MCommerce Adoption is Slow as 724Solutions Cuts Staff

724 Solutions Inc. has announced further cuts in its global workforce - its third round of job reductions over the past one year - to control costs and wait out a market slowdown that has turned one of the highest-flying wireless application development company stocks into a penny stock. This will bring the remaining workforce to 165 from its peak of 750.

Toronto-based with Fortune 500 clients like Bank of America and Bank of Montreal has found to its dismay that wireless banking and stock trading (its first product solution) is not being adopted by a large number of consumers. In the same vein, its redirected product strategy to switch to m-commerce infrastructure software (like payment systems) has also not met with much success or revenue stream.

For more information: www.724solutions.com

MobileInfo Comments and Advisory: We are not going to run 724 solutions down with poor software technology, lack of enterprise application development expertise or declining confidence of its client base. The company indeed has good software solutions and good expertise in a rather complex enterprise marketplace. Instead, we are going to fault the hype of the market forecasters, investment bankers and surrounding bunch of analysts who led the management team at 724 Solutions to start believing that the consumers will start adopting emerging wireless banking and stock trading in huge numbers. Any pragmatic technology watcher who understood fundamentals of human psychology should have warned you that consumers do not have much incentive to switch to wireless banking because these transactions are not spur-of-the-moment transactions. People's habits will change but only slowly and very gradually. M-commerce market is not ready for suddent resurgence, either.

Therefore, 724 Solutions is wise in conserving cash and meeting the development needs of its selected set of clients. Thanks to its hugely-successful IPO and cash in the bank, 724 Solutions should survive this down-turn. As for suggested merger talk in the market, there is nothing strategic about that, in our view. Large companies like IBM will buy small companies like 724 Solutions when they are dirt cheap (which 724 Solutions is, at below a dollar share price) or when the market is expanding (which it is not in the short term). IBM or EDS might still make 724 an offer at the right time if the share prices continue to be low.