Gemalto, SIM card maker turned “world leader in digital security” (I wonder how many companies claim that title; it’s like boxing, it seems) announced it would subscribe to a capital increase in Netsize, turning Gemalto’s share (24% pre-money) into a majority position.
This may well signify another move towards a closer tie to highly integrated hardware/software/service solutions on the mobile value chain. Gemalto is one of the leaders on the SIM card side, it manufactures SD cards, USB tokens, smart banking cards, etc. Netsize sits on the service side of things: it provides SMS and MMS delivery, is one of the leading mobile payment providers and provides content management platforms. Glue it together, and it becomes a vertically integrated solution from the same mould. Has someone been reading Apple’s philosophy?
Besides these points, cross-selling opportunities would appear to be fairly obvious, too. The only mismatch could be that Gemalto focuses on digital security (they list mobile connectivity, identity and data protection, credit card safety, health and transportation, e-government and national security). Alas, no messaging and entertainment here, the two main areas of Netsize’s business.
This little mismatch is not unprecedented: does anyone remember the VeriSign acquisition of Jamba? Whilst it seems it may (just) have been paid off, the match between the companies was never really there, it seems. Let’s hope the Gemalto-Netsize story will be a brighter one.
Now, this is a big deal: Motricity puts $135m in cash onto the table of the under-pressure Infospace people to acquire the remains of the Infospace mobile business, including search, storefronts, portals and messaging. The deal was financed by existing investors Carl Icahn and VC Advanced Equities (see reporting from MoCoNews here and here).
The acquisition marks the end of an odyssey into mobile by Inforspace, in which it first acquired and then effectively destroyed some of the brightest stars on the mobile content sky, including game developers Atlas (bought for $6m, sold for $1.5m), Elkware (bought for some $26m and then closed) and IOMO (bought for $15m, then closed in August 2007) as well as ringtone giants Moviso. They lost people, money and ultimately the businesses (e.g. IOMO’s founders have recently opened their new shop, Finblade). What a battlefield…
Motricity’s, so far predominantly a platform and storefront provider, entrant into the increasingly competitive content publishing space comes at a time where more and more players try to extend their reach on the value chain: one sees platform providers expanding into master content provider relationships, one sees publishers (e.g. Player X) seizing the same position, and all are in a quest to concentrate enough revenue and margin in order to be able to run a profitable business in an environment where still the majority of players are losing money.
The challenge for Motricity will be to grow its business outside the US, and this is arguably where the risks are hiddedn. In the US, the company claims to have now grown their distribution footprint to 11 of “top 13″ North American carriers (which leave another 10 that are apparently not top), which however seems OK since they add two of the biggies which they couldn’t reach before, namely mighty Verizon and AT&T (I still prefer the name Cingular!). The gamble is arguably being mitigated by the presumed synergies through the search, portal and messaging business, and this is where I suspect the balance of risk lies in respect of the financial considerations: because it harnesses Motricity’s existing business, the venture into the publishing side of things appears somewhat less risky. All in all, a deal that might just make sense; if the money is adequate? Who could say? What proportion of growth will come through which part of the business? Hmmm. There have been deals that, on the face of it, looked more reckless in the past (remember the seemingly atrocious $145m Jamdat paid for Blue Lava [incl. $8m non-breakup fee to Tetris, LLC])? It paid off for them as then EA bought them for a rather sweet $680m. I would not suggest that the same will happen to Motricity although, looking at the monies invested into them to date, it will just about have to be the exit its investors are looking to.
