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Apple acquires AuthenTec for $356 million

Apple is in the news again, not due to its usual patent battle, but has bought a mobile security firm called AuthenTec. Apple has agreed to purchase AuthenTec for $356 million and the deal was closed on Thursday.

AuthenTec is among few public companies that Apple has acquired in its history. Apple is world’s most valuable technology company and rarely acquires public companies, but rather prefers to settle for startups when on a hunt for cutting edge technology.

AuthenTec’s biggest client includes parent company of Samsung Mobile, Apple’s biggest rival. Samsung Electronics Co. Ltd. Accounts for a major chunk of the security firm’s revenue. According to Reuters, Apple has paid a premium of about 58 percent for the Melbourne, Florida based company, or about $8 per share. Shares of AuthenTec closed well above the $8 per share which Apple had decided to pay for the company. Apple stock on the other hand concluded up $10.28 to $585.16.

AuthenTec is a very popular company in the security business. The company basically manufactures fingerprint sensors which can be used to authenticate admission to laptops, computers and mobile devices. The company claims that it has already shipped more than 100 million of its sensors and more than 20 million of these sensors have been installed on phones. Some of the notable customers of AuthenTec include Motorola (a Google company), HP, LG, Samsung (largest customer) and Nokia to name few. AuthenTec, spun off from Harris Semiconductor in 1998 and went public in 2007. The company also provides mobile security software licenses to companies like Samsung.

“In the past 5 years, the growth of iPhone and Android smartphones has made mobile data security essential, not just a ‘nice-to-have’ feature,” said Ben Yu, Managing Director of Sierra Ventures, one of the early investors in AuthenTec. “People have their whole lives on the phones.”

If you are wondering why Apple bought a company that manufactures biometric equipment, the reason may be because mobile security is obviously essential. Apple may be looking to add fingerprint based authentication for its mobile, iPhone and MacBook range of laptops. Apart from this, fingerprint technology is widely being used on mobile phones in Japan, mostly for authenticating mobile payment transactions. Mobile wallet services are slowly catching up pace in United States and Apple may perhaps use AuthenTec’s technology to bring sophisticated authentication of mobile payments using Apple’s own mobile wallet service in future.

The next generation of iPhone will be supporting Near Field Communication (NFC) technology, and Apple could use the security technology from the acquired firm to make mobile payments more secure, but that’s set aside for future. Apart from all this, it is also worth noting that Apple will be getting company’s patent assets as well. The Florida based security company has more than 200 technology patents to its name, and some of these patents are “foundational” to fingerprint biometrics.

Cupertino based technology giant will be debuting its “Passbook” software in the near future. Passbook is basically a mobile app for storing coupons, tickets and other loyalty cards. Passbook will mark Apple’s foray into mobile payment space, a segment where good security is indispensible. Google already has its mobile payment offering called Google Wallet, but hasn’t been popular in US due to security concerns that surround it.

The technology can also be used to make Apple’s mobile offering more secure, and may be develop an anti theft system as well. Nevertheless, Apple got the company and its technology for $356 million, which is a small amount for a company that has $117 billion in bank balance. Apple has been buying smaller companies for a long time now, but most of its acquired companies were from the software niche, but from past few months, Apple has been seen showing interest in hardware companies as well. In the latter half of 2011, Apple bought Israel based flash memory maker Anobit for somewhere around $400 million and $500 million. Anobit is popular for production of Multi Level Cell (MLC) flash based solid state drives (SSD). MLC flash devices have been popular because they are very economical over Single Lever Cell flash drives. Previously acquired hardware companies include Intrinsity, a company that was acquired by Apple in 2010 and works on designing chips to run faster. In 2008, P.A. Semi was acquired. The company was brought in to design Apple’s custom iPhone and iPad chips. What do you think about Apple’s this move? Let us know using the comment form below.

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