Software developer and billing platform provider Amdocs Ltd. plans to enter the digital transaction space with a $275 million buyout of Seattle-based Qpass Inc.
Qpass’ technology facilitates content sourcing, merchandising, delivery and billing across mobile, Voice over Internet Protocol and Wi-Fi networks. Amdocs said the all-cash deal, which has been the subject of rumors for several weeks, would allow its customers to create additional sources of revenue by selling digital goods across platforms and networks.
“We believe the main growth of the telecom industry will be in the digital services and content area,” said Amdocs Executive Vice President Eli Gelman, predicting the space will grow from $15 billion today to $70 billion in the next four years. “We can (now) offer these types of services to carriers around the world…. The same thing can be offered to broadband companies, cable companies, satellite companies, Internet service providers and others.”
Amdocs develops and markets customer relationship management software, and works with 150 service providers including wireless operators. Qpass has relationships with more than 300 content providers, and the company’s customers include Cingular Wireless L.L.C., T-Mobile International, Sprint Nextel Corp. and Skype Technologies SA. In recent months, Qpass has been touting its technology as a way to reduce carriers’ “revenue leakage” that stems from selling content and applications from a variety of publishers and aggregators.
The move follows last month’s announcement that VeriSign Inc. will pay $250 million in cash to acquire mobile messaging and content services provider m-Qube Inc.
Qpass was founded in 1997 as a platform for media companies looking to sell content over the Internet. The company restructured in 2000, aborting plans for a public offering and raising $16.5 million in venture capital.
The developer was reportedly valued at $20 million six years ago, but has grown into a 300-employee firm with revenues of more than $42 million last year. And the company’s scope has increased dramatically as the mobile content business begins to diversify, according to Chief Executive Officer Chase Franklin: ringtones, which once accounted for more than 90 percent of the transactions Qpass processed, now represent about half of its mobile business.
Amdocs said its new acquisition is “expected to be profitable very soon.”
While Wall Street was ambivalent on the move-the price of shares hardly moved for several days following the announcement-analysts said the deal appears to be a good way for Amdocs to integrate its own billing services with Qpass’ transaction platform.
“Most of the service providers that had been betting on the mobile supermarket business model are now getting a more realistic approach and are outsourcing some of their own [service delivery platforms] to managed services companies,” said Jean-Charles Doineau, service infrastructure practice leader for market research firm Ovum. “Newcomers in that field are looking for a turnkey approach, mixing both contents and distribution enablers…. Over time, (Qpass) has been one of the few companies offering a managed services SDP solution with real market success.”
The Qpass deal is expected to close by July. Amdocs said the transaction would dilute earnings per share by a penny or two, and the company may incur a one-time charge during its third fiscal quarter to account for certain costs related to the acquisition.
