Category: mobile

Amobee moves past mobile

Scott Denne

Contact: Scott Denne

Amobee’s pair of acquisitions today shows a dramatic increase in the mobile ad network’s ambitions since becoming a subsidiary of SingTel in late 2012. The purchases of Adconion and Kontera for a combined $359m take Amobee beyond offering mobile advertising products and into selling advertisers the capability to reach their intended audience across digital mediums.

The pickup of Adconion brings Amobee the ability to send targeted ads to individuals across different ad channels (mobile, video, display, social, etc.) It also didn’t hurt that most of the target’s $185m in 2013 revenue came from North America, giving Amobee an instantly larger footprint in that market (about 40% of Amobee’s revenue comes from Asia). With Kontera, Amobee obtains technology that improves contextual understanding of where and how ads are placed on the Web and mobile devices.

These deals stand in contrast to Amobee’s only two previous acquisitions, which were mobile-focused technology tuck-ins (Gradient X and Adjitsu.com). The increasing importance of audience-specific, rather than channel-specific, digital media is a trend that’s playing out across the ad-tech industry as advertisers seek to optimize interactions with target audiences, rather than experiment with individual ad channels.

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Vantiv nabs Mercury for $1.65bn

Scott Denne

Contact: Scott Denne Jordan McKee

Amid a slowdown in its growth, Vantiv picks up payment technology processor Mercury Payment Systems for $1.65bn in a bid to boost its integrated payment offerings. This is Vantiv’s second acquisition of an integrated payments company in less than a year, a reflection of the importance of this emerging corner of the point-of-sale (POS) market.

Founded just over a decade ago, Mercury sells integrated payment-processing services that are built to connect with other business software, such as CRM or accounting systems. As more software becomes available to SMBs, more of them are exchanging isolated payment systems (where Vantiv’s roots lie) for integrated payments. Not only is this trend likely to accelerate as tablets and mobile devices gain a larger footprint in POS systems, but integrating payments with other systems will make it less likely that customers would replace Vantiv/Mercury. Vantiv first got into integrated payments with its $162.5m purchase of Element Payment Services in July.

While Vantiv’s revenue grew 14% in 2013, the company expects to post just single-digit percentage growth in 2014, so gaining a bigger stake in an expanding market like integrated payments is an attractive proposition. The deal also provides Vantiv with a new channel to target SMBs, as Mercury sells its services through software developers and a network of local POS distributors.

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MobileIron forges on toward IPO

Scott Denne

Contact: Scott Denne

Mobile device management (MDM) vendor MobileIron unveiled its S-1 this week, posting strong revenue growth as it inches toward becoming a profitable business. Our surveys indicate that there’s more to come: MobileIron is on the cusp of pulling ahead in a market where spending shows few signs of slowing.

The company finished 2013 with $105.6m in revenue, up from $40.8m in 2012. And it isn’t having a hard time managing that growth. MobileIron’s operational costs are growing at a slower rate than revenue and while it is still far from profitable, its losses shrank to $32.5m last year from $46.5m in 2012. Although its revenue growth is decelerating as it scales, it’s still growing fast: in the most recent quarter, revenue doubled year over year to $28m.

Surveys by TheInfoPro, a service of 451 Research, indicate that there’s plenty of blue sky left for the MDM market and MobileIron. In a survey of IT pros last year, 46% expected to spend more on MDM in 2014 than in 2013, up from 41% a year earlier. In those surveys, MobileIron was the second-most-implemented MDM provider (Good Technology was the first, with AirWatch in third and BlackBerry a distant fourth), and was in more planned deployments and trials than any other vendor.

 

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Vodafone continues consolidation in Europe with Ono acquisition

Scott Denne

Contact: Scott Denne

Vodafone picks up its second cable company in a year, spending $10bn on a cash- and debt-free basis on Spain’s Grupo Corporativo Ono amid an uptick of telecom consolidation in Western Europe. The deal has similarities to Vodafone’s $10.2bn purchase in June of Germany’s Kabel Deutschland.

