Motricity Inc. once again added to its bank account, pocketing $50 million in equity funding from controversial investor Carl Icahn. Whether the cash will be enough to see the company through the troubled wireless entertainment waters is uncertain, as the mobile content space increasingly becomes a “survival of the richest” race.
Motricity, which provides and delivers mobile content for carriers and media companies, named Icahn’s son Brett to its board of directors under terms of the deal. The elder Icahn made headlines several weeks ago when he asked for a seat on the board of Motorola Inc., causing shares of the handset maker to jump 6 percent and potentially setting the stage for a proxy battle.
The Durham, N.C.-based company has continued to accrue funding even as it has struggled to streamline its business. Motricity closed a $60 million round of financing last fall, pushing its overall venture funding past the $150 million mark, but in December cut 50 jobs in a surprisingly drastic move to cut costs. And the firm has struggled to keep key executives in the last year, losing Senior Vice President Dov Cohn and COO Michael Robinson, among others.
But the company said it has quadrupled its customer base in the last year, and in July acquired GoldPocket Wireless, a transaction broker that provides technology for mobile voting campaigns and other TV-based applications. Motricity’s customers include MTV, NBC, Warner Music Group, Sprint Nextel Corp. and Cingular Wireless, which in January renewed its content distribution deal.
“They are well positioned for dominance in mobile content, a sector for which we forecast strong growth in the coming years,” Carl Icahn said in a prepared statement.
Icahn may be right on both counts, but Motricity faces several substantial hurdles. As a content aggregator for carriers, it must deal with ever-slimming margins for wireless goodies such as ringtones, games and wallpapers. And as a technology company delivering the stuff, it faces increasing competition from infrastructure vendors such as L.M. Ericsson and Alcatel-Lucent as well as non-wireless digital content companies that are moving into mobile.
And Motricity finds itself in the middle of a consolidating market of content delivery companies and the mobile transaction firms that support them. The company last year lost in a bid to acquire m-Qube, a payment processing outfit that was snapped up by VeriSign Inc. for $250 million. Amdocs Ltd. last year acquired Qpass, a Seattle-based transaction company, for $275 million. Lucent in September jumped into the game with the acquisition of Mobilitec, a Motricity competitor, for an undisclosed sum.
More consolidation ahead
Expect more of the same, said Ian Blaine, CEO of thePlatform.
ThePlatform offers a white-label digital video publishing service for content providers, broadband media sites and wireless carriers. The 7-year-old company was picked up by Comcast last year for an undisclosed sum, and is expanding aggressively from online into mobile video distribution.
“More consolidation is clearly coming” as larger, Internet-based companies jump into mobile, Blaine said. “It’s nice to have it behind us.”
Motricity evaluating targets
Indeed, Motricity CEO Ryan Wuerch has said his company is constantly evaluating targets for acquisition. An initial public offering is still possible, Wuerch has said, and could raise enough to keep investors happy. And while it’s unlikely that any well-heeled company will pony up the $500 million or so insiders say it would take to acquire Motricity, the company may have enough funding to stand alone amid the ever-shrinking field of independent mobile content delivery companies.
Meanwhile, look for Motricity to do its part to decrease the number of players on the field.
“This investment bolsters our balance sheet,” Wuerch said of Icahn’s funding, “and positions us to continue to aggressively grow the business and consolidate the industry.”