I spent quite a lot of the summer of 2006 trying hard to convince a number of people that 5x was not an appropriate PER for a mobile content company, even if the market had fallen on hard times.
Regulation and consumer cynicism after the Crazy Frog episode (customers finding out that they had an expensive subscription they couldn't stop, when they thought they'd just bought a single ringtone) had hit the market. And ringtones were beginning to slow down anyway.
I feel quite smug this morning.
Bango has come out with a positive trading statement. WIN and 2ergo have already announced positive updates. So it looks as if the slowdown is over.
Some of the share prices have done rather well. But WIN, for instance, despite a real spike in late December (120p to 180p in a few days) is still trading 30% below its year high. Sitting on 15x earnings for the financial year just past, and 12x for next year, it's not outrageously cheap - but that does represent quite reasonable value for a company expected to grow earnings at 30%. (If it succeeds, of course.)
Is there more mileage? Well I suspect there might be. Ringtones may be old hat, but mobile operators now need software for handling many more types of content. Besides, there's one big change in the market since the beginning of 2006; there's a much bigger population of phones out there with multimedia capabilities.
It's been a long and bumpy ride.... but I'm going to hang on for the moment.
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