Both transactions get Vodafone deeper into markets where it already offers some services, such as mobile and Internet access. However, the rationale for the two deals is different. While both add to the top line, the chance to grow revenue seems to be front and center in the Ono buy, where Vodafone sees an opportunity to market wireless services to the target’s customers and take share from Telefonica, which powers Ono’s existing mobile service, by transitioning those customers to Vodafone’s network. With the Kabel purchase, much of the logic for the deal came in the opportunity to lower costs by migrating Vodafone DSL customers in Germany onto Kabel’s coaxial network.

Vodafone’s move comes during a period of extraordinary consolidation of large telcos in Western Europe. So far this year, three telcos in that region have sold for more than $500m (including today’s announcement), for a total of $19.2bn of M&A. In all of last year there were four such transactions, combining for $32.2bn. In the preceding five years combined, such deals totaled only $22.2bn, according to The 451 M&A KnowledgeBase.

The hunt for additional revenue growth and cost savings comes as prices for wireless services in Europe are declining, and will continue to decline. The pricing pressure will amplify the need for further consolidation. In its most recent quarter, Vodafone’s own revenue fell 3.6% from a year earlier to $15.1bn, a drop that its management attributed to stiffer price competition. In Spain in particular, Vodafone’s revenue declined 14% due to increased competition from services offering combined wireless and wireline packages. Yankee Group, a unit of The 451 Group, anticipates that price squeeze in Europe will continue.

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AirWatch brings to VMware what few deals have before: revenue

Scott Denne1 Comment

Contact: Scott Denne

Aside from being its largest deal to date, the $1.54bn acquisition of MDM company AirWatch marks another milestone for VMware. While the rationale aligns with its other recent transactions, AirWatch itself does not. VMware typically acquires tuck-ins or early, promising technologies that bring it little revenue.

VMware’s dealmaking in the past two years has reflected its ambition to cover more of the IT stack. Working from a foundation in server virtualization, VMware extended into storage (picking up Virsto Software for $184m), networking (grabbing SDN startup Nicira for $1.26bn) and endpoints (buying Wanova, Desktone and now AirWatch).

Virsto was only doing a few million in sales by our estimate, Nicira was just starting to work with customers, and Wanova had just begun to grow its sales when it was taken out. Not so with AirWatch, which VMware expects will add $75m in revenue in 2014 (assuming a late Q1 close). In fact, according to an analysis of The 451 M&A KnowledgeBase, VMware has only twice in its history picked up companies with more than $25m in sales (Shavlik Technologies and SpringSource), and most have been far below that mark.

While $75m isn’t enough to immediately move the needle – VMware expects to post about $6bn in 2014 – it’s not surprising that the potential for a larger sales boost would appeal to VMware as it doesn’t put up the growth rates it once did, especially in software license revenue (as we noted earlier). License revenue grew just 9% in 2013, compared with 13% in 2012 and 31% the year before that.

VMware anticipates that there’s still plenty of upside in AirWatch and the MDM market, a thesis that aligns with our own surveys. According to TheInfoPro, a service of 451 Research, MDM is the top security concern, with 18% of respondents indicating that it was one of their top three pain points. In those same surveys, AirWatch moved up over BlackBerry to third place in 2013, from fourth a year earlier, as the most implemented MDM and mobile device security categories.

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Citrix nabs virtual app vendor Framehawk

Scott Denne

Contact: Scott Denne Michael Cote Chris Hazelton

Citrix picks up Framehawk just three months after Oracle took out Bitzer Mobile, which, like Framehawk, was developing products to enable enterprises to move their data and applications onto employees’ mobile devices. While there’s a real need for this service, the products have proved relatively simple for larger vendors to duplicate.

