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EXHIBIT 20.1
[SMITH MICRO LOGO]
Smith Micro Software, Inc.
1996 Investment Profile

"As Smith Micro enters into its 15th year in business, we have positioned
ourselves as a leading supplier of communications software for personal
computers and have capitalized on the growing markets for video conferencing,
voice, data, and fax communications." William W. Smith, Jr., Chairman of the
board, President and CEO.

[SMITH MICRO LOGO]

Business Profile

Smith Micro Software, Inc. is a leading supplier of communications software to
modem, PC and video conferencing camera manufacturers and retail distribution
channels worldwide. The company designs, manufacturers and markets personal
computer software that enables data, fax voice, and video teleconferencing
communications. Its principal products QuickLink II, AudioVision, HotFax,
HotPage and HotFax Menu.

Table of Contents
Page
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FINANCIAL RESULTS AT-A-GLANCE i
PRESIDENT'S LETTER ii
CFO's LETTER iv
Additional Stockholder Information Inside Back Cover

This document contains forward-looking statements, which are pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
The Company's actual results could differ materially from those projected in the
forward-looking statements as a result of numerous factors, including, without
limitation, general market conditions in the software industry; ordering
patterns of the Company's largest customers, including U.S. Robotics; demand for
the Company's primary product, QuickLink; changes in technology; actions by
Microsoft; the Company's ability to successfully launch new product offerings;
successful implementation of the Company's retail product strategy; retaining
key personnel; risks associated with international sales; successful integration
of acquired companies and products; diversifying the Company's product mix;
meeting product development schedules; controlling expenses; and other risks
that are discussed in documents which the company files with the Securities and
Exchange Commission. For a discussion of such risks, see Management's Discussion
and Analysis of Financial Condition and Results of Operations and Risk Factors
in the Company's most recent Form 10-Ks and 10-Qs filed with the SEC.

[SMITH MICRO SOFTWARE]

President's Letter

To Our Shareholders,

Several significant trends for Smith Micro Software, Inc. occurred in 1996. A
strategic acquisition; a broadened product line; an increase in the number of
agreements we have with OEM's; and greater diversification of Smith Micro's
customer base all contributed to revenue growth in 1996 and provide us with an
opportunity for strong growth in 1997 and beyond.

In March, we completed our acquisition of Performance Computing Incorporated,
which resulted in the addition of video conferencing software to our product
line. Details of the new business this has generated are included below. Related
to this transaction, we took a one-time charge of $5.1 million for acquired
Research & Development expenses in the first quarter of 1996.

Smith Micro's 1996 net revenues increased 23% to $22,091,000 with pro forma net
income of $3,650,000 or $.26 per share (prior to the charge associated with our
purchase of Performance Computing Incorporated).

Smith Micro's business and stock price performance were negatively influenced by
a slowdown within the modem industry in the second half of 1996. Roll-out of the
new 56Kbps modems has been slower than anticipated, however, as the new modems
become more widely available, we look for interest in modem products to rebound.

ACHIEVEMENTS IN 1996

Smith Micro released five new products in 1996. We introduced two new video
conferencing solutions: AudioVision for the retail market, and VideoLink, an OEM
video conferencing product that several of our traditional modem customers are
already bundling. We also introduced VideoLink MessageCenter, which merges video
conferencing with fax, data, and voice mail technology from QuickLink
MessageCenter. HotFax MessageCenter also started shipping in 1996, adding voice
mail and telephony to the fax and data functionality of our original HotFax.

We are proud of the strides we made in diversifying our customer base and
product line. Through our VideoLink bundling effort we expanded our roster of
OEM customers to include manufacturers of digital cameras and video capture
cards, such as Vivitar, and MediaSonic. Boca Research agreed to ship QuickLink
with its modems and VideoLink with Boca Video Phone Classic, the latest offering
in its family of desktop video conferencing products. Other OEM customers added
during 1996 include Digi International, Archtek, NewCom, Best Data Products,
Logicode, and Askey. Distribution agreements were signed with Merisel and
U.K.-based Augur Industries.

ACHIEVEMENTS SO FAR IN 1997

Already in 1997, we have introduced two new products and signed up a number of
new customers and distributors. We recently unveiled the newest version of
HotPage, our wireless messaging software. We also introduced VideoLink Mail,
which allows a PC user to easily record a video and audio message and then send
it as an attachment in an ordinary email for transmission over the Internet or
any other email system.

