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Verizon Acquires Jaunt For AR And VR Tech

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About: Verizon Communications Inc. (VZ)
by: Donovan Jones
Summary

Verizon has acquired Jaunt for an undisclosed sum.

Jaunt has developed augmented reality and virtual reality technologies.

For VZ, the deal adds to its growing AR/VR content and technology efforts as it prepares for the next wave of media and entertainment offerings.

Quick Take

Verizon (VZ) has acquired Jaunt for an undisclosed amount, according to a news report.

Jaunt has developed technology that enables capturing and publishing human forms in augmented reality and virtual reality [AR and VR] content.

VZ likely acquired Jaunt for a sharply reduced price to add to its burgeoning mobile AR/VR content efforts.

Target Company

San Mateo, California-based Jaunt was founded in 2013 and has developed the XR Cast technology that enables capturing and publishing of human forms in AR and VR content.

Management is headed by CEO Mitzi Reaugh, who has been with the firm since 2016 and was previously CEO and Co-Founder at GoodLooks.

Below is an overview video of the company’s XR Cast capturing technology:

Source: Jaunt

Company partners and major customers include:

  • AT&T (T)

  • Snapchat (SNAP)

  • Facebook (FB)

Source: Fortune

Investors have invested at least $100 million in the company and include Axel Springer (OTC:AXELF), Evolution Media, The Madison Square Garden Company (MSG), Sky, TPG Growth, ProSiebenSat. 1 Media (OTCPK:PBSFF), GV (GOOG), Redpoint, InnoSpring Seed Fund, Disney (DIS), and Highland Capital Partners among others. Source: Crunchbase.

Market And Competition

According to a market research report by Market Research Engine, the global virtual reality [VR] market is projected to exceed $43 billion by 2024.

This represents a very strong CAGR (Compound Annual Growth Rate) of 33% between 2018 and 2024.

According to another market research report by Market Research Engine, the global VR and AR market is projected to surpass $117 billion by 2024.

The main drivers for this expected growth of the VR market include the increasing acceptance of head-mounted displays in the entertainment and gaming sector as well as the use of VR for training and imitation in defense.

Major factors driving AR market growth include an increasing demand from the retail, e-commerce, and medical sectors for 3D Visualization, as well as a growing interest of large tech companies in the technology.

Major vendors that provide VR or AR solutions include:

Source: Sentieo

Acquisition Terms And Financials

Verizon didn’t disclose the acquisition price and terms and didn’t file a Form 8-K or provide a change in financial guidance as a result of the acquisition, so it was likely for a financially non-material amount.

A review of the firm’s most recent published financial results indicate that as of June 30, 2019, VZ had $1.9 billion in cash and equivalents and $225.2 billion in total liabilities, of which long-term debt was $104.6 billion.

Free cash flow for the six months ended June 30, 2019, was $7.9 billion.

In the past 12 months, VZ’s stock price has risen 8.9% vs. the U.S. Telecom industry’s rise of 6.5% and the U.S. market’s rise of 1.4%, as the chart indicates below:

Source: Sentieo

Earnings surprises have been positive in eight of the last twelve quarters, per the chart below:

Source: Seeking Alpha

Analyst sentiment in recent earnings calls has dropped markedly from a recent mid-2018 high, as the linguistic analysis shows here:

Source: Sentieo

Commentary

VZ acquired Jaunt’s technologies after unsuccessfully attempting to acquire Spinview Global’s virtual reality technology in 2018.

As the report in TechCrunch stated:

Verizon Media (of which TechCrunch is a part of) already has some assets in the VR space, including the virtual reality content studio RYOT, which has been playing around with 360 content and general AR/VR content. The company’s Envrnmnt arm is basically focusing on making AR and VR apps run more efficiently on mobile, which is something Jaunt has had to be mindful of as they’ve tried to focus on broadcasters that need to deal with bandwidth strains.

Jaunt raised a large amount of financing from major corporate and venture capital firms and was considered one of the top-funded firms in the virtual reality space.

However, the company pivoted away from virtual reality to augmented reality but apparently could not make a business on the resources it had left.

With the deal, VZ is picking up some interesting VR and AR technologies at what is likely a very low price for it.

I expect to see more acquisitions and development in the VR/AR space by Verizon as it seeks to continue to broaden its content offerings while pursuing a strategy that is more than just a ‘dumb pipes’ approach in its competition with other major telecommunications firms.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.