ZAGG: Parlaying the iPhone 3G Into Huge Growth

by Michael Alexander
SeekingAlpha.com

ZAGG is an extremely interesting company as both a trade on what is likely to be a huge third quarter and as a potential longer term investment based on what could be a monopoly on a niche product for electronic devices like the iPhone and Blackberry.

The company has one primary product called the Invisible Shield, which is a clear plastic wrap only a couple millimeters thick that can be permanently affixed to the surface of electronic devices to render them virtually impervious to scratches dings and chips. The company touts the fact that this is a material originally designed by the military to protect helicopter blades.

ZAGG offers over 2000 different designs to cover everything from laptops to the new iPhone 3g. The best way to understand the appeal of the InvisibleShield is to understand the fanatical love people have for their gadgets. I have heard iPhones referred to as "my precious" by more than one person referencing the obsession of Gollum in the Lord of the Rings trilogy. For many users the idea of scratches in their device from keys, coins or general wear and tear is somewhere between unacceptable and horrifying.

The company has leveraged this zealous affection for gadgets into a quickly growing business. For the most recent quarter ZAGG turned in revenues of 2.7 million up over 200% year over year. Revenues were down slightly from the previous quarter during what is generally a bit of a dead retail season but there are numerous reasons to believe the upcoming quarter is going to show huge growth. My rough estimate is for it to show somewhere close to 100% sequential growth.

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