Future's calling
Smartphone company plans global push
By AMAN BATHEJA
STAR-TELEGRAM STAFF WRITER

Handango is making another major shift.

The Hurst company -- the world's largest provider of software for smartphones, which combine the functions of mobile phones, personal digital assistants and other information devices -- has snagged $60 million in new backing from a group of venture capital firms and investors. About $45 million of that will go to buying out much of the stake of Q Investments, Handango's biggest and earliest backer.

Randy Eisenman, Handango's chief executive, said he plans to use the new financing to pursue acquisitions and further develop Handango as a trusted global brand, similar to Intel in the computer market. The company, which has relied on North American consumers, now plans to push into Europe and Asia, he said.

"The future has never really looked brighter for us," Eisenman said.

Handango has partnerships with most major wireless carriers, including Verizon Wireless and Sprint, and handset makers including Motorola and Research In Motion, maker of the BlackBerry.

As smartphones become more sophisticated, Handango is focused on supporting new content that takes advantage of the phones' capabilities, Eisenman said. Smartphone owners still show strong interest in buying games like Texas Hold 'Em and the latest ringtones, but more consumers are searching for video and location-based applications, such as mapping programs.

More than 16,000 software developers use Handango to distribute their applications to smartphone owners. Handango sells software through Handango.com and other sites. In recent years, more of the company's sales have come from people purchasing applications directly through their mobile devices instead of through a Web site, Eisenman said.

Until now, about 90 percent of Handango's team has been focused on North American consumers, who account for about 60 percent of sales, Eisenman said. That's about to change dramatically, he said, as Handango's new funding will allow the company to focus more of its energy on Europe and Asia.

Despite Handango's lofty goals, Eisenman said its vision remains close to what was hatched at Q Investments years ago.

So does Handango still have high hopes for the PDA market?

"Let's just say the majority of our content is for phones now," Eisenman said. "We still support the PDA platform ... but the growth in the smartphone market is too exciting for us to not fully focus on that."

Handango certainly has seen its share of change.

In late 1998, a company called GoPDA.com was launched in the offices of Q Investments, a private equity group in Fort Worth. The hope was for the Internet startup, which subsequently renamed itself Handango, to become the premier provider of mobile content for the expanding market of Palm Pilots and other PDAs.

But PDAs lost their luster. And in 2002, Handango began moving into the smartphone market.

The new financing proves that Q's hunch was right, both on Handango and the mobile content market's overall growth potential, Eisenman said. After an initial $2 million in seed capital, Q Investments has continued to periodically support Handango financially. Eisenman would not say whether Handango has ever been profitable.

The new investors include venture capital firms that specialize wholly or in part in technology companies. Two of the investors -- Centerpoint Ventures, based in Dallas and Austin, and Memphis-based SSM Partners -- have portfolios heavily weighted with Texas companies. Q Investments will still retain an ownership stake in Handango and a spot on the company's board.

As it has grown and worked with more developers, Handango has found that not all developers are happy with their relationship with the company.

Writers on several blogs and other Web sites devoted to the wireless industry have complained about the commissions Handango takes from the sales of its applications. According to Handango's Web site, the company retains 40 percent of the revenue from products sold through its site, excluding taxes, but that amount can increase on certain applications if they sell well.

"I think when you work with 16,000 content partners, not all 16,000 are going to agree with your pricing policy," Eisenman said. "Fortunately the vast majority do. We really don't hear much criticism from the content community. For the most part, I think they're thrilled with the value we deliver to them."

SplashData of Los Gatos, Calif., is one of Handango's bestselling developers. The company makes applications designed to increase productivity for smartphone users, such as a password manager.

Handango is "one of the companies you think of first when you're establishing a software company in the mobile space," said Morgan Slain, SplashData's chief executive.

Slain said that when his company was started, in 2000, its target market was business professionals. As the market has shifted from PDAs to smartphones, handset makers are designing devices with more of the average consumer in mind, and that's translating to more interest in applications for the devices, he said.

While that broader base is emerging in the U.S., it's already arrived in other parts of the world.

In Japan, 4 of 10 adults browse the Internet on their wireless handsets, double the rate in 2003, according to global market research firm Ipsos Insight. The firm said mobile phones are rivaling computers as the dominant Internet platform in parts of Europe and Asia, while Web browsing by mobile phone in the U.S. and Canada isn't catching on as quickly.

"We're seeing more people who aren't the classic business [people] buying our products," Slain said. "It's starting to appeal to a broader base of users."

HANDANGO

Headquarters: Hurst

What it does: Works with 16,000 software developers to distribute their content to smartphone owners.

What kind of content: Games, ringtones, mapping programs.

What's a smartphone? A handset that combines the functions of a mobile phone, a PDA and other information devices.

Financial performance: Handango, a private company, does not disclose figures.

SOURCE: Star-Telegram