Motricity is acquiring the mobile services business unit of InfoSpace in an all-cash deal worth some $135 million, the Durham-based company announced Monday morning.
Billionaire Carl Icahn, an investor in Motricity, and Advanced Equities provided what Motricity called “significant investments” in Motricity to help fund the deal.
InfoSpace trades on the Nasdaq (INSP). Motricity is privately held.
The deal could add well over $100 million in annual revenues to Motricity, but InfoSpace’s mobile unit has not been profitable. Through the first six months of this year, InfoSpace reported $72.4 million in revenue for its mobile unit. That total was a sharp drop from $89.6 million in the first six months of 2006. However, the unit did cut its losses to $7 million from $8.12 million in the same time frame.
In a letter sent to customers, Motricity said its headquarters would remain in Durham. A “large base” of InfoSpace employees will continue to be based at its current headquarters in Bellevue, Wash., the letter added. Motricity will add offices in the United Kingdom, France and the Netherlands.
The acquisition also expands Motricity’s capabilities to provide services for mobile network service providers, including electronic storefronts, portals and messaging. It is expected to close in the next 90 days.
As part of the deal, Steve Elfman, the executive vice president of the InfoSpace business unit, will become president and chief operating officer of Motricity.
Elfman joined InfoSpace in July of 2003. He at one time was chief information officer at AT&T Wireless. He also was CIO at GE Capital Fleet Services and information technology manager for international operations at 3M.
Ryan Wuerch remains chairman and chief executive officer of Motricity.
“We’re combining two of the strongest companies in the industry to create the premier provider of mobile infrastructure,” Weurch and Elfman said in the letter to customers. “Between us, we have unparalleled experience in mobile platform development and systems integration, powering mobile storefronts, search, portals and community services for the market’s leading carriers and media companies.”
The deal will mean Motricity has customer relationships with 11 of the 13 largest North American wireless providers, such as AT&T, Verizon and Sprint. European clients will include Virgin UK and Vodafone.
“We’re combining two of the best companies in the industry to create the premier provider of mobile platform infrastructure,” Wuerch said in a statement. “Between us, we have unparalleled experience in mobile platform development, systems integration, innovation and building world class technology with a proven ability to scale – powering the mobile marketplace including the largest operators and media companies in North America and Europe. "
The combined companies will be able to offer wireless providers as well as content provider with what Wuerch called a “single source solution” Motricity already works with several content firms such as BET and NBC.
“Motricity is now a single source solution for mobile operators and media companies alike – offering them the full range of services with our integrated, scaleable Fuel [technology] platform,” Wuerch added. “An end-to-end platform is particularly valuable in a market where technology is converging and operators are seeking support across multiple media types.”
Once combined, the larger Motricity will generate more than $1 billion in mobile content sales, Wuerch said. Motricity receives commissions on content sold.
“At InfoSpace, we take great pride in the strategic, trusted role we play for our partners delivering the highest quality managed service solutions in the market,” Elfman said in the announcement. “Motricity shares that vision and has a very similar operating philosophy.”
InfoSpace’s mobile business includes portal, storefront, search, messaging, search and managed Web solutions. The company was founded in 1996. Its headquarters are in Bellevue, Wash. It has some 500 employees and generated $371 million in revenues in 2006. Other InfoSpace offerings include online search technology.