With one gulp –and a big one at that – Motricity has nearly doubled in size and will soon have all but two of the largest North American wireless operators as customers.
On Monday, Motricity said it would acquire the mobile services business unit of InfoSpace in an all-cash deal worth some $135 million, the Durham-based company announced.
Billionaire Carl Icahn, an investor in Motricity, and Advanced Equities provided what Motricity called “significant investments” in Motricity to help fund the deal. An executive with Motricity said the company would not disclose how much either Icahn or Advanced Equities, which also has invested in Motricity in the past, put in the new deal.
InfoSpace trades on the Nasdaq (INSP). Motricity is privately held.
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.
Adding Elfman to Motricity’s management team was a crucial part of the deal, according to Motricity’s Chris Chuang, vice president for strategic development.
“He was one of the key assets of the deal,” Chuang said of Elfman. “He is highly regarded in the industry and by our customers.”
The deal means a bigger, stronger Motricity, Weurch and Elfman said.
“We’re combining two of the strongest companies in the industry to create the premier provider of mobile infrastructure,” Weurch and Elfman wrote 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 produce a company with more than 600 employees and contractors, including some 350 at Motricity. Some jobs are likely to be moved among the various offices and others will be phased out as the merger is implemented, Chuang told WRAL Local Tech Wire.
“In any major acquisition, some people will be going back and forth on a temporary basis or a full-time basis,” Chuang said. “We’re not prepared to share the details yet. There will be overlap. You would expect some synergies and redundancies, but we don’t have details to share.”
How much revenue the InfoSpace unit brings to Motricity was not specified by Chuang. 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. The unit did cut its losses to $7 million from $8.12 million in the same time frame.
Chaung pointed out that the figures for the mobile unit are misleading since Motricity is not acquiring the mobile content portion of the InfoSpace business unit.
“The only assets we are buying – the infrastructure part of the business – has been seeing growth on a very strong scale,” Chaung said. “It is not something to be concerned about. [The unit] has a good margin profile.”
The revenues of the combined company will reach “into nine figures,” Chaung added. He declined to be any more specific.
Asked if the deal would perhaps position Motricity for an IPO, Chaung only said Motricity was seeking ways to “further enhance shareholder value.”
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 merged 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.”
A 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.
