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February 2011Adeyno and Birch Hill Top the Month’s News
Posted in Mike's Commentary
Congratulations have to go out to Tyler Nelson and his team at Adenyo for the successful sale to Motricity (MOTR-Nasdaq) for US$100 million or 5 times 2010 revenues. The transaction includes the potential for a further earn-out of US$50 million during the 12 months following the completion of the acquisition. It was less than a year ago (March 3, 2010) that Adenyo announced that it had secured US$17.2 million in institutional capital, following an earlier US$9.7 million in private placements raised between July and March of 2009. Given valuations at that time, I suspect that Adenyo investors realized a very nice lift in their investment over the 10- to 18-month period, particularly given that I believe Adenyo fell well short of its revenue expectations for 2010. Previously known as Silverback Media, Adenyo’s management did an excellent job of determining the direction and future hot spots of the market and made strategic acquisitions in areas to build a platform that made it attractive to carriers, enterprises and ultimately a market consolidator like Motricity.
Motricity (originally Power By Hand LLC) was co-founded in 2001 by Jeb Bowman, who has since moved on to create Appia (rebranded from PocketGear), a company focused on offering a white label app store platform for mobile operators, handset manufacturers and other mobile portals. Motricity grew through organic growth and acquisitions, merging with Pinpoint Networks in 2004 and in December 2007 acquired the mobile division of InfoSpace for $135 million. This latter acquisition provided its current mCore platform, over 220 employees and additional contracts with AT&T and Verizon. In February 2007, Carl Icahn invested $50 million in the company, bringing to over $200 million the amount that had been invested in the company. No doubt Icahn’s stature and influence led to J.P. Morgan and Goldman Sachs leading Motricity’s $60 million IPO (at $10.00 per share) in June 2010. Initial market interest was soft with the Company failing to raise its stated goal of $250 million and the shares falling to a low of $6.55 in mid-July 2010, but there has been increased market interest since that time, with the shares hitting a high of $31.95 in November before trading down to the mid-$16 range.
On February 9th, Motricity released fourth quarter and year-end results,reporting an increase of 42% in year-over-year Q4 revenues and a 17% annual increase while the company reported a full year loss of $7.0 million (versus $16.3 million in 2009), fourth quarter net income came in at $2.9 million versus a loss in Q4 2009 of $4.4 million. Unfortunately, the Company also reported that it expected Q1/2011 revenues to fall to the $32 million to $33 million range while analysts were looking for just over $42 million for the quarter. Consequently, the market reacted negatively to the announcement, with MOTR’s shares trading down significantly on huge volume so we can be pretty sure that management will work hard to drive the share price higher with more press releases and further acquisitions.
I see Adenyo playing an increasingly important role within Motricity, particularly since Adenyo’s story and strengths play well to the Wall Street analysts looking to follow companies in the increasingly hot smartphone space. Expect to see those boys clamoring to raise a fresh round of equity during the next quarter. Despite the Adenyo acquisition, Motricity continues to have customer concentration issues and press releases about India and Malaysian contracts may hold less weight going forward. My guess is that more acquisitions await so if you’re looking to be acquired, giddy up!
In other mobile news, Polar Mobile announced an agreement to build applications for smartphones powered by Samsung Electronics’ bada operating system. Polar will initially launch 30 apps for the bada platform, leveraging off of apps that it has already built for Apple’s iPhone, RIM’s BlackBerry and Google’s Android operating system. Polar reported that it currently has 200 customers in 10 countries, has launched 500 applications to date and expects to double this number by the summer.
Birch Hill continues to power along with the announcement that it has closed on its fourth private equity fund, raising $1.04 billion from a group of Canadian and international investors. Great news! Birch Hill now has C$2 billion in capital under management, 19 partner companies and 29 fully realized investments since 1994. In other news, Birch Hill announced in January the finalization of the sale of two of its investee companies: Atria Networks to Rogers Communications for $425 million and Comcare Health Services to Revera.
Interesting Twitter statistics included in a recent Edelman Digital presentation:
Statistics provided by our own home-grown Sysomos indicate that:
- Twitter is recording 110 million tweets per day
- 71% of tweets get no reaction
- 23% get @reply
- 6% get RT
- 92% of retweets are within the first hour
- 85% of tweets with @replies get just one
The same presentation details “How Video Content Decays” sourced from data provided by tubemogul:
- 89.61% of viewers watch for more than 10 seconds
- 80.41% of viewers watch for more than 20 seconds
- 66.16% of viewers watch for more than 30 seconds
- 46.44% of viewers watch for more than 60 seconds
- 23.71% of viewers watch for more than 2 minutes
- 16.62% of viewers watch for more than 3 minutes
- 9.42% of viewers watch for more than 5 minutes
Interesting data, particularly when you consider that YouTube has over 2 billion views per day and announced in January that it was already serving over 200 million video views per day to mobile devices.
TiEToronto reported that it has received 98 applications from over 200 entrepreneurs for TieQuest, its annual business venture plan competition with entrants competing for over $150,000 in prizes. Prizes are awarded to companies in the following categories: Intellectual property; Clean Tech Venture; Medical Assisted Technology; and New Entrepreneur. Participants in past TiEQuest events that have recently achieved significant liquidity events include Echologics Engineerings acquisition by Mueller Water Products for $8 million and CognoVision’s acquisition by Intel Corporation. Winners will be announced at the TiEQuest Awards Gala on April 16, 2011 in Toronto.
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