The recent news that Apple, Inc. has reached an agreement to acquire AuthenTec, a Florida-based mobile and network security provider, makes for some interesting news. The deal itself, assuming it goes through – though not a certainty – represents nothing more than a drop in the bucket for Apple.
The deal calls for Apple to pay out just about $356 million in cash. That works out to $8 per share, and represents a 58-percent premium over Authentec’s closing price of $5.07 on July 26, 2012. Not a bad deal for AuthenTec, which earned $69.8 million in its fiscal 2011.
Apple will also pay an additional $20 million to acquire certain non-exclusive licenses. A further part of the deal gives Apple option to acquire inside of the next nine months, a number of patent licenses for another $115.0 million.
Finally, Apple will also pay an additional $7.5 million to develop a 2D fingerprint sensor.
It isn’t entirely clear what products Apple initially has in mind for such a sensor, though its higher end MacBooks and MacBook Air are the likely first targets. The acquisition will also allow Apple to deliver a more secure mobile commerce platform, especially if it introduces – as expected – built-in near field communication (NFC) capability in the next-generation iPhone, which may or may not debut early September.
AuthenTec introduced its first smart sensor for the NFC mobile commerce market a short time ago. Consumers concerned with the security of mobile payments will find comfort in knowing such a capability is available to them.
AuthenTec’s key products include both embedded and plug-in (e.g. through USB) fingerprint and area sensors (the company refers to them as Smart Sensors and TouchChips), software for identity management and e-commerce solutions, and embedded security solutions for network and mobile security systems.
One of the very interesting things AuthenTec has in hand is that a number of sizable customers – almost all of them likely competitors to Apple in one way or another – include Hewlett-Packard, Lenovo, Dell, Asus, Cisco, Nokia, Texas Instruments...and Apple’s favorite friend, Samsung.
Samsung, of course, is particularly interesting. The company has already signed a deal to use AuthenTec’s QuickSec VPN technology as part of its growing collection of “SAFE” enterprise security capabilities. But of even greater interest at the moment is that the company could – as some in the financial analyst community have speculated – put out a rival offer to Apple’s.
AuthenTec might be feeling a bit giddy about such a possibility emerging.
An Apple Enterprise Angle
AuthenTec can certainly provide Apple with a significant competitive edge over Android and Windows Phone 8, both of which are perceived as having susceptibility to potential security threats owing to perceived weaknesses in NFC technology. At a recent security conference, some several security experts demonstrated that current NFC security capabilities may not be good enough to keep user information safe. AuthenTec can mitigate such issues.
Authentec brings more to the game than consumer security, however. Adding additional capabilities such as fingerprint recognition creates a three-factor authentication process that adds significantly to employee security. Although Apple currently has a dominant mobile device position in the enterprise, it comes at the cost of IT having to back away from certain standard security precautions over the last five years.
Promising IT a return to more rigorous security standards than Apple currently allows is a wedge issue that both Samsung and Research in Motion - who’s BES infrastructure currently offers the mobile industry's only truly proven enterprise-wide mobile security capabilities (RIM has the very hard to come by security certifications that include meeting most federal government requirements) – hope to wield in the battle for enterprise mindshare.
RIM has always had strong security capabilities, but the original iPhone and the subsequent enterprise BYOD scenario it spawned pushed that security capability onto the back burner for most enterprises. But we believe that open ended BYOD is coming to a close, and that enterprises are already looking to return to previous levels of security. This is what Samsung and RIM (and Microsoft by default) hope to exploit - and we believe that Apple is beginning to take such security issues seriously - and the move to acquire AuthenTec solidifies that thinking for us.
Apple may also be sensing a general shift in the mood of employee/consumers – even though we anticipate huge sales of the next iPhone, there is no denying that Samsung is making inroads on the device front. And once RIM gets its new devices out the door they will deliver a concerted enterprise security push.
Finally, Windows 8 laptops and tablets, as well as Windows Phone 8 devices, are just about ready to ship (Microsoft itself has confirmed that the code for Windows 8 is done and is now being released to manufacturers).
It is exceedingly clear that there is going to be a substantial battle waged for gaining workforce mobile device market share that Apple has completely taken for granted to date. The next round will not be nearly as easy for Apple, as the last five years have been. Hence, the real reason for the AuthenTec/security acquisition strategy –and the reason we believe that Samsung may make a play for AuthenTec, or at least look to make the deal a much more expensive one for Apple to pull off.
However way the ball bounces, it's good to be AuthenTec at the moment.
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Tony Rizzo has spent over 25 years in high tech publishing and joins MobilityTechzone after a stint as Editor in Chief of Mobile Enterprise Magazine, which followed a