Category: mobile

Comverse augments digital services portfolio with Acision purchase

Scott Denne

Contact:  Scott Denne Declan Lonergan

Comverse comes off the divestiture of its BSS division to make its largest – and only significant – acquisition in nine years. The mobile service systems vendor is paying $135m in cash, $75m in stock and a $35m earnout to acquire Acision. The deal carries an enterprise value of $367m – Comverse will take on $157m in Acision debt – and values the target at 1.9x trailing revenue.

The multiple is well below the median for software M&A, as Acision has struggled to diversify its business beyond SMS messaging. Comverse hasn’t been immune to those struggles. In fact, its business commands just 0.7x trailing revenue on the public markets. Comverse’s management anticipates that this deal will enable it to return to growth by 2017.

As mobile operators’ revenue from traditional voice, voicemail and SMS continues to decline, both Comverse and Acision have been pursuing strategies based on diversifying their own businesses to address the operators’ changing requirements. Acision has improved its competitiveness in mobile messaging while also steadily expanding into new areas such as white-label OTT apps and enterprise messaging. The fit with Comverse, which remains a leader in voicemail but is also expanding in digital services, should be good. Though there may be overlap in some operator accounts, the combined entity will be a strong and credible player in delivering a broad suite of communications and digital service products to operators in all major regions.

We’ll have a full report on this transaction in tomorrow’s 451 Market Insight.

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Size matters: Charter acquires Time Warner

Scott Denne

Contact: Kenji Yonemoto Rich Karpinski

Charter Communications’ purchase of Time Warner Cable for $56.7bn and its recent acquisition of Bright House Networks for $10.4bn are both about taking its traditional cable/fixed broadband business to the next level by scaling a national player (and the latest with a cutthroat CEO in cable legend John Malone). The move also cuts off an aggressive competitor at the pass, as France-based Altice last week made an offer for US-based cable operator Suddenlink Communications and floated the idea of going after Time Warner itself.

The key will be finding the right mix of traditional cable service, broadband-fueling OTT and content deals flowing across each and every access medium. In all of these endeavors, scale helps tremendously – as AT&T is pursuing with its $48.5bn DIRECTV buy, Verizon with its aggressive OTT video plans and $4.4bn AOL pickup, and Comcast with… well, Comcast looks like it’s going to need its own second act (with perhaps a landscape-changing mobile merger being just the ticket, though we’ll leave that conjecture for another day).

Will this latest telecom deal get done? The impact will certainly be more ‘pro-competitive.’ With today’s purchase, Charter will grow to 24 million subscribers, compared with Comcast’s 27 million – making this acquisition a much different proposition than the ‘big getting bigger’ via the abandoned Comcast-Time Warner combination.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

App Annie buys Mobidia to improve mobile app usage intelligence

Mark Fontecchio

Contact: Mark Fontecchio

App Annie makes its second acquisition in the past year with the pickup of Mobidia. The target, with 30 employees, provides mobile app usage data for mobile carriers and application providers. Its technology will augment App Annie’s existing analytics for app stores and downloads.

The deal comes just a few months after App Annie, founded in 2010, secured a new $55m round of funding, bringing its total financing close to $100m. It has been about a year since App Annie’s last acquisition, when it bought its main competitor Distimo.

The purchase of Mobidia will give App Annie added momentum in the industry, expanding its app usage dataset and solidifying the company’s positioning beyond app store analytics as a provider of market intelligence for the global app economy. The global number of active mobile application users is projected to increase 20% this year to 2.17 billion, while mobile apps downloads will jump 35% to 185.94 billion, according to 451 Research. As more companies rely on mobile application revenue, demand for market intelligence on mobile apps will continue to rise.

tracking-mobile-apps-users

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What do the main buyers in the tech M&A market see for the year ahead?

Brenon Daly

Contact: Brenon Daly

Last year was a big year for tech M&A, but what was the biggest deal of year? To find out, we asked the main buyers in the tech M&A market: corporate development executives. As part of a broader survey, we had them look at the handiwork of their peers and give us their pick for the most significant tech transaction of 2014.

