Privately held mobile email provider Visto said Tuesday it agreed to buy rival Good Technology from Motorola Inc to expand its position in a market dominated by Research in Motion Ltd.
Pressure on smaller vendors like Visto and Good has been growing as even Blackberry-producer RIM, which made email on the go wildly popular among executives, also faces new competition from technology heavyweights such as Microsoft Corp, Nokia and Apple Inc.
The market has been consolidating for a while and there are more opportunities for consolidation, Visto Chief Executive Brian Bogosian told Reuters in an interview. We were quite profitable before and we continue to be profitable.
Terms of the transaction were not disclosed. Motorola, which has been struggling to turn around its loss-making mobile phone business, bought Good Technology in January 2007 for more than $400 million.
Analysts described Motorola's Good purchase as a misguided deal that helped neither Motorola nor Good, which lost market share after the acquisition. As a result, analysts saw the sale to Visto as a sensible move to cut costs, even if Motorola were to recoup little of its original investment.
I don't think Motorola is going to get much of an upfront payment at all, said Avian Securities analyst Matt Thornton. I think it was a failed marriage, and at this point with new management and new strategy (Good) doesn't have a seat at the table (at Motorola).
Visto's Bogosian said the deal doubles his company's workforce to more than 400. This compares with Good's own workforce of about 470 workers when it became part of Motorola in early 2007.
Motorola, which has been cutting jobs to reduce costs, said some teams of Good employees are now part of its own mobile phone unit, but it did not give numbers.
The handset unit is currently working on a phone based on the Android operating system from Google Inc.
Analysts said that the deal could help Visto improve its market share in mobile email for companies.
The acquisition of Good Technology will give Visto an enhanced presence in the North American market and greater scale, which is now essential to compete with Microsoft and RIM, said Geoff Blaber, analyst with CCS Insight.
This move draws clear similarities with Nokia's decision to pull back from its Intellisync enterprise solutions business, he said.
Last year, Nokia ceased the corporate email offering it had bought in a $430 million acquisition of U.S. firm Intellisync, but strengthened its push for consumer email.
Motorola, which has been struggling to stem market share losses in its cellphones, said the Good deal would help it focus on its core operations, which include network equipment, television set-top boxes and wireless equipment for enterprises and governments as well as its cellphone business.
We believe that this transaction is in the best interest of our customers, employees and shareholders, Gene Delaney, president of Motorola's Enterprise Mobility Solutions, said in a statement.
Visto said it expects the deal to close by the end of February. Its investors include Oak Investment Partners, Draper Fisher Jurvetson, Altitude Capital Partners, Meritech Capital Partners and Rustic Canyon Ventures.
Good Technology specializes in offering wireless messaging, mobile virtual private network (VPN) data access, device management and handheld security for enterprise customers.
Motorola shares closed up 23 cents or 6 percent at $3.86 on the New York Stock Exchange on Tuesday.
(Additional reporting by Ratul Ray Chaudhuri in Bangalore, Sinead Carew and Euan Rocha in New York; Editing by Jon Loades-Carter, Andrew Macdonald and Gerald E. McCormick)