Wireless e-mail company Seven Networks Inc. today announced it acquired Helsinki, Finland-based rival vendor Smartner. Terms of the deal were not disclosed.
“It’s much more of a global marketplace,” explained Bill Nguyen, Seven’s founder, chairman and co-chief executive officer. “We realized that … we really lacked a completeness for a global solution. The deal really is to increase our market presence.”
Nguyen said the acquisition of Smartner will add legs to Seven’s European business. Seven counts carrier deals with U.S. and Asian carriers, while Smartner has focused on the European market. The combination of the two businesses will create a company counting 45 carrier customers and products for most of the industry’s handset models. Seven declined to provide its total subscriber numbers.
“I think the market is going to happen sooner rather than later,” Nguyen said, adding that Seven may reconsider its postponed initial public offering after completing its acquisition of Smartner.
Both Seven and Smartner sell their technology to wireless carriers. Carrier customers re-brand the technology and offer it either to individual business users or IT managers. Essentially, the service runs on an application installed on a handset-be it on BREW, Java, Symbian or Windows Mobile devices-and connects back to a server. The server technology can be installed on a desktop, behind a corporation’s firewall or inside a carrier’s network with a connection to a business’ e-mail server. The system then pushes out e-mails to mobile users’ devices.
For example, Sprint Corp. teamed with Seven to sell its Business Connect Enterprise Edition for $25 per month-$10 for the BCEE and $15 for Sprint’s unlimited data service. Seven’s technology connects to Exchange, Lotus Domino and Internet accounts, and supports wireless access to e-mail, calendar, contacts and various documents.
Nguyen said the combination of Smartner and Seven would create a low-cost, device-agnostic alternative to industry leaders such as BlackBerry-maker Research In Motion Ltd. RIM as well as vendors like Good Technology Inc. sell their wares directly to businesses, and charge several thousand dollars for server offerings. Nguyen said Seven’s technology targets the lower, less expensive end of the market.
“There should be multiple people supplying multiple products,” he said.
Seven’s acquisition of Smartner is just the latest in a series of mergers and acquisitions in the wireless enterprise space. However, consolidation moves by Seven, Visto and others so far have failed to make a dent in RIM’s early lead in the space.
“RIM appears to face little near-term competitive pressure in the corporate market, which it dominates,” wrote Maynard Um, an analyst with UBS, in a research note to investors. The firm makes a market in RIM securities.
Indeed, RIM reported another solid quarter last week, although its results were pulled down by its settlement expenses with patent-holding company NTP Inc. and its higher-than-anticipated tax provisions.
The company’s mixed fourth-quarter results gave investors pause, with RIM’s stock falling slightly after its results to $73.69 per share. However, analysts generally issued positive views on the company, with expectations of continued successes.
“With the NTP issue now behind it, RIM can focus on executing its global strategy of growing BlackBerry subscribers through both RIM devices as well as BlackBerry-enabled devices,” wrote Jason Tsai of ThinkEquity Partners in a research note. The firm makes a market in RIM securities. “We would view weakness in the stock as a good buying opportunity.”
Others issued notes of caution. Piper Jaffray warned that some carriers may reduce their BlackBerry inventories in expectation of competing products. RIM’s handset sales were slower than many analyst firms had expected in the quarter, which the company said was because U.S. carriers are reducing their handset inventories.
“We believe a larger selection of both competitor and BlackBerry Connect devices will increase pricing and margin pressure for RIM devices,” wrote T. Michael Walkley of Piper Jaffray in a note to investors. The firm also makes a market in RIM securities.
RIM reported revenues for the fourth quarter of $404.8 million, up 92 percent from its $210.6 million in the same quarter a year ago. The company’s BlackBerry subscribers increased by 470,000 to a total of 2.51 million. However, the company reported a net loss of $2.6 million in the quarter compared with net income of $90.4 million in the same quarter a year ago. The net loss includes an expense of $294.2 million in relation to the company’s settlement with NTP, as well as a write-up of its deferred tax asset.
In the coming quarter, RIM expects to report revenues of between $430 million and $455 million and earnings per share of between 51 cents and 56 cents per share.
“Fiscal 2005 was a landmark year for RIM as the BlackBerry subscriber base more than doubled and revenue grew past $1 billion for the first time. Momentum continued throughout the fourth quarter with subscriber growth and operating results both exceeding expectations,” said Jim Balsillie, RIM’s chairman and co-chief executive officer. “We continue to execute our business plans effectively as demand for BlackBerry grows around the world. RIM expects to surpass 3 million BlackBerry subscribers in the current quarter, and we are planning to launch BlackBerry with an additional 100 carriers this year.”
