mobile – Page 13 – Inorganic Growth

KIT buys in bulk

February 4, 2011February 8, 2011 Ben Kolada

No stranger to inorganic growth, video asset management provider KIT digital just announced three acquisitions worth $77m. The company’s recent dealmaking brings its total M&A spending to $151m since 2006 – a hefty sum considering that KIT currently sports just a $350m market cap. While similarly sized firms might stop for a breather, KIT plans to announce another large purchase by the end of the quarter.

KIT has bought KickApps, Kyte and Kewego as it continues to consolidate the video asset management market and add social media to its platform. Kyte, the least expensive of the three targets, will provide KIT with mobile video content delivery while Paris-based Kewego provides a video distribution software platform for internal communications to enterprises in the EMEA region. KickApps, arguably the most valuable of the acquired assets, provides social media software for interactive video to enterprises. (A side note: KickApps is betting the farm on the role that social media will play in KIT’s evolving business – the company’s equity holders took their $45m payout entirely in KIT digital stock.)

As if announcing three acquisitions at once isn’t enough, the company claims to be on track to close another large transaction by the end of the quarter. KIT wouldn’t comment on who its next target would be, and the video asset management market is still too fragmented to tell which companies are on KIT’s radar. But we expect that the new target will continue KIT’s M&A strategy of buying companies for geographic expansion, entry into new verticals and complementary technology. KIT will pay for its new property out of the proceeds from its recently closed IPO, which netted $103m.

KIT’s triple play

Date closed	Target	Deal value	Target adviser	Acquirer adviser
January 28, 2011	KickApps	$44.7m	America’s Growth Capital	Janney Montgomery Scott
January 26, 2011	Kewego	$26.7m	Not disclosed	No adviser used
January 25, 2011	Kyte	$5.7m	GrowthPoint Technology Partners	No adviser used

Source: The 451 M&A KnowledgeBase

Motricity’s equity activity

February 4, 2011 Brenon Daly

Contact: Brenon Daly

Although shares of Motricity have been trading on the Nasdaq since mid-June, it’s only been in the past few weeks that most of the action has taken place. We have already chronicled the difficult birth of the company, which had to trim both its offer size and price to go public. Debt-heavy Motricity ended up raising only half the amount that it expected in its June IPO.

Born under a bad moon, Motricity appeared destined to live out a life of quiet woe on the public market. And for the first three months, that’s exactly how it played out for the mobile data platform provider. Shares changed hands in the single digits. Then the stock took off, tripling from September to November. (That run was enough to tempt Carl Icahn, a significant shareholder in Motricity, to look to lighten his load in December. However, the activist investor pulled the planned secondary last week.)

For its part, the company has found its own use for equity: an acquisition. Earlier this week, Motricity picked up mobile advertising and analytics startup Adenyo for $100m upfront and (perhaps) another $50m in an earnout. Terms call for Motricity to use an unspecified mix of cash and stock to cover the bill. Adenyo, advised by Citadel Securities, did get a collar on shares as part of the final consideration. But for now, the once-volatile shares of Motricity have been holding steady at about $20 each, which is at the high end of the collar’s range.

Facebook dives into mobile

January 31, 2011January 31, 2011

Contact: Jarrett Streebin

In its eighth acquisition in the last six months, Facebook picked up Seattle-based rel8tion. The startup is only nine months old and still in stealth mode, but it appears to be focused on targeted mobile advertising using location and demographics – data that Facebook has tons of. With 200 million active mobile users globally, and demographics and location on them all, the social media giant is ripe for an ad network of its own.

Facebook already has two location features rolled out, Deals and Places. In addition, it has existing infrastructure with carrier partnerships and mobile apps, including a recently launched app for feature phones that drastically expands its market. These features along with the amount of demographic data that Facebook has on its users could make for a very profitable ad network.

In the next year, we’ll likely see Facebook mobile ads roll out in full. This will provide stiff competition to those in the local deal space, such as Groupon and others. Facebook will also compete with display ad networks that advertise based on search and user check-in, such as Google Offers-AdMob, Where Inc, xAD and other hyper-local advertisers. With Facebook already owning a massive chunk of mobile users’ bandwidth, it appears likely to own a large chunk of the mobile ad and deals space, as well.

Google adds to NFC with Zetawire

December 13, 2010 Ben Kolada2 Comments

Contact: Jarrett Streebin, Ben Kolada, Vishal Jain

Google continues to gobble up startups, and we’ve just uncovered a deal that supports its near field communications (NFC) ambitions. We’ve learned that Google recently picked up Zetawire, a Canadian startup focusing on mobile payments transactions. Like most of Google’s buys, this was a small deal, but it plays into a bigger market.

