OZ Communications: The IM 'Wizard'
Firm wins big clients with wireless-messaging software
By; Jeffry Bartash, CBS. MarketWatch. com
Last Update: 6:00pm ET - November 26, 2004
Washington (CBS: MW) - OZ Communications, a private firm based in Montreal, has been
winning over high-tech giants by enabling wireless phones to send instant messages.
Already, the company has deals with Yahoo, Microsoft, Siemens, Nokia, Samsung,
SonyEricsson, America Online, T-Mobile and Cingular. OZ expects to announce
a contract with another big mobile carrier soon.
And recently OZ won a $27.3 million cash infusion from a major Silicon Valley venture capital firm.
See the OZ Web site.
The company has two main products. The first is software that enables wireless phones to
transmit instant messages using the services of AOL, Yahoo or Microsoft. The other is a device
called a gateway that monitors traffic and enables wireless carriers to bill customers for IM usage.
Unlike free instant messaging over desktop computers, wireless customers pay a small fee to
send short text messages via cell phones. OZ believes carriers can profit handsomely from IM
service.
Phone manufacturers and wireless carriers see the same opportunity. Shipments of phones
including the OZ technology jumped from 1 million in the first quarter to as many as 10 million in
the fourth quarter.
On Wednesday, CBS.MarketWatch spoke to OZ CEO Skuli Mogensen, one of the company's
founders.
CBS. MW: How do you generate revenue? Is it one-time or recurring?
Mogensen: It's very much a recurring revenue stream on the gateway side. We get paid based
on active usage. On the client side, we get paid on a per-phone basis.
CBS. MW: Who are your competitors in this space?
Mogensen: Comverse Technology ( CMVT : news , chart , profile ). It's our biggest competitor on
the gateway side. We are in a 50-50 position.
On the client side, we are competing against internally developed clients, and actually Openwave
Systems ( OPWV : news , chart , profile ). We own the vast majority of the clients, so we are the
dominant player on the client side.
CBS.MW: Why are these big companies picking you?
Mogensen: We have been in this place a long time. We have been in all the standards and
interoperability meetings since day one. We have continued to contribute over the last three or
four years. And cultivating relationships over the last 15 years is a significant part of it. But it's not
enough to be early if you are not good.
CBS.MW: How was the company founded? What was the genesis for the idea?
Mogensen: Today you have 5 billion instant messages being sent every day from desktop to
desktop. That's enormous traffic. There's one fundamental flaw: there's no business model.
There's no revenue apart from advertising.
Whereas on the wireless side, you have 2 billion short messages sent every day. It's enormously
popular and profitable for the mobile operators. We basically said that if we could combine the
two communities, that would be an enormous opportunity.
The operators would love to tap into those 5 billion IM messages as long as they can bill for it
properly. And the portals -- MSN, AOL and Yahoo -- would love to go mobile because that's how
they can tap into a real business model and charge on a per-message basis.
We see mobile IM as being the most popular data service in North America. Way beyond any
particular game or any particular SMS service or anything else.
CBS.MW: The company's recent success would seem to raise two opportunities, a possible
acquisition or an initial public offering. Can you talk about either of those options?
Mogensen: We just raised $27.3 million. Obviously, we intend to put that money into good use.
We're currently expanding into Europe. We are definitely busy in building the company and
adding more customers and partners, so there are no immediate plans for an early exit.
We will continue to get offers. We have already had offers. That's no secret. So the short answer
is that the key is to build a viable long-term business, then you have all the possibilities in the
world. You can do a merger or an IPO.
Jeffry Bartash is a reporter for CBS.MarketWatch. com in Washington.
download OZ Communications: The IM 'Wizard' Firm wins big clients with wireless ...
