The recent market downdrafts are starting to signal upcoming consolidation in the mobile space. This is a two-fold effect. First, many of the smaller players hoping to IPO and cash out are not going to get bank support as evidenced by recent delays in both Zynga (ZYNG) and Groupon (NASDAQ:GRPN) IPOs and poor performance by recent media darling Pandora (NYSE:P). The second key is a lot of larger companies are sitting on cash that is earning next to nothing in interest and to keep themselves from being takeover targets need to either buy back their own shares or buy other companies at discount values.
The most recent mobile company on a buying spree has been Velti (VELT). The company announced the purchase of Air2Web, a provider of mobile customer relationship management (mCRM) solutions in the United States and India for many of the world's largest and most trusted consumer brands. Air2Web's technology and data reach are very complementary to Velti's mGage platform. This transaction deepens Velti's U.S. footprint and provides it improved access to carriers and verticals such as the financial services industry. In India, Air2Web expands Velti's footprint in the second largest mobile market by subscribers, providing Velti a stronger foundation to continue to service the Indian market. In addition, Velti also announced today that it signed a definitive agreement to consummate the previously announced acquisition of the remaining interest in CASEE. CASEE is the largest mobile ad exchange and mobile ad network in China. Both acquisitions increase Velti’s footprint in China, India and the United States.
Augme Technologies (AUGT.OB), another mobile leader, just completed two acquisitions in the last quarter and these two companies were Hipcricket and JagTag.
"We believe that the acquisition of Hipcricket will allow Augme to provide the most powerful best-of-breed mobile marketing and advertising solutions to global brand name leaders, backed by strong intellectual property portfolios that include patented technology and software-as-a-service (SaaS) technology platforms," noted Paul Arena, Chief Executive Officer of Augme Technologies, Inc.
Recent high profile nationwide ad campaigns seem to already be proving this out and include FordDirect's Mobile Marketing Texting Service, Macy‘s Backstage Pass Campaign and MillerCoors Blue Moon on the Fly campaign.
The JAGTAG acquisition allows the delivery of multimedia to both smart phones and standard phones without requiring the consumer to download an application prior to use. While smart phones are the obvious future, there will continue to be a high percentage of standard phones that can be reached in the U.S. and in developing countries going forward.
Augme is headquartered in New York City, with operations in Seattle, Atlanta, Dallas, Los Angeles, Chicago, Tucson, Mexico City and London. They have done an excellent job expanding their footprint within the United States and are now starting to extend internationally in Europe and Mexico.
Another mobile company that recently put itself in play is Motricitiy (MOTR). Recently the company announced that they have entered into a $20 million term loan financing arrangement with High River Limited Partnership, which is beneficially owned by Carl C. Icahn, who beneficially owns approximately 14.6% of the company's outstanding shares. Motricity also announced that it has retained GCA Savvian Advisors to assist the company in exploring strategic options, including a spin-off, sale or other transaction involving the company's carrier business and mobile marketing and advertising business. Stay tuned, but it seems like the pace of change only is accelerating since Motricity only went public 18 months ago with a $250M IPO.
A final company that has been active has been Oracle (NASDAQ:ORCL) with its recent purchase of GoAhead software out of Bellevue, Washington. GoAhead makes software used in the communications industry. Obviously even companies as large as Oracle recognize it is easier to buy certain software than to spend hundreds of millions creating and then trying to win away established clients. Market penetration and established clients bases cannot be undervalued in any type of buy out.
It is not hard to imagine in a down market that many of the high flying IPOs and solid performing established companies might not get beaten down, making them targets. Larger companies sitting on billions will be looking for key pieces that bring wider foot prints to their business and new clients that can be sold additional features and functionality.
Disclosure: I am long AUGT.OB.