Synchronoss in the iPhone spotlight

Synchronoss Technologies, an under-the-radar maker of order activation software for telecom service providers, is unknown no more as both the telecom and consumer electronics industries zeroed in on activation issues during the blockbuster iPhone launch last week. Synchronoss provides the technology behind AT&T's automated activation process.

By the time this magazine hits the street, the activation issue will either have been forgotten and the focus will have migrated to the performance of the iPhone itself — and the AT&T network it runs on — or it will have become an issue for Synchronoss.

Steve Waldis, president and CEO of Synchronoss, believes it will be the former because, from his perspective, “The overwhelming majority of people flew through the system.”

Neither AT&T nor Apple gave data on the number of iPhones sold the first weekend, but estimates hit 500,000. Waldis said the number of exceptions — orders that fall out or do not flow through the system automatically — was far fewer than they had expected.

Internet blogs gave more power to anecdotal reports, which became the basis of news stories ahead of the availability of empirical data. Although a 2% to 4% fall-out rate is within an acceptable range for most service providers, consumers of Apple products are used to much higher levels of customer service. Therein lies the Synchronoss challenge.

Not only has the it been working to automate order activation for a continually consolidating company, Synchronoss had about one year to tie an already a complicated process into the Web-based iTunes interface.

Waldis pointed out that there will always be order exceptions, some due to customer errors in providing incorrect information and some due to other systems such as number porting. He believes that despite delays for some iPhone consumers, his company has helped develop a revolutionary way of activating services.

Critics have charged AT&T with not being ready for the volumes of orders, and the company acknowledged that some of its servers were overwhelmed. For its part, Synchronoss reported a week prior to the launch that it had increased the transaction capacity of its ConvergenceNow platform by 65 times. The company tested the enhanced platform at its research and development facility in Bethlehem, Md., with the help of BEA and Oracle.

Financial analysts have forsaken a weekend judgment of Synchronoss because of perceived issues with the activation portion of the launch and are still recommending a buy of the stock. The company went public last year with a starting price of about $8 per share. After last weekend's hullabaloo, it was trading at around $33 and climbing. The company has had a 72% compound annual growth rate since 2002.

Larry Goldman, an analyst for OSS Observer, said the process “puts a generally positive light on how important solid activation systems are in rapid customer acquisition.”

A spokesman for AT&T said nearly all customers have been able to activate their phones within five to eight minutes. And despite the negative hype on the Internet, Waldis said, “While sitting in the war room Friday night, watching activations come in and the automation rate was so high, we knew we were in for a good weekend.”

When the actual numbers are made public and other Tier 1 providers take stock of the activation performance, Synchronoss will have a better idea if it is in for a good decade, too.

“We are focused on convergence, making our platform work with smart devices that you can activate through iTunes or over the air,” Waldis said. “I'm not sure people have always gotten that part. I hope what comes out of this is that they see this is as a revolutionary way to activate devices.”