Elektrobit, which produces hardware and software for connected cars and other wireless technologies, is switching gears in the midst of a company split and opting to sell its automotive business to Continental AG for approximately $668 million.
Elektrobit had been making progress toward a planned company split, in which the Finland-based corporation divided its automotive software and development operations from its wireless products and services business. The two units had been operating as separate entities under the Elektrobit umbrella, according to the original demerger plan (available here as a pdf file). The auto business was supposed to maintain the Elektrobit name, while a new company focused on wireless would be created, called Bittium.
But the company announced today that instead of the demerger process, it has come to an agreement to sell the automotive segment and the Elektrobit brand name to German automotive manufacturing company Continental. The transaction is expected to close in July.
The Elektrobit auto unit focuses on automotive software and research and development, as well as tools for in-car software development. The company said that the $668 million transaction includes Elektrobit Automotive and its subsidiaries, the transfer of the Elektrobit brand name and a 51% ownership stake in a joint venture with Audi Electronics that is called e.solutions. The transfer puts Elektrobit’s assets within a much larger automotive company: Elektrobit’s automotive workforce consisted of more than 1,400 people and nearly 500 in the joint venture; Continental employs about 200,000 people, including 11,000 in software development. The two companies said that Continental intends to have Elektrobit operate as a separate unit with its own brand and direct customers.
Jukka Harju, CEO of Elektrobit, said in a statement that the automotive market, including software, “is in a very dynamic phase. Cars are becoming increasingly connected and automated driving is another megatrend in the car industry. The carmakers continue to invest in automotive software for new car models and the market for software products and services is estimated to continue to grow. As a result, the carmakers, suppliers of various parts and systems for cars and well-known consumer and IT products companies are increasing their focus on these markets. We believe Continental has the right capabilities and is very committed to further developing Elektrobit Automotive business as a part of a broader range of its products and solutions.”
The plan to form Bittium will continue, and Harju said that the company will focus on growing its wireless business, which includes wireless test and measurement, communications solutions for defense and public safety, “Internet of Things” solutions and industrial IoT as well as security offerings. Elektrobit bought SafeMove, which focuses on IT security for mobile devices and laptops, from Birdstep Technologies in January to bolster its wireless security offerings.
According to the company’s most recent quarterly report, sales in the auto segment were up more than 30% year-over-year and profits were up 3%. Sales in the wireless segment were up less than 8% to about $17 million for the quarter, and profits were flat year-over-year. Elektrobit has been putting significant resources into R&D for tactical communications as well as a specialized device platform and a new ruggedized LTE smartphone that it plans to bring to market in the second half of the year. It also has an agreement that was announced earlier this month with the Ministry of Mexican Communication and Transportation to develop three types of Android mobile devices for public safety to be used with satellite and terrestrial networks in Mexico.
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