Little is known about Toronto-based Zetawire, but we suspect that the company was in the pre-revenue stage, making its only valuable asset a patent and corresponding trademark awarded by the US Patent and Trademark office. According to the filing, the patent provides for mobile banking, advertising, identity management, credit card and mobile coupon transaction processing. These features would allow a consumer to make purchases using their smartphone instead of their credit card. Think of a smartphone with this technology as a virtual wallet (in fact, the company has also trademarked the name Walleto for these very purposes).

This acquisition bolsters Google’s position in the coming wave of NFC and the phone as a device for payments, tracking and identification. For Google, the timing of the deal couldn’t have been better. Although we understand that the transaction closed in August, just earlier this month Google released its Nexus S smartphone, which has built-in NFC capabilities. In the meantime, Google’s competitors are hard at work. Research in Motion has also filed a patent for NFC functions, and Nokia in June announced that all of its phones will have NFC capabilities by 2011. Isis, a partnership involving telcos AT&T, T-Mobile and Verizon, is also planning a similar mobile wallet and UK startup Proxama has been working on NFC-focused technology for payments and advertising. (We’ll take a deeper look at the Zetawire purchase and the greater NFC market in an upcoming Post-Merger IQ.)

‘You bought what? For how much?’

August 20, 2010 Brenon Daly

Contact: Brenon Daly

In both of the largest enterprise IT acquisitions so far this year, the deals are not what they seem. Or more accurately, the target companies were not acquired for what they are. What do we mean? Well, we would posit that Intel didn’t buy McAfee for its core security applications any more than SAP scooped up Sybase for its core database product. Instead, in each case, the buyers really only wanted a small part of the business but found themselves nonetheless writing multibillion-dollar checks for a whole company.

For SAP, the apps giant really wanted Sybase’s mobile technology, essentially using the Sybase Unwired Platform to ‘mobilize’ all of its offerings. It’s nice that the purchase also brought along some data-management capabilities, particularly some pretty slick in-memory database technology. But for SAP, this deal was all about getting its apps onto mobile devices. However, Sybase’s mobile business only generated about one-third of total revenue at the company. So SAP ends up handing over $5.8bn in cash for a business that’s currently running at just $400m.

If anything, Intel is paying even more for the business that it truly wanted – or, at least, the business that’s most relevant – at McAfee: embedded security. Yet that’s only a small (undisclosed) portion of the roughly $2bn revenue at McAfee, the largest stand-alone security vendor. Tellingly, Intel plans to operate as a kind of holding company, letting McAfee continue undisturbed with its business of selling security applications to businesses and consumers.

McAfee doubles down with tenCube

August 10, 2010

Contact: Jarrett Streebin

McAfee recently made its second purchase this year in the mobile security field, picking up tenCube. The Singapore-based startup’s applications provide backup and restore for select data, device tracking, as well as remote lock and wipe for Android, BlackBerry, Symbian and Windows Mobile smartphones. Combined with McAfee’s recent acquisition of Trust Digital, recently disclosed in an SEC filing as a $33m purchase, the two deals help provide the largest stand-alone security company with the ability to secure and manage both consumer and enterprise smartphones.

Although mobile hacking is increasing, the several levels of control present in the devices and networks have prevented a major outbreak of malware infections. But due to the rapid expansion of mobile traffic, as well as the amount of sensitive information stored on and sent by these devices, the likelihood of such attacks is increasing. McAfee is well aware of these threats and has been expanding its offerings since its purchase of SafeBoot in 2007. Then, in May it purchased Santa Clara-based startup Trust Digital, providing McAfee with a robust set of Enterprise Mobility Management tools to help manage smartphones on employer networks. Now with tenCube, McAfee adds WaveSecure, the leading device security application for Android phones. WaveSecure is also offered on most other mobile operating systems, providing McAfee with a complete suite to sell to carriers and OEMs.

To say that mobile security has been a hot space recently would be an understatement. TenCube was the most recent of seven acquisitions this year – up from zero in all of last year and only one the year before. Although McAfee gets one of the best device security application makers with tenCube, there are still others left on the market. It’s likely that we’ll see tenCube’s competitors SmrtGuard and Lookout Inc, as well as other mobile device management players like Conceivium, BoxTone, MobileIron and Zenprise, attract M&A attention in the future as more players look to enter the mobile market or strengthen current offerings. Look for our full report in tonight’s MIS sendout.

