Visto Corp. added to its already impressive coffers earlier this month, raising another $35 million in what the mobile e-mail service provider said is its final round of funding. But this time it’s the investor-not the amount of cash-that’s raising eyebrows.
The Redwood City, Calif.-based developer has pocketed a jaw-dropping $300 million since its founding in 1996 and claims a host of backers including Allegis Capital, Blueprint Ventures, Draper Fisher Jurvetson, ePlanet Ventures, GKM Ventures, Meritech Capital Partners, Oak Investment Partners and Rustic Canyon Partners. Meanwhile, Visto has gained more attention for its patent-infringement litigation than its success in wireless, winning a $7.7 million judgment against Seven Networks Inc. last year before targeting heavyweights Microsoft Corp. and Research In Motion Ltd.
Investor intentions
And Altitude Capital Partners L.L.C., which ponied up the recent $35 million cash infusion, appears to be more interested in the courtroom than the mobile e-mail market. The firm’s Web site outlines its investment criteria, which include “investment relative to damages, reasonable royalty rates (and) resale value,” “number and quality of potential infringers/licensees” and “title, validity and enforceability” of intellectual property licenses.
The investment captured the attention of bloggers and wireless enthusiasts, who speculated Altitude is betting on Visto’s lawsuit, not its service. “You could call it hedge fund or private equity, either way (Altitude) is investing in patents and lawsuits, not sales growth,” one unnamed person posted on Valleywag, a tech blog focusing on Silicon Valley businesses.
Visto changing focus?
Indeed, Visto for more than a year has battled charges that is has morphed from a developer of mobile e-mail technology into a de facto law firm. The company’s most recent announcement of a carrier customer came in August, when it inked a deal with Vodafone Czech Republic, and Visto failed to go public last year, as CEO Brian Bogosian had predicted.
Bogosian dismissed charges that Altitude’s investment was strictly lawsuit-related, though, and said his company has been “reluctantly drawn into” the world of patent litigation.
“I put investors into two groups: financial and strategic,” Bogosian said. “All of our investors are financial investors, not strategic investors. They all are equally enthusiastic about all parts of our business.”
Visto certainly seems to have deep enough pockets to continue to pay its lawyers as it fights for traction in the mobile e-mail space. But the ranks of independent developers continues to thin, and while RIM continues to dominate, several behemoths are already battling it out for a taste of what analysts say is a market set to explode. Motorola Inc. made headlines in November when it picked up wireless e-mail provider Good Technology Inc. for an undisclosed sum, and Nokia Corp. is moving aggressively to leverage its $430 million acquisition of Intellisync Corp. Meanwhile, Microsoft continues to gain ground, and market research firm IDC predicts Windows Mobile-supported devices will own a 32- percent market share by 2010.
Of course, there may still be plenty of room on the playing field. While there are more than 2 billion cell phones in use around the world, only 15 million to 20 million receive push wireless e-mail services, according to Gartner Research.
Bogosian insists an IPO is still a primary goal for Visto, although the company is “in no hurry for a liquidity event.” Regardless of its prospects in the real world, though, Visto may be well positioned to find success in the murky and unpredictable world of U.S. patent-infringement court. And Bogosian appears to have both the tenacity and the cash to take on Microsoft, RIM and others for some time.
“We had, literally, a couple of guys starting Visto in a garage a couple of years ago,” Bogosian said. “We took the time and resources to patent our technology. If any company infringes on that, we have to stand up for our rights.”