An agreement was signed to provide Texas Instruments with QuickLink
MessageCenter for use in their new high-end notebook computers, a significant
step forward in our effort to obtain a leadership role in the communications
software PC pre-load business.

[SMITH MICRO SOFTWARE]

We will be providing QuickLink II and MacCommCenter to Dayna Communications for
use in its new PC card product line. Joining the Connectix QuickCam Developer
Program assures that our video conferencing products will be compatible with
Connectix's QuickCam products. We have also formed an important strategic
alliance with FaxSav, Incorporated whereby we will integrate our HotFax and
HotFax MessageCenter products with their Fax Launcher technology to provide an
innovative Internet faxing solution. Also, we have added FM Com of Seoul, Korea
as a distributor, thereby expanding our presence to the Korean market.

STRATEGIC DIRECTION FOR 1997 AND BEYOND

Perhaps the most important event of late 1996 was the development and
implementation of Smith Micro's new 3-pronged strategy to enhance and diversify
our business growth in the years ahead.

First we are expanding our sales efforts to our "traditional" core OEM market to
include product offerings not just to modem manufacturers, but to manufacturers
of digital cameras, video capture cards, and personal computers as well.

Second, we are committed to our retail sales effort. In 1996, retail sales grew
both in absolute dollar terms and as a percentage of overall sales.

And third, we plan to expand our marketing efforts into the corporate and
government marketplaces. An early sign of success is that we are teaming with
HealthCare Vision to provide the newest advance in tele-medicine -- real-time
virtual home health care. Columbia/HCA HealthCare, the nation's largest health
care provider, has contracted to field test this new system, which allows a
doctor to examine patients at remote locations by video conferencing with a
nurse at the patient's side.

We have also begun working with Bell Canada to jointly develop computer
telephony front-end systems which will enable direct dial-in to the phone
company's central office voice mail and fax messaging systems via modems and the
Internet. Bell Canada has also indicated they are very interested in video
product development with us. Smith Micro is pursuing similar business
arrangements with the Regional Bell Operating Companies in the United States.

IN CLOSING

Our goals in 1996 were to achieve greater diversification of our OEM customer
base, increase revenue contribution of our retail business, and reduce
dependence on our larger OEM customers. We succeeded in these efforts.

We are disappointed that the company's progress has not been reflected in our
stock price, but Smith Micro today is a more diversified and stronger company,
both in terms of market segments serviced and revenues received -- than ever
before. While Wall Street has not been kind in recent months to small-cap
technology companies -- especially those whose business results came in below
expectations during 1996 -- we are actively working to communicate to the
investment community that we have a very strong balance sheet, we continue to
develop and release new products, we are adding new corporate partners, and we
are successfully entering new markets -- all strong indicators that we are
paving the way for future success.

We look forward to a rewarding future for Smith Micro and its shareholders, and
we thank you for your continued support.

[SIG]

William W. Smith, Jr.
Chairman of the Board, President and CEO

[SMITH MICRO SOFTWARE]

CFO's Letter

Dear Stockholders:

Smith Micro Software experienced 23% growth in revenues during fiscal 1996 as
the company continued to implement its program of diversifying both product
offerings and customer base. The revenue gains were driven primarily by our
retail business, which grew from $1.1 million in 1995 to $3.4 million in 1996.

Operating and net profits were negatively impacted by the $5.1 million pre-tax
write-off of acquired Research & Development expenses related to the purchase of
Performance Computing Incorporated ("PCI") in March, 1996. Operating expenses
were also affected by an increase in staffing associated with the PCI
acquisition and the devotion of more resources to marketing our expanding
product line. Spending on research and development increased to 15% of sales
during 1996, compared to 9% in 1995, primarily resulting from the PCI
acquisition.

Also during the 1996 fiscal year the company's gross profit margin rose to 69.2%
of sales from 67.3% in 1995. The current ratio climbed to 10.8 at the end of
1996 from 6.8 a year earlier. At fiscal year end, the company had working
capital of $20.7 million, cash of $14.5 million, and no long-term debt.

All of us at Smith Micro Software are very excited about the coming year, and we
look forward to the future for the company and all of our stockholders.

