iPass Inc. (NASD:IPAS) has a pretty clear mission statement, "to enhance enterprise productivity by delivering simple, secure, and ubiquitous connectivity to remote and mobile workers". In other words, if a company has mobile employees, iPass will keep them connected to the "enterprise resources" within that company.

The business has been a bit slow. Revenue for 2004 was $166.3 million. For 2005, the top line was $169.4 million. Operating income between the two years actually dropped according to Yahoo!Finance, going from $29.0 million in 2004 to $17.9 million last year.

The company's Q1 06 reports showed that things are getting worse. Revenue was flat compared to a year ago, with $44.3 million this year versus $44.1 million last. But, operating income took a nose drive. It went from $6.0 million last year to a loss of $2.3 million in Q1 06. The company guided for Q2 to be as low as $46 million.

iPass paid $75.8 million in cash to buy GoRemote, a public company in a closely related business. The transaction closed in February, so it will be interesting to see how the company makes it through the integration. It is worth noting that in the iPass 10-Q there is a pro forma showing the results of the combined companies as if they had been together for the full quarter in both 2005 and 2006. Revenue would have dropped from $56.3 million to $49.3 million. Net income in Q1 05 would have been $3.4 million. In Q1 06, the combination would have had a loss of $4.8 million.

Not a very pretty picture.

iPass has a lot to prove. Two years ago, the stock was just below $12. Results for Q1 drove it down over 15% to $6.51 and intraday it fell to $6.12. The stock's high for the year is $8.52 and the low is $5.00. At $420 million, the company's market cap is almost three times sales.

And that is too high.

IPAS 1-yr chart:

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

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