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Revision as of 01:01, 7 March 2006

InPhonic Inc (NASDAQ: INPC) is a company that sells wireless services and devices online, both through its e-commerce site Wirefly and through private labeled websites it creates and manages for online retailers. The board of directors includes such notable names as would-be VP Jack Kemp and John Sculley (formerly of Pepsi Co and Apple). Inc. Magazine listed InPhonic as the #1 company of 2004.

The company was modeled after sites like Expedia, gathering information from competing companies into a single site, to help costumers find the best deals. The appeal to wireless carriers who partner with InPhonic is that getting a customer through InPhonic can be significantly less expensive (by $100 or more) compared to other marketing approaches (television and radio ads, for example) that lead to a customer signing up at a retail store. InPhonic receives a commission from carriers for each customer, if the customer meets a number of criteria.

The company, founded and headed by David Steinberg, went public in November 2004. The company raised $108.9 million through its initial public offering. The IPO was InPhonic's second attempt to tap the public markets. The company filed to go public in 2002 but canceled the offering because of stock market conditions at the time.

In September 2001, the online retailer closed a $19 million Series D round of capital financing headed by Core Capital Partners. The investment also included new investors McAndrews & Forbes, First Analysis, Spring Capital and Wynnefield Capital. All previous investors- including Sculley Brothers Investments, CMS Financial Services, and Mid Atlantic Venture Funds- participated as well.

Two years later, Technology Crossover Ventures invested an additional $56 million in the company.

Inphonic grew its business interests in 2001, acquiring three tech companies. In January, it bought Reason, Inc. for its expertise with device and management tools; in early October, the company acquired GadgetSpace Inc., a company that develops software and services that extend large-scale corporate applications to wireless devices, for stock valued at $10 million; and in November, it added Skyware Group, a New York developer of custom wireless applications, for an undisclosed amount of cash and stock.

In 2002, Inphonic continued to build its wireless distribution channels, when it bought Simplexity, Inc. for $20 million in stock and cash. The following year, the company maintained its aggressive acquisition strategy when it bought mobile marketing firm Avesair, signaling a move into mobile ad messaging and delivery.

In January 2005, Inphonic bought rival A1 Wireless for $10 million, and a few months later it purchased VMC Satellite, a player in the satellite TV industry, for $11 million.

The company's Wirefly site has received a number of Internet awards, including Forbes magazine's Best of the Web for 2004.

The company is headquartered in Washington, D.C. and maintains technology and operations centers in Largo, Maryland, Long Island City, New York and Reston, Virginia.

Partners and Affiliates

In addition to Wirefly, InPhonic operates some 6,000 other private label cell phone sales Web sites, according to company spokesman Tripp Donnelly. The firm said in early 2006 that it was the largest third-party online cell phone retailer in the US, accounting for one-third of the market, and that it sold 850,000 cell phones in 2005 alone.

Partners include brands such as Radio Shack, Cognigen, and AOLMobile.com and others, which sell wireless phones and cell phone service plans from major carriers like Verizon Wireless, Cingular, T-Mobile, and others. InPhonic also runs fulfillment for OEMs like the Motorola and LG brands.

In addition, it allows owners of smaller sites to monetize their own web pages through the LinkShare Affiliate Program.

In 2005, InPhonic sold its mobile virtual network operator, or MVNO, called Liberty Wireless.

Cell phone pricing, rebates, and complaints

InPhonic became popular for its aggressive pricing strategy, which includes "free cell phones after rebate" or discounts worth several hundred dollars. The terms of the rebates however require the customer to wait 180 days after activation, but no more than 210 days, to file the rebate. This unusual rebate model stems from the fact that the carriers will not pay a commission on a customer who does not maintain service for six months. This strict requirement has fueled outrage among a group of customers who are calling for the regulation of rebate incentives by electronics manufacturers and retailers.

Between 2003 and 2005, 1,500 people filed complaints about InPhonic with the Better Business Bureau, charging that the company had falsely denied their rebate claims worth up to several hundred dollars in some cases. As a result, in November 2005, InPhonic's BBB membership was revoked.

External links

• Wirefly.com
• InPhonic corporate site
• Washington Post profile of InPhonic
• Consumers Irked by Cell Phone Rebates on Hold, MSNBC.com, January 13, 2006
• FAQs on submitting Wirefly rebates

• Cellular telephone companies of the United States