There’s a compelling story to tell around the need for such technology: the bring-your-own-device trend means employees are demanding access from devices of their choice, which puts pressure on IT to focus on controlling mobile apps and data directly, rather than just the device. Venture money has followed that story, with Framehawk having raised $16m and Bitzer landing $6m. And these types of app and data silo technologies have indeed become must-haves – so much so that the big enterprise mobile management players have built similar offerings, making it more difficult for the pure-play vendors to gain traction.

Citrix itself will not be offering Framehawk as a stand-alone product. Instead, it’s picking up the technology and engineering team with the aim of integrating it into XenApp and XenDesktop to improve their ability to operate across subpar wireless networking conditions. This makes sense, as delivering applications in methods like this (i.e., not installed locally on each desktop) is Citrix’s core business, and must be defended and evolved.

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Under Armour expands mobile community with MapMyFitness buy

Scott Denne

Contact: Scott Denne

The opportunity to build a community of customers is pushing non-technology companies toward mobile application businesses. The latest such deal, Under Armour’s $150m acquisition of MapMyFitness, shows the opportunity for consumer goods vendors to enter new markets – and expand current markets – by moving into mobile.

Under Armour is covering the entire purchase price in cash, though it hasn’t yet decided if the funds will come from its own balance sheet (it held $186m in cash and equivalents as of September 30), its revolving credit facility or a combination of the two. Allen & Co advised MapMyFitness on its sale, while Peter J. Solomon Company advised Under Armour.

While Under Armour already sells some wearable technology that monitors athletes, it lacks an online and mobile community, which traditional tangible goods suppliers are seeing as increasingly crucial to brand value and customer retention. MapMyFitness changes that. Founded in 2009, the company quickly grew to more than 20 million registered users. And unlike many other fitness applications, which offer little in the way of social networking, MapMyFitness provides a wide-reaching social network of fitness enthusiasts, as well as a directory of fitness events.

The desire to build a live, interactive community reflects the rationale in other similar deals this year, such as Hasbro’s pickup of Backflip Studios, in which the toymaker cited the mobile gaming firm’s existing network of users as part of the motivation for the transaction, and Lonely Planet’s recent acquisition of TouristEye, which has the potential to greatly expand the reach and real-time information of the travel-book publisher’s existing Web community.

Purchases of mobile app developers by non-tech companies this year

Date announced Acquirer Acquirer sector Target Deal value
November 14, 2013 Under Armour Sporting goods MapMyFitness $150m
November 13, 2013 Lonely Planet Travel book publisher TouristEye Not disclosed
August 14, 2013 The Occasions Group Invitations and greeting cards Red Stamp Not disclosed
July 8, 2013 Hasbro Toymaker Backflip Studios $112m

Source: The 451 M&A KnowledgeBase

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In constant transition, Fiberlink sells to IBM

Scott Denne

Contact: Ben Kolada Scott Denne

Fiberlink Communications has been constantly evolving since its launch more than two decades ago. The company found its sweet spot in fast-growing, cloud-based mobile device management software, which has led to its sale to IBM.

Founded in 1991, Fiberlink spent most of its life building a VPN services business that it hoped would eventually hit $100m in sales, but its top line began to shrink as customers viewed those services as commodity. About six years ago, it began offering additional services for IT administrators to monitor and control mobile usage, eventually pivoting the company into the cloud-based enterprise mobile management business it has today.

According to sources, the pivot paid off handsomely – revenue for the cloud product, which launched in 2011, grew to account for about 40% of the $50m in sales the company generated last year. Fiberlink raised at least $84m in venture funding. Deutsche Bank Securities advised Fiberlink on its lengthy sale process (we first heard the company was for sale a year ago).

For IBM, the deal is the latest in a string of mobile acquisitions panning sectors from application development to fraud prevention. The purchase of Fiberlink gives Big Blue a SaaS-based service to complement its on-premises BigFix endpoint management software and a single offering for managing mobile devices and applications.

