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04/15/2010

Update 2: RIM to Acquire QNX – Terms of the Deal

What Happened?

 

Harman International (NYSE:HAR) and Research in Motion (NASDAQ: RIMM) announced that the companies reached an agreement for RIM to acquire the QNX Software Systems unit on April 12.  The expected close at the time of the announcement was 30 to 45 days, however, at the time of the announcement the terms of deal were not disclosed. 

 

The Ottawa Citizen reported today that RIM will be paying $200M (USD) cash, based on a Harman Industries International regulatory filing, to acquire QNX Software Systems from Harman International.  To read the complete Form 8-K filing by Harman International click here.

 

VDC’s View

 

As we previously reported it was only 6 years ago when Harman acquired a privately owned QNX Software Systems for $138M at greater than 5 times QNX’s revenue at the time.

 

Flash forward to today and a $200M (USD) price tag would also represent greater than 5 times QNX’s revenue.  This represents a significant premium to pay for QNX considering the current economic climate and the fact that earlier acquisitions of Wind River Systems and MontaVista Software in the second half of 2009 were at a lower premium. One can argue that the premium is worth paying for access to QNX’s automotive platforms and customer base as RIM looks to boost their brand recognition and loyalty beyond corporate smartphone users to enable tighter integration and streamlined user experiences between connected devices and interacting with the cloud

 

Keep in mind that VDC estimates that Harman represents a significant portion of QNX’s revenue from the automotive sector, as well as compared to its overall revenue. As a result it will be important for RIM to continue to maintain and expand the relationship with Harman post acquisition as competitors (i.e., Microsoft, Wind River, and others) look to pursue business opportunities with Harmon for future product development - opportunities that prior to this announcement would most likely not be available to them.

 

Stayed tuned as VDC looks to comment further on this announcement.

 

To read more about VDC's views on the recent embedded and ESL market shake ups, please visit the other postings linked below.

 

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