Motorola to buy e-mail software firm
By Ville Heiskanen - Bloomberg News - Published November 10, 2006, 3:50 PM CST
Motorola Inc., the world's second- largest mobile-phone maker, agreed to buy Good Technology Inc. to gain wireless e-mail software that will challenge Research In Motion Inc.'s grip on business customers.
The acquisition gives Motorola control of one of the biggest threats to Research In Motion's BlackBerry. Good Technology's e-mail system is used by 12,000 companies and runs on devices made by Motorola, Palm Inc. and Nokia Oyj. Terms weren't disclosed.
``Motorola is making a concerted effort to go after RIM,'' said Lawrence Harris, an analyst at Oppenheimer & Co. in New York. ``This acquisition gives them credibility.''
By buying Good Technology, Motorola will be able to add e- mail functions to more devices and expand beyond the consumer market. The company started selling the Q phone in June in its first challenge to the BlackBerry and now plans products that directly target businesses.
Shares of Motorola rose 18 cents to $21.38 at 4:02 p.m. in New York Stock Exchange composite trading. Shares of Waterloo, Ontario-based Research In Motion fell 64 cents to $124.11 in Nasdaq Stock Market composite trading. Palm dropped 32 cents, or 2.1 percent, to $14.61.
Motorola will continue to license Good Technology software to other mobile-phone makers including Palm and Nokia, Scott Durchslag, a general manger at Motorola's mobile-devices division, said in an interview. The company will also continue to use other e-mail programs in its phones.
Good Technology is among several challengers to Research In Motion's e-mail software including Redwood City, California- based Seven Networks Inc. and Visto Inc., also based in Redwood City. Motorola, Palm and Nokia compete with it in hardware.
By buying Good Technology, Motorola can compete on both fronts.
``It's becoming more important to have your own e-mail solution,'' said Harris, who rates Motorola shares ``buy,'' and has a ``neutral'' rating for Research In Motion and Palm. ``If you look at the reason for the success of RIM, it's not the devices. It's the end-to-end solution.''
About 800,000 subscribers use Good Technology's e-mail service, putting it in third place in the U.S., RBC Capital Markets analyst Mike Abramsky wrote in a note today. Research In Motion has about 7 million customers and Nokia has about 900,000, Abramsky estimates.
Good Technology's service gained popularity among businesses because of its ease of use and likeness to Microsoft Corp.'s Outlook calendar software. The company began in 2000 with the backing of venture capital firms Kleiner Perkins Caufield & Byers and Benchmark Capital. Both still hold stakes in Good Technology.
Since then, Good Technology has attracted customers such as Morgan Stanley, United Parcel Service Inc. and Wal-Mart Stores Inc. In 2005, Cingular Wireless LLC, the largest U.S. mobile- phone services provider, started offering the e-mail system to enterprise customers.
The closely held company is based in Santa Clara, California, and has 470 employees.
``We expect this development to put new competitive pressure on RIM,'' John Bucher, an analyst at BMO Capital Markets, said in a note to clients. He is based in Los Angeles and rates Motorola shares ``outperform.''
The acquisition by Motorola and a similar purchase by Nokia earlier this year give the phone makers tools to offer corporate clients more devices that function as handheld personal computers.
``We're looking at a broad range of enterprise devices,'' Durchslag said. Motorola is also considering expanding the e- mail offering beyond business customers, he said.
Demand for wireless e-mail devices by corporate customers is expected to soar as businesses seek to become more efficient, Good Technology Chief Executive Officer Danny Shader said in an interview today.
About 10 million out of about 500 million corporate e-mail boxes are currently accessed with mobile devices, he said.
``We expect significant growth,'' Shader said.
Nokia, based in Espoo, Finland, bought Intellisync Corp., another maker of e-mail software with 450 employees, for $430 million in February.
The purchase is expected to close early next year, Motorola said.
``I don't think RIM will be displaced as the No. 1 provider to corporate wireless e-mail in the foreseeable future,'' Harris said. ``Longer term, I would not underestimate Motorola.''
--With reporting by Jason Kelly in Atlanta.
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