The rising tide that is the mobile-content industry is hitting choppy waters for some publicly held content providers.
Dwango Wireless is the latest company to get pummeled by the waves. The Seattle-based aggregator saw its shares plummet last week on news that it posted a second-quarter loss of $5.56 million, or 64 cents a share.
The company blamed declining sales of its Rolling Stone-branded ringtones for a 17-percent drop in revenues in the second quarter compared with the previous quarter. Dwango reported revenues of $885,000 during the period, down from $1.06 million in sales in the earlier quarter.
Interestingly, the company also cited a one-time charge of $157,000 for deck placement with a carrier the company declined to name. Alltel Corp., which inked a deal to carry Dwango ringtones last fall, is widely rumored to solicit cash from content and application vendors for optimum placement on its deck.
Rick Hennessey stepped down as chief executive officer after last week’s quarterly report, which marked Dwango’s second straight multimillion-dollar loss. The company lost $4.85 million, or 58 cents a share, in the first quarter.
Hennessey will be replaced by interim CEO Alexander Conrad, who will continue to serve as president, chief operating officer, secretary and board member.
“We are not satisfied with the results for the 2005 second quarter,” Victor A. Cohn, chairman of Dwango’s board of directors, said in an earnings call. “This was a disappointing quarter for us, but we have emerged with a strong resolve.”
Dwango delivers offerings from Beliefnet Inc., a faith-based content provider, and plans to launch Playboy-branded content later this year. The company also is partnering with Web-based music service Napster L.L.C. to bolster its sagging ringtone service.
Investors responded to the news by sending Dwango shares into a tailspin. The stock plunged more than 50 percent, settling at a 52-week low of 59 cents per share by late last week.
Dwango declined to discuss the quarterly report in detail or to discuss its future plans with RCR Wireless News.
The company isn’t the only player to get roughed up, however. In recent quarterly reports, InfoSpace Inc. reported weaker-than-expected wireless revenues, game maker Jamdat Mobile Inc. revised downward its third-quarter forecast and VeriSign’s Jamster and Jamba content businesses issued disappointing sales.
“The competitive environment is accelerating,” First Albany Capital analyst Jason Avilio wrote in a research note on Jamdat’s earnings. “Revenues were flat quarter-over-quarter due primarily to more publishers distributing content on its deck.”
It’s not just carrier decks that are getting crowded. Content and messaging providers are using broadcast media and Web sites to push their wares, offering the gamut of wireless products and services.
Also, some analysts believe aggregators will continue to get squeezed as traditional media companies forge direct relationships with carriers instead of partnering with a middleman.
The packed playground isn’t stemming the tide of new players, however. Many non-wireless brands are just beginning to tap mobile users, and foreign content providers are increasingly aggressive in moving to U.S. consumers.
Japanese mobile-content conglomerate For-side.com Co. Ltd. is among those looking to expand its presence on U.S. shores. In a company report dated June 20 that recently came to light, For-side.com said it plans to expand its operations by listing its U.S. subsidiaries on an American market exchange.
For-side.com owns a host of companies worldwide; its American businesses include music-identification software developer MusiKube, ringtone provider Zingy and New York-based lifestyle application developer Vindigo.
“We will begin listing (U.S.) subsidiaries on the Nasdaq and endeavor to expand the operations” in America, reads the report. The document hints that such a move could occur during the company’s current fiscal year, which ends Oct. 31.