Sincerely,

[SIG]

Robert E. Grice, Jr.
Vice President-Finance and Chief Financial Officer

Selected Financial Data

Year Ended December 31,
----------------------------------------
1994 1995 1996
------- ------- -------
(in thousands, except per share data)
Statement of Operations Data:
Net revenues ................. $10,372 $18,012 $22,091
Gross profit ................. 7,244 12,125 15,296
Gross profit margin .......... 69.8% 67.3% 69.2%
Operating income ............. 2,603 5,954 68
Operating profit margin* (B) 25.1% 33.1% 23.7%
Net income (loss) ............ $ 2,567 $ 5,452 $(1,519)
======= ======= =======

Net loss per share ........... $ (.11)
=======
Pro forma net income ......... (A) $ 3,757 (B) 3,650
======= =======
Pro forma net income per share (A) $ .30 (B) $ .26
======= =======
Shares used in computation ... 12,627 13,992

As of December 31,
---------------------------------------
1994 1995 1996
-------- ------- -------
Balance Sheet Data:
Cash & Cash equivalents $ 632 $19,020 $14,487
Working capital 2,044 19,693 20,735
Total assets 3,240 23,662 24,107
Total liabilities 608 3,417 2,277
Long term debt 0 0 0
Total stockholders' equity 2,632 20,245 21,830

Current ratio 4.4:1 6.8:1 10.8:1

(A) Prior to the effective date of the initial public offering, the Company was
treated as an S corporation pursuant to the Internal Revenue Code.
Subsequent to the effective date of the initial public offering, the
Company's tax status reverted back to that of a C corporation. The pro
forma information presented on the statement of operations data reflect a
provision for income taxes in 1995 as if the Company had been taxed as a C
corporation for the entire year, assuming effective tax rates that would
have been in effect at such time.

(B) During the first quarter of 1996, Smith Micro acquired Performance
Computing Incorporated. This resulted in a one time pre-tax charge of
$5.169 million. The pro forma information presented on the statement of
operations data for 1996 is presented to show the comparable business
operations prior to the one time charge.

* Operating margin calculated prior to charge for acquired research &
development.

1994 1995 1996
------ ------ ------
(in thousands, except current ratio)

Net Revenues 10,372 18,012 22,091

Gross Profit 7,244 12,125 15,296

Working Cap 2,044 19,693 20,735

Current Ratio 4.3 6.7 10.8

[SMITH MICRO SOFTWARE]

Additional Stockholder Information

Corporate Headquarters:
Smith Micro Software, Inc.
51 Columbia
Aliso Viejo, CA 92656

Officers and Directors:

William W. Smith, Jr. Robert E. Grice
Chairman of the Board, President & CEO Vice President and Chief Financial Officer

Rhonda L. Smith Robert A. Caggiano
Director, Executive Vice President, Vice President of Sales and Marketing
Chief Operating Officer, Secretary, Treasurer
Thomas G. Campbell
Robert W. Scheussler Director
Director, Senior Vice President of Engineering,
Chief Technical Officer F. Terry Eger
Director

Auditors: Legal Counsel:
Deloitte & Touche LLP Brobeck, Phleger & Harrison LLP
Costa Mesa, California Newport Beach, California

SEC FORM 10-K:
A copy of the company's Annual Report to the SEC on Form 10K is available
without charge by calling or writing:

Smith Micro Software
51 Columbia
Aliso Viejo, CA 92656
(714) 362-5800

INVESTOR RELATIONS:
Smith Micro Software's shares are traded on the Nasdaq National Market System
under the symbol "SMSI." The company maintains an active investor relations
program to keep shareholders and potential investors informed about company
activities. We welcome questions and comments from shareholders. For investor
information about Smith Micro Software, we encourage you to call, write or
e-mail:

Bruce Quigley Mark Trinske
Director of Investor Relations Investor Relations
Smith Micro Software, Inc. Trinske Communications, Ltd.
51 Columbia, Aliso Viejo, CA 92656 778D West Baseline Road, Lafayette, CO 80026
(714) 362-2308 (303) 665-7760

[SMITH MICRO SOFTWARE]

Smith Micro Software, Inc.
51 Columbia
Aliso Viejo, CA 92656
http://www.smithmicro.com
investor@smithmicro.com

(Nasdsaq NMS: SMSI)