IBM’s most recent mobile deals

Date announced Target Sector
November 13, 2013 Fiberlink Communications Mobile device management
October 3, 2013 Xtify Mobile messaging
October 1, 2013 The Now Factory Mobile device analytics
August 15, 2013 Trusteer Anti-fraud
April 22, 2013 UrbanCode Software development tools

Source: The 451 M&A KnowledgeBase

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LivingSocial moves $260m worth of product in its biggest sale

Scott Denne

Contact: Scott Denne

In an unusual divestiture among close competitors, LivingSocial sells its Korean Ticket Monster business to Groupon for $260m. Looking past the surprising development that LivingSocial will shortly own about $160m in stock (the rest is cash) of a rival, the transaction shows the companies’ paths diverging as the daily deals market cools down.

Sales at both businesses soared in the early days of flash sales and have since stalled as the novelty of the concept faded. To bounce back, LivingSocial, whose revenue was down this quarter for the first time (its financial performance is made public in Amazon’s filings, as the company has a 31% stake in LivingSocial), is expanding its role as a marketing partner for merchants, while Groupon is taking a different tack by moving into physical goods.

Ticket Monster fits well with the new Groupon – more than half of the Korean company’s business is physical goods. Last quarter, physical goods sales at Groupon set a record, accounting for more than one-third of the company’s $595m in revenue. While the new strategy has enabled Groupon to grow revenue as its daily deals business shrinks, its profits have taken a hit – margins on its physical goods are 10% compared with 86% from its merchant business. That’s OK for Groupon, which has $1.1bn in cash on hand, but it’s a less appealing strategy for LivingSocial, which is still private, unprofitable and raised another $110m from investors earlier this year. Following this transaction, physical goods will be less than 10% of LivingSocial’s business.

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Is the new (and improved?) BlackBerry ready to deals again?

Brenon Daly

Contact: Brenon Daly

After a sale process that was equal parts aspirational and delusional, BlackBerry has wrapped up its review of ‘strategic alternatives’ with a bit more money and a few new executives. It’s highly unlikely that combination – however well-intentioned – will do much to change the immediate trajectory at the Canadian company. A paltry 2% of customers who plan to buy a cell phone before the end of the year intend to pick up a BlackBerry, according to a September survey by ChangeWave Research, a service of 451 Research.

And candidly, there’s probably not much that can be done to change the final outcome at BlackBerry, which appears to be set for a long, slow grind toward oblivion. That’s at least one conclusion we would draw from the fact that all of the would-be buyers for the company passed on it. Even the kind-of/sort-of ‘stalking horse’ bid trotted off, with Fairfax Financial opting to limit its exposure to its largest holding by investing $1bn in BlackBerry rather than acquiring the whole thing.

One area where we may well see a change at BlackBerry, however, is in M&A. Understandably, the company hasn’t been a buyer as it has been trying to sell itself. The company hasn’t done an acquisition since March 2012, back when it was still known under its original name, Research in Motion.

But with BlackBerry getting a few more coins in its treasury from Fairfax, and an incoming CEO who has done some valuable acquisitions in the past, it could look to go shopping once again. (Don’t forget that BlackBerry’s new CEO, John Chen, picked up a handful of mobile technology companies when he was running fading database company Sybase. The mobile offerings were the primary asset that SAP wanted at Sybase when it paid $5.8bn for it back in 2010. At the time, SAP applications didn’t even run on the core Sybase database.)

Already the rumor-mill has been churning on a potential acquisition for BlackBerry: OpenPeak. Although all the upheaval at BlackBerry would appear to make any acquisition right now unlikely, this pairing would actually make a bit of sense. OpenPeak built BlackBerry’s Secure Work Space for iOS and Android, which was released in summer. The offering plays to the (sole) remaining strength at BlackBerry – mobile security and data management for IT departments – at the same time acknowledging that the overwhelming majority of devices coming into the enterprise are not BlackBerry-powered. Owning OpenPeak could advance both of those initiatives at BlackBerry.