Sybase recently announced it will acquire Mobile 365 for $425M. Mobile 365 may not be well known by the public, as it is a behind-the-scenes infrastructure company that works with carriers to offer SMS text messaging services, providing customers with the ability to send cross-network messages (e.g., Cingular to Verizon) at the rate of 3 billion per month and across 700 carriers worldwide. Mobile 365 also offers companies mobile device content delivery services (e.g., contests, alerts of events, marketing messages, financial alerts, transactions), a growing and lucrative area of the marketplace.
On the surface, this seems like a diversion for Sybase, which generates most of its revenues from enterprise use and manipulation of large amounts of data, and increasingly through extending the enterprise through use of mobile data. However, we believe this is a smart move on the part of Sybase. Mobile 365 will complement and greatly enhance the capabilities it already has in place with its AvantGo offerings. Further, it provides Sybase with a channel to offer data products and analytical services to a growing and established list of premiere companies currently serviced by Mobile 365 (e.g., AOL, Citbank, Yahoo, Sony, MSN). Finally, it provides a much needed long term capability to offer mission critical alerting services to the enterprise via its capacity to directly connect mobile users to business intelligence (BI) and similar operational needs built upon its database and analytics businesses, and on nearly any device over nearly any carrier. This is key to maintaining Sybase’s edge in the mobile middleware market.
Although Mobile 365 is currently primarily a consumer play, we do not expect Sybase to become a consumer oriented company. Rather, we expect it to stay true to its primary mission of offering products to enterprise users. However, AvantGo has many millions of consumer-level subscribers, and Mobile 365 will compliment the current capabilities of web-oriented mobile content offered by AvantGo on relatively sophisticated mobile devices with a wider audience of users and on devices previously not capable of accessing AvantGo. Despite the consumer success of AvantGo which generates its revenues primarily through advertising, Sybase makes more of its revenues through enterprise deployment of the related product, M-Business. We do not see that changing dramatically.
Sybase will run the Mobile 365 business through an executive appointment (Marty Beard, SVP who engineered the acquisition) who is chartered to run it as a subsidiary and not as part of the iAnywhere business where most of the mobility products are currently housed. What this ultimately means for the enterprise user is a service that can be included within or added on to the iAnywhere products to provide mission critical alerts, messages and content to the growing base of mobile smart phone device users (e.g., Palm Treo, RIM Blackberry, Motorola Q, Nokia E-Series), as well as less capable devices (through two-way text messaging). Further, Mobile 365 will provide Sybase with a way to test the true scalability of its mobile product offerings over a network servicing hundreds of millions of transactions. Finally, Mobile 365 will offer a link to most carriers that enterprises can utilize to simplify cross network connectivity issues often encountered with corporate-wide or multinational mobile rollouts.
Bottom Line: With the use of Sybase’s Unwired Accelerator (rapid deployment tool for mobile applications), and coupled with its M-Business suite capabilities, Mobile 365 offers Sybase customers a direct delivery channel to nearly any mobile device on any carrier, anywhere in the world – something no other mobile middleware provider can claim. We believe, as Sybase continues to expand its mobile business, it will need to make some additional acquisitions. Within the next 2-3 years, we would expect Sybase to acquire capabilities in seamless network roaming, enhanced security (to add to its Afaria lines) and location based services (LBS); all of which will be required to extend its range and provide services needed by its enterprise customers. We expect Sybase to maintain its leadership position in the mobile middleware market.