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Why the Norwood Systems Ltd share price is up 700% this year

The Norwood Systems Ltd (ASX: NOR) share price has rocketed up 700% so far this year and currently stands at 15.2 cents.

The company completed its transformation from the Monteray Mining Group earlier this year, and now Norwood is a tech company offering two major products:

World Phone is a popular ‘Over-the-top’ (OTT) voice app which allows users to make lower-cost roaming and international calls, as well as cheap local calls when overseas. The second is Corona, a unified communications platform – related to World Phone but aimed at corporate travellers.

World Phone was approved for the Apple App store in June this year and saw 50,000 downloads in the first two weeks and 1 million downloads within 3.5 months. Today the company rolled out an Android version onto the Google Play store and could see an even large take up by Android smart phone users.

Norwood makes money by billing users for call minutes as well as offering subscription plans using simple in-app purchases. So far, it appears to be working fabulously. World Phone annualised revenue now stands at $1.3 million – up 44% since November 5.

The company’s technology appears exciting, given the massive market it’s operating in. Consumer mobile is a $1 trillion global market while enterprise voice roaming is estimated to cost companies $30 billion each year.

The key risk to Norwood’s apps and technology is that a newer, better disruptive technology arrives to replace it – much like Norwood is doing to traditional telco roaming products, as well as Skype and Viber now.

Traditional telcos like Optus, Telstra Corporation Ltd (ASX: TLS) and Vodafone general offer their users roaming data packs, but they can be very costly while fees for going over your limits can be enormously expensive.

Foolish takeaway

With annualised revenues of just over $1 million, Norwood is still some way away from becoming profitable. There’s also a high risk that things won’t work out as planned – but if the company can keep growing users and revenues at such fast rates, it might be worth adding as a speculative stock to your portfolio.

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Motley Fool writer/analyst Mike King owns shares in Telstra Corporation. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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