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An Attractive Buyout Play In The Mobile App Space

Leading tech researcher Gartner is forecasting a major jump in mobile app sales over the next four years. They estimate sales will surge from an already impressive $18 billion in 2012 to $61 billion by 2016.

"No matter how we slice it, the application market continues to grow at unprecedented rates, and increasingly across more borders," stated Peter Farago from Flurry Analytics. "With smart devices adoption rates more than four times greater than those witnessed during the 1980s PC revolution and twice as great as those seen during the 1990s Internet Boom, no other consumer technology has been more accessible than smart device application software. It's literally taking over the world."

All of this growth in the mobile app space comes with a major challenge: discoverability.

There are already more than one million mobile apps, and the market is growing exponentially. This presents a challenge to both users and developers. Rimma Kats from Mobile Marketer stated, "Marketers need to look at how to get consumers to download their apps and let their friends and family know about it."

A platform that helps users find the apps that will benefit them the most and helps developers get their apps noticed is sorely needed.

A California-based company we recently looked at has already begun to solve this problem with the development of a proprietary solution called the MEDL Brain.

The company, MEDL Mobile Holdings (OTCBB: MEDL), is a leading developer in the mobile app space with major clients that include Verizon, Taco Bell, The New York Times, Real Madrid and Medtronic. MEDL has also developed popular apps for well-known celebrities including MTV's Pauly D, Rampage Jackson, Sarah Silverman, and Cheech & Chong, and its Learn to Draw app was featured in the "Top 25 Best Apps of All Time" at MacWorld's Appolooza.

While MEDL's credentials as a top app developer are impressive, the inherent value of MEDL lies in its MEDL Brain technology, a revolutionary step forward for mobile applications that makes it easier for users to discover new apps and relevant mobile content.

Very different from a basic search technology, the MEDL Brain is actually a behavior-based recommendation engine that is capable of tracking individual user analytics and data in a way like never before. It learns how users utilize their mobile devices and then makes intelligent recommendations.

As a user plays, shops, researches, shares and enjoys their MEDL apps, the MEDL Brain gets to know them and compiles what the company calls a "Detailed Anonymous Profile." This profile is then leveraged to determine what recommendations it should make to each user.

Because of the highly targeted nature of these recommendations, MEDL is able to generate very attractive conversion rates, leading to increased app downloads and sales.

The revolutionary nature of its technology and the tremendous interest in the high-growth app market make MEDL an extremely attractive buyout candidate.

There is no shortage of examples of lucrative M&A transactions in the mobile space.

Google acquired mobile ad delivery platform AdMob for $750 million; Apple acquired AdMob's competitor, Quattro Wireless, for $275 million, and app search engine Chomp for $50 million; IBM acquired Worklight, a smartphone and tablet app developer, for a reported $70 million; Yahoo acquired online-ad technology company Interclick for $270 million.

Currently, MEDL has a market cap of only $10 million. Even using a modest lifetime value per user figure of $25 to $35, and factoring in MEDL's current base of 15 million users, MEDL should have a valuation of between $375 million and $525 million - right now. That represents a valuation that is 37 to 52 times greater than its present valuation. This doesn't even take into consideration MEDL's track record for growth. It simply looks at what MEDL has today and what that is worth using widely agreed upon metrics.

With a revolutionary and proprietary technology that solves a major challenge in the world's fastest-growing industry, it's only a matter of time before someone jumps on the MEDL opportunity.

To learn more about this exciting company, tune into the upcoming RedChip Small-Cap Virtual Conference on August 29 at 11:15 a.m. Eastern time and sign up for The RedChip Money Report to stay current on news as the MEDL story continues to evolve.

Disclosure: The subject security is a client of RedChip Companies, Inc. RedChip Companies, Inc., employees and affiliates may have positions and affect transactions in the securities or options of the issuers mentioned herein. For full financial disclosures for all RedChip clients, please visit http://www.redchip.com/disclosures.asp?src=rcv.