Contact: Scott Denne
Audience takes a different angle to its customer concentration problem with the $41m purchase of Sensor Platforms. The rationale behind the acquisition is similar to Cirrus Logic’s $488m pickup of Wolfson Microelectronics in April – both audio component providers get the vast majority of their revenue from a single phone maker, and while Cirrus took out Wolfson to find more wiggle room in the cell phone sector (it hopes to upsell Wolfson’s low-end device makers), Audience’s M&A answer to the concentration conundrum is to find new markets.
Audience has wrestled with the downside of overreliance on a single vendor in the past. In mid-2012, Apple accounted for more than half of Audience’s revenue, but that number has steadily slipped since, reaching 5% last quarter as Apple opted not to use Audience’s technology in iPhone 5 models. That announcement in September 2012 carved 63% off of Audience’s stock price. Today, Audience’s growth has rebounded, but the stock hasn’t gotten back to its highs and 74% of sales come from Samsung. (Not coincidently, Apple accounted for about 80% of Cirrus’ business in 2013.)
Companies selling voice processors and other audio components for cell phones are boxed in. Smartphones are the fastest-growing segment of the market, but that market is dominated by two players. According to a March survey by ChangeWave Research, a service of 451 Research, 70% of people planning to buy a smartphone in the next 90 days planned to purchase an Apple or Samsung device – Motorola occupied third place with a whopping 3%.
In reaching for Sensor Platforms, Audience aims to crack into the market for wearable devices by integrating Sensor’s motion technology into its voice processors. It’s smart for Audience to snag a software firm with 20 employees that likely has a low burn rate, meaning there’s little downside to the deal aside from the upfront price. Today, however, there are no clear applications for a chip that combines voice processing with motion sensing in the wearables space (Sensor’s business is currently in phones), and Audience could remain vulnerable to the whims of a single OEM for several years.
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