HARMAN International announced the planned acquisitions of both Symphony Teleca and Red Bend Software. These two acquisitions come at a vital time in the company's growth plan and have wide ranging implications for the automotive industry, as well as mobile, retail, healthcare and other Internet of Things (IoT) verticals.
Here, IHS Automotive highlights the key details of the acquisitions and answers questions about the impact to various nodes in the connected car value chain.
Key Details of Symphony Teleca and Red Bend Software acquisitions
Company | Key Notes | Financial Terms |
Symphony Teleca | - Outsourced Product Development and Software Services Company
- Focused on intersection of the cloud, mobility and analytics
- HQ in Silicon Valley
- ~8,000 employees, primarily software engineering and designers
- 50% of revenue from automotive and mobile verticals, 25% from healthcare, retail and other verticals
- Diverse customer list of more than 300 tech companies
| - $780M in cash and stock total
- $382M in cash and $166M in stock at closing
- $232M in cash and $0 in stock in second payment in Q3 FY2017
- The estimated 1.6M shares are subject to a 1-year lock up
|
Red Bend Software | - Leading provider of the OTA solutions to handset manufacturers and mobile carriers
- More than 2B Red Bend-enabled devices in the market globally
- Focused on managing OTA updates for firmware, middleware, third party apps, and other services
- Key technologies in IoT verticals and cyber security
- ~230 employees in Israel (HQ), France, UK, US, Japan, Korea, Germany
| - $170M in cash and stock at closing
- $71M in cash and $99M in stock
- Estimated 950K shares are subject to a 6-month lock up
- $30M performance-based earn-out opportunity is payable in January 2017
|
Customer Questions & IHS Answers about the impacts of the acquisitions
Questions | Answers |
Why did Harman acquire Symphony Teleca? | - Software competency is growing in importance in the auto industry and all Tier 1s need more software resources and expertise
- Symphony Teleca is a strong software player in automotive and other segments and will greatly expand Harman's software competency
|
Why did Harman acquire Red Bend? | - Remote software is a new growth opportunity in automotive software
- Red Bend is the leader in Smartphone FOTA and is well positioned to be the leader in automotive FOTA and SOTA
- Harman is likely to grab the leadership position in automotive FOTA-SOTA with the Red Bend acquisition
|
What is the impact for Harman? | - Harman is already a leader in automotive software among Tier 1s, but this will further strengthen its position to get future OEM infotainment design wins, which are increasingly dependent on software capabilities
- Tier 1 companies are dependent on the production revenue from infotainment systems and need to protect this business against contract manufacturers. The more Tier 1 software expertise, the better the Tier 1 can retain this business versus contract manufacturers
- Synergy likely between Harman's current Aha Cloud platform and Red Bend OTA infrastructure and Symphony Teleca OTA and analytics infrastructure
|
What is impact for OEMs? | - This is mostly good news for the OEMs as they need better software competency from their Tier 1 suppliers
- Some OEMs may worry that Harman will be too powerful and may work to even the competitive position among the top Tier 1s
- FOTA and SOTA are likely to be deployed sooner by OEMs as Harman can add remote software update capabilities quicker than previously
|
What is the impact for Tier 1s? | - Other Tier 1s will need to acquire additional software expertise to remain competitive with Harman in infotainment system business-either via acquisitions or rapid internal build-up
- Some competing Tier 1s may not want to work with Red Bend as a Harman subsidiary (unless the OEM requires it) and may look for other FOTA providers
|
What is the impact for other players? | - Arynga is a start-up FOTA company with good technology and existing, but unknown OEM design wins-it was already an acquisition candidate and will now be even a more desirable partner and acquisition target
- Other software companies with automotive competence will become acquisition target for Tier 1 companies that want to boost their competitiveness versus Harman
- Bosch, Continental, Delphi, Denso, Panasonic, Visteon and others are probably analyzing these events and some are making plans to talk to software companies
|
What does it mean for the infotainment industry? | - Automotive software has been on a growth curve for many years-in terms feature importance, development cost, intellectual property significance, BoM cost and many others. This clearly demonstrate that the Tier 1s have recognized these trends and will be on the prowl to acquire software expertise and assets
- Which Tier 1s will acquire which software specialist next?Stay tuned for the answers...
|
It is clear that today's announcements from HARMAN are significant. IHS expects them to begin a round of additional industry mergers and acquisitions over the next 12 to 18 months as automakers, suppliers, and technology firms sitting tangential to this industry begin to challenge the powerful business proposition that HARMAN has now created.
By Egil Juliussen, Director of Research, Automotive Technology, IHS Automotive
Posted January 30, 2015