Nokia hiring by acquiring

July 19, 2010July 21, 2010 Ben Kolada

In an unusual bit of dealmaking, Nokia bought geo-tagging vendor MetaCarta in April and then turned around and sold it three months later. The recent divestiture might appear to be a botched acquisition. However, as we look closer at the deal, it turns out that Nokia actually got what it wanted out of the purchase. It is retaining MetaCarta’s engineering team while shedding its enterprise accounts to Qbase. (Nokia didn’t really have any use for the startup’s enterprise business, which was largely oil and gas industry as well as government installations.)

Cambridge, Massachusetts-based MetaCarta employed approximately 20 development engineers, plus 15 enterprise sales and support staff. Although terms of the deal weren’t disclosed, we understand that Nokia paid about $30m for MetaCarta. If we look at the price in terms of what assets Nokia actually wanted to obtain, we pencil it out at about $1.5m per engineer. This is obviously an expensive way to recruit personnel, and underscores the increasing pressure that Nokia is seeing in the mobile-mapping space.

Nokia ‘hired’ MetaCarta’s engineers to reinforce the search feature in Ovi Maps, Nokia’s most popular application. MetaCarta is a specialist in geo-tagging unstructured text such as websites and emails. While mapping competitor Google does the same, MetaCarta’s information will be layered on NAVTEQ’s mapping data, which is arguably more detailed than Google’s maps.

The transaction is another in the long line of acquisitions that Nokia has made in its move toward mobile advertising. However, Nokia’s rivals have also been active in the mobile M&A space. Research In Motion reached for GPS vendor Dash Navigation in June 2009. In November 2009, Google outbid Apple and bought AdMob for $750m. In response, two months later, Apple picked up Quattro Wireless for an estimated $275m. Nokia hasn’t made a purchase of this magnitude, but we still believe it could be on the hunt for additional mobile providers. The company could build on its MetaCarta acquisition by buying location-based advertising vendor 1020 Placecast. The San Francisco-based firm is a major strategic partner of Nokia’s NAVTEQ, and would supplement MetaCarta’s geo-tagging capabilities.

The Motricity monstrosity

June 23, 2010 Brenon Daly1 Comment

Contact: Brenon Daly

Pulled prospectuses, cut terms and broken issues – it’s a singularly poor time for any company to go public. We’ve already chronicled the dispiriting ‘new normal’ for IPOs, with smaller offerings and lower valuations. But just when it seemed that the IPO market couldn’t sink any further, along came Motricity’s offering.

The debut last Friday from the mobile data platform provider had to be trimmed, both in the number of shares and the price. Originally, Motricity planned to sell 6.75 million shares at $14-$16 each. At the midpoint of the range, that would have netted the unprofitable company, which has rung up a total deficit of some $313m, about $100m.

Instead, Motricity managed to raise just half that amount. It ended up selling just five million shares at $10 each, raising just $50m. Since then, the newly public shares been underwater, having only changed hands in the single digits. How bad is that? Consider this: Motricity’s valuation as a public company ($350m) is less than the amount of money that it raised as a private company.

HTC bids on mobile ads

June 10, 2010June 16, 2010

Contact: Jarrett Streebin

In the shadow cast by Apple’s iPhone 4 release, HTC’s purchase of Paris-based Abaxiaon Monday went largely unnoticed. Granted, it was a small deal, costing HTC just $13m. But it has the potential to be a big deal, since it bolsters HTC’s offering in the emerging mobile advertising market.

Abaxia, which has worked with HTC since 2001, offers a cross-platform UI for idle screens. HTC already has a UI called the HTC Sense that sits on top of Google’s Android OS. The Taiwanese device vendor has incorporated its own custom applications and some MDM capabilities into Sense. While similar, Abaxia offers a platform for pushing mobile advertising to idle screens. This acquisition provides HTC a modest entry into an area that Apple has already staked out with its iAd product.

Although HTC entered the North American and European markets as a white-label device for carriers, its advanced devices and early support for Android have boosted the value of its brand. Customers have been snapping up the phones, with both Verizon and Sprint reporting they have sold out of some HTC devices. The Droid Incredible and EVO 4G are the strongest competition to Apple’s iPhone 4, which means they are also comparable ad delivery platforms. Now that HTC has proved it can compete with Apple devices, it’s time to take on Apple’s iAd.