So which deal got the Golden Tombstone? Facebook’s $19bn cash-and-stock acquisition of WhatsApp. The purchase last February by the 10-year-old social network represents the largest VC-backed exit in history. It drew twice as many votes as the second-place transaction, SAP’s $8.3bn reach for Concur Technologies, which is the largest-ever SaaS acquisition.

Additionally, we asked the corporate acquirers what they expected for the coming year. Their responses point to a continuation of the record run of tech M&A. More than half of corporate development executives (58%) indicated that they expect their company to pick up the pace of dealmaking in 2015. That stands as the highest forecast in a half-decade and compares with just one in five respondents (6%) projecting a slowdown in their M&A activity in the coming year.

Other highlights from the survey of corporate development executives include a bearish outlook for startup valuations, a record forecast for IPOs and the expectation of unprecedented amount of competition in deals from their private equity rivals in 2015. Subscribers: See the full report.

Top vote getter for ‘most significant tech transaction’

Year Deal
2014 Facebook’s acquisition of WhatsApp
2013 IBM’s acquisition of SoftLayer
2012 VMware’s acquisition of Nicira
2011 Google’s acquisition of Motorola Mobility
2010 Intel’s acquisition of McAfee
2009 Oracle’s acquisition of Sun Microsystems
2008 Hewlett-Packard’s acquisition of EDS
2007 Citrix’s acquisition of XenSource

Source: 451 Research Tech Corporate Development Outlook Survey

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Mandalay parlays Appia buy into tighter carrier relationships

Scott Denne

Contact: Scott Denne

Mandalay Digital Group makes its most ambitious deal yet with the $65m acquisition of Appia in its drive to carve away at the dominance of Google, Apple and Facebook in the application discovery and installation business. Mandalay has accumulated tools that enable wireless carriers to get back in the app distribution game – a market they were essentially booted from with the launch of the iPhone and the growth of the smartphone sector that followed.

At first glance, the idea that carriers could carve away at the dominant app distribution channels seems like a long shot. And in the US, it is. In emerging markets, however, carriers have an advantage as they have existing payment relationships with customers who often lack credit cards and rely on carrier billing to buy apps and content.

Since its acquisition of Digital Turbine Group, Mandalay has built and bought tools for carriers to get their cut of the app industry, such as payments, app marketplaces and preloaded apps. With Appia, it adds a mobile ad network with an app-install focus to the mix. Mandalay expects the deal to boost both businesses as it can bring Appia’s gains in exposure to more carrier-specific channels, such as preloaded apps and carrier app stores. Mandalay also obtains another monetization channel to offer carriers.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

Waterfall capitalizes on Archer’s bankruptcy

Scott Denne

Contact: Scott Denne Sheryl Kingstone

Waterfall sifts through Archer’s bankruptcy to pick up some mobile marketing and messaging assets. The acquirer will pay $2.9m upfront (plus as much as $1m more if certain closing requirements are met) for Archer’s marketing services division, which is essentially the iLoop Mobile business that Lenco Mobile (Archer’s parent company) bought in 2011 for $42m.

The trailing revenue of the assets Waterfall is getting isn’t clear, as it is leaving behind a side business in healthcare-focused mobile messaging. What is clear is that iLoop hasn’t fared well under Lenco’s ownership. The unit posted about $5.5m in trailing revenue, less than the $9m we estimate it had at the time of its sale.

This transaction is small but indicative of a coming trend toward consolidation in mobile marketing and messaging. The space is intensely fragmented between mobile advertising networks, mobile website and content creators, mobile payment firms, aggregators, mobile publishing and application development providers, and mobile analytic vendors.

Like Archer, several other companies could quickly find themselves in financial distress. In fact, one of Archer’s competitors, Velti, filed for bankruptcy a year ago. Others could land lucrative exits as marketing dollars continue to shift toward mobile and businesses like Adobe, Oracle and salesforce.com that invested heavily in email marketing look to expand their mobile messaging offerings.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

Microsoft’s mobile efforts are tabulating gains

Scott Denne

Contact: Scott Denne

Record tablet sales helped Microsoft beat revenue expectations by more than $1bn last quarter. Redmond reported $908m in sales from its Surface tablet devices in the quarter – twice the tally of the previous quarter and the same quarter a year ago. The momentum looks set to continue.

According to an August survey by ChangeWave Research, a service of 451 Research, 20% of consumers looking to buy a tablet in the next quarter planned to purchase one built by Microsoft. Among corporate IT departments, Microsoft commanded the same 20% of respondents, putting it in second place behind Apple in both surveys.

The results of Microsoft’s efforts in smartphones have been tepid, but it’s essentially the only vendor growing market share in the tablet business. The company gained the most ground in our consumer survey, nearly doubling the positive responses from 11% in the same survey a quarter earlier. Both Apple and Samsung lost ground in the consumer and corporate surveys.

Millennial adds mobile exchange in pickup of Nexage

Scott Denne

Contact: Scott Denne

Millennial Media turns to Nexage in a $107.5m acquisition to better position the mobile ad network into programmatic mobile advertising as it looks to return to growth. Most importantly, Nexage provides the publisher-facing pieces Millennial needs to offer a complete mobile ad stack that serves the entire ecosystem from advertiser to publisher – but it comes at a big price.

Nexage will cost Millennial $85m in stock and $22.5m in cash for the mobile-focused supply-side platform. For Millennial, that’s a hefty amount as it will have to print 37 million new shares (26% of the total outstanding post-close) and use up almost one-quarter of its cash. In return, it doesn’t immediately add much to the top line, as Nexage posted about $8m in trailing revenue. Roughly $45m in ads ran through its system, making it about one-sixth the size of Millennial (closer than Nexage’s revenue would suggest), but since Nexage is an exchange, rather than an ad network like Millennial, it only books as revenue the portion of the spending it keeps.

Millennial already faced competition from several dozen ad networks and DSPs, and with this deal will add a smattering of ad exchanges to that mix. But in one way, this purchase pivots it away from much of the competition in mobile. Most of the mobile ad-tech industry – especially the programmatic portion – is aimed at serving performance-based advertisements, particularly geared toward driving app downloads. While this is still part of Millennial’s business, it’s a shrinking segment and the company has turned to brand advertising to fill the gap. Nexage, with its focus on larger publishers, brings Millennial an inventory set that’s desirable to those advertisers.

GCA Savvian advised Nexage on the sale, while LUMA Partners advised Millennial.

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At the Wall Street box office, Alibaba is a blockbuster

Brenon Daly

Contact: Brenon Daly

In Hollywood, a blockbuster debut that is expected to help support the release of other films around the same time is known as a ‘tentpole.’ And while that phenomenon may have also played out in the IPO business in the past, no one is expecting the Alibaba debut later this week to help prop up other offerings. Quite the opposite, in fact.

To understand why, think of Alibaba as Godzilla (the monster, not the movie). The Chinese e-commerce giant is looking to come to market – backed by no fewer than 20 investment banks – and create almost a Facebook-size valuation overnight. The sheer size of Alibaba’s record-setting offering of some 320 million shares at (currently) $68 each basically pushes other IPO candidates outside the awning of any Alibaba tentpole.

With Alibaba and its underwriters looking to place billions of dollars of equity, buyers are unlikely to step right back in to buy smaller-ticket tech IPOs. That means solid offerings that are in process, such as Cyber-Ark and HubSpot, may initially open a bit soft at the box office that is Wall Street.

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BlackBerry’s software sweetens

Scott Denne

Contact:  Scott Denne

While BlackBerry continues to decline, enterprise software provided a bright spot in the struggling phone maker’s earnings announcement. Though only 7% of BlackBerry’s overall revenue, software – mostly licenses of email server and mobile management software – moved up to $67m, a 15% increase on a sequential basis. Software declined on a year-over-year basis, as did every other part of the business, but the falloff was slower when compared with other divisions.

The uptick in software suggests that BlackBerry is holding on to enterprise clients far better than individual customers. That’s born out in surveys by ChangeWave Research, a service of 451 Research, where 20% of corporate IT buyers in May reported plans to buy BlackBerry phones in the coming quarter. Though that’s down by two percentage points from a quarter earlier, the results are exponentially better than the consumer market, where only 2% of smartphone buyers plan to pick up a BlackBerry.

With its decision earlier this year to provide customers of AirWatch, Good Technology and MobileIron with free licenses of its own mobility management software, BlackBerry doesn’t look ready to concede the enterprise just yet.

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