Giving the wireless data industry some important momentum to start the new year, American Mobile Satellite Corp. announced it plans to acquire Motorola Inc.’s Ardis data messaging business, which combined potentially could create the most ubiquitous coverage of any wireless data company.
Under terms of a definitive agreement signed by both companies, American Mobile will pay $100 million for the business, half of which will be in cash and the other half in stock, making Motorola the company’s second-largest shareholder.
Reston, Va.-based AMSC provides telephone, digital voice dispatch, data communications, mobile messaging and position reporting services. In particular, the company expects the Ardis network-one of the largest nationwide wireless data networks in the country, with coverage in all 50 states, Puerto Rico and the U.S. Virgin Islands-to complement its satellite communications technology, claiming it will be the first combined, seamless satellite/terrestrial wireless data network.
“This is an extraordinarily exciting time for wireless data services, with a long-projected emergence of new applications and customers beginning to take hold,” said Gary M. Parsons, president and chief executive officer of AMSC. “New, attractively priced pagers, modems and terminal equipment designed for the Ardis network, combined with recent new customer contracts, convinced us that the growth prospect for Ardis, and the wireless data industry in general, are outstanding. Further, the combination of our companies’ data offerings creates a critical mass, coverage area and breadth of services that is unmatched in the industry.”
AMSC targets its services to the transportation and field services industries. The deal would add to this base Ardis’ customers, which include corporate clients with field sales and service activities, such as IBM Corp., Sears and Pitney Bowes, among others. Once merged, more than 80 percent of the company’s revenue and close to 90 percent of its customer base will be data subscribers, the company said.
The two companies’ combined product line would include voice, voice dispatch, circuit and packet data service, vehicle-mounted and handheld messaging products. The suite of capabilities would be targeted at corporate clients in the transportation, maritime, government, oil and gas, utilities and field sales and service industries, AMSC said.
The acquisition comes at a time when mobile data services are positioning themselves for a significant marketing push into more consumer-oriented horizontal markets. However the companies’ combination is geared toward more of a vertical market focus, which has raised eyebrows among analysts.
“There’s a real need for the combination of satellite and terrestrial services,” said Andrew Seybold, industry analyst and editor of The Outlook. “My hesitation is that I think the wireless data market is ready to make inroads into the horizontal market and this combination seems to spend most of its focus on vertical markets.”
Seybold said he believes the combination should prove to be a “very powerful” one for vertical markets, but “the future of the industry is going to be in horizontal markets” and as such, it is “strange” to create a vertical market powerhouse.
“Certainly it’s a very different business model,” said Renate Brown Neely, spokeswoman for AMSC. “I think that as far as a company, American Mobile pre-acquisition, our services don’t lend well to a consumer market. With Ardis’ acquisition, that will change.”
The combined company will remain primarily focused on vertical business markets in the short term, she said. “But in the long term, it (the consumer market) may very well be in the cards.”
For now, the company is stressing its coverage strengths over its customer focus. “Our customers have long told us the most important attributes of a wireless services provider are coverage and breadth of product offerings,” said Walt Purnell, president and CEO of Ardis. “The integration of Ardis with American Mobile, while providing both voice and data solutions, also enables the joint entity to become the `100 percent coverage company.’ The timing is ideal as it enables this robust set of customer solutions to converge with recent increases in customer demand.”
The integration of AMSC and Ardis is expected to go fairly smooth, as the two have collaborated in the past. AMSC’s Multimode Messaging Service has employed the Ardis network as a transmission pathway, for instance.
While the future of Ardis’ executive team is “not clear,” Neely said, “Purnell and his management team are expected to have a key role.”
The deal is subject to governmental regulatory approval. Closing is expected in the first quarter.
