Apple agreed to pay $356 million for AuthenTec, a Florida-based firm, which develops technology to secure networks and mobile devices using
fingerprint sensors and identity management. Did Apple overpay in one of its largest acquisitions ever? The answer to that question may be irrelevant – though if it did, its only a small chip off of Apple’s $117 billion block of cash – after we see what Apple intends to do with AuthenTec’s technology.
AuthenTec in the Apple Fold
So what does AuthenTec have that Apple could use? Well, security for systems and mobile devices is the obvious skill set to point at to explain why the acquisition was attarctive. AuthenTec’s authentication features could be integrated into Apple’s iPads, iPhones and potentially as security measures for other features, like non-mobile computer systems or cloud-based networks or services.
Patents for the Future
As part of the deal, Apple (NASDAQ:AAPL) will pay $20 million for the right to buy non-exclusive licenses, patents and hardware & software tech from AuthenTec. This property could be used by Apple to develop new products and to gain leverage over competitors. AuthenTec’s customer roster includes Cisco, Fujitsu, HBO, HP, Lenovo, LG, Motorola, Nokia, Orange, Samsung, Sky, and Texas Instruments.
A Fingerprint As A Key
AuthenTec’s research into fingerprint sensor technology and the products that have emerged from that work could be integrated into Apple devices like iPhones and iPads. What’s more ambitious – and undoubtedly on the minds of forward-thinking engineers at Apple and other device and systems manufacturers – is the possibility of using a fingerprint as a key to any number of products or services that a user must interact with in everyday life. Sure, a fingerprint will identify a user to his or her systems, but what about the possibility of connecting a fingerprint to an iTunes account, a social networking or job-hunting site, or even a credit card number?
Jack Dorsey – co-founder of Twitter, Square and the world’s latest billionaire – recently told Charlie Rose that the best technology disappears —it fades into the background of a person’s life. Complex yet simple, it asks the least of the user while quietly going through a myriad of actions itself, providing service when called upon. Using a fingerprint to act as the authenticator for every authentication procedure facing a user fits that concept and Apple may look to develop products in that realm with AuthenTec’s help.
Deal Costs
News of Apple’s acquisition of AuthenTec pushed share prices up for the mobile security firm. AuthenTec, which traded just over $5 per share before word of the deal broke, saw stocks jump to over $8 Friday.
As of its 2011 end-of-year filing, AuthenTec had generated almost $70 million in revenue, up roughly $25 million from the previous year. Impressive growth but filings show the company hadn’t turned a profit, reporting a net profit of $10.87 million in the red.
Was AuthenTec’s technology and personnel worth Apple dipping into its $117 billion stockpile of cash to pay about five times the company’s revenue? Well, Apple decided the deal was worth what it hopes the company’s products can do under the Cupertino umbrella.
