Zagg ( Nasdaq - ZAGG ) - Product Line Diversification Takes Root

Zagg (ZAGG $7.75) appears on track to produce better than expected Q4 results.  Demand for the company's core "Invisible Shield" line remains vibrant, fueled by the ongoing boom in smartphone sales.  Zagg's protective covering is available for all of the major offerings.  The new ZaggMate for the Apple iPad (tablet computer) has gained meaningful adoption since its launch in mid Novemeber, too.  That line already has generated $2.0 million in sales so far in Q4.  Further gains are likely in upcoming periods as the new line expands beyond the limited distribution network originally employed.  The "Invisible Shield" line still holds substantial potential itself as smartphones grow from their current 15%-20% share of the entire cell phone market to a projected 35%-50% over the next 2-3 years.  Zagg is poised to broaden its distribution channels for that line, as well, providing additional impetus.  The ZaggMate probably will remain a complementary offering, delivering perhaps 10%-15% of the Invisible Shield's sales volume over the long haul.  That diversification should enhance and stabilize financial performance, though, and it could lay the groundwork for additional product introductions.  We are maintaining our 2010 and 2011 estimates for the time being, but a stronger performance appears achievable.