LTE subs could ramp sharply from recent levels as the network footprint grows and the company’s Mobile Hotspot Manager could become a major new revenue driver. If we can gain visibility to this occurring, we will reconsider our rating."

For more ratings news on Smith Micro Software click here and for the rating history of Smith Micro Software click here.

Shares of Smith Micro Software closed at $7.26 yesterday.

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