WorldGate: Phoning for a Clearer Picture

It was less than a year ago that a struggling WorldGate was negotiating with its landlord after not paying rent for 3 months. And it was just last summer that CEO Hal Krisbergh announced WorldGate would abandon ITV in favor of a side project he’d been working on-videophones. While WorldGate’s not out of the woods, Mon’s $5mln initial order from Motorola Broadband for "Ojo" indicates it has at least found a clearing. Motorola plans to begin commercial deployment of the phones this fall; there has been "extreme interest from both the operator and retail community," Motorola says. There was no comment on specific customers, though we’ve heard Radio Shack mentioned. The order is part of a distribution partner agreement the 2 companies reached in May. Yesterday’s news sent shares up more than 6% to $2.21 (shares fell in after-hours trading to $2.17) . That’s a significant improvement from the sub-$1/share (and potential Nasdaq delisting) WorldGate faced in Sept and Oct. CFO Joel Boyarski credits the turnaround to Krisbergh setting major milestones and WorldGate "delivering on every single one" of them. "He said we were going to develop a product that worked, and we showed it at the CES show [in Jan]," Boyarski says. "Next was to get a distribution partner and we got Motorola. He said there would be a shipment in the fall, and here’s Motorola." CES marked the stock’s 1st big bump; it hit a 52-week high of nearly $3 after the distribution deal with Motorola was announced around National and, perhaps not coincidentally, after Comcast’s [CMCSA] Brian Roberts gave Ojo a shout-out on CNBC’s "Kudlow & Cramer." But it’s not smooth sailing yet. WorldGate needs more cash (though Boyarski says it has a nice war chest) and there’s skepticism over Ojo’s popularity. The initial price is pretty steep-$700-$800/phone. Plus, for it to work, videophone callers can phone only other videophones. And despite Roberts’ kind words, a Comcast exec raised questions recently over how comfortable customers would be having an unedited video of themselves streamed. He suggested subs were more comfortable with the MSO’s recently launched video via email service, since it allows them to preview and edit video.