Jefferies Gives Color On Smith Micro Software After Reporting Weak Results, Guidance

H2 results are weak as Smith Micro Software SMSI continues to navigate an inventory correction at Verizon, its largest customer. Management remains confident in an H2 snapback, but the increase looks to be less steep than prior expectations. Though new product ramps could drive upside to 2012. Jefferies reiterates its Hold but cuts the target to $7. Management cited a combination of inventory workdown at Verizon and slow sales of 4G dongles. Smith Micro's software is used to manage Verizon's 3G USB dongles and hotspots as well as the 4G dongles. Verizon recently launched 4G mobile hotspots from Samsung and Novatel with the Samsung product receiving the vast majority of Verizon's marketing attention. Management continues to expect an H2 rebound but implies a less steep ramp than before due to slow dongle sales; however, Verizon should work through its excess inventory by then and resumed normal order rates. Revenues from Mobile Hotspot Manager and Mobile Network Director are expected to meaningfully ramp in H1:12. Jefferies checks indicate Verizon is considering using SODA and SMSI's Mobile Hotspot Manager across its Android devices. Jefferies lowers its PT to $7 and has a Hold rating on SMSI SMSI closed Wednesday at $7.26