Symantec’s IMlogic Acquisition Probably Fair for Shareholders

Symantec announced it will acquire instant messaging middleware vendor IMlogic.

The parties are not disclosing the terms of the acquisition, and we haven't yet learned the details through the grapevine. Here are our preliminary thoughts and guestimates:

  • Symantec doesn't usually drive a hard deal. Indeed, sometimes it can be very generous.
  • IMlogic was one of three leading IM middleware players. The other two are FaceTime and Akonix. They all provide valuable services, yet have all had difficulty achieving profitability. They each have annual revenue rates of $15 million to $25 million, with reasonable growth of around 25% annually.
  • All in all, the firms don't have a reasonably clear way to have significant growth and profitability. So from the shareholder standpoint, an acquisition probably makes sense.
  • IMlogic has never disclosed hard revenue information. We estimate its revenue rate at about $18 million annually, with perhaps a 10% loss. The 2006 overall revenues might be 25% to 50% up on 2005. We guestimate a deal of around $75 million.
  • Venture investors put in around $40 million. They're unlikely to make a return on this as a stand-alone business, so a merger with a large partner makes sense.
  • Given the situation, it seems to be a fair deal for IMlogic shareholders, although not the return they hoped for.

... David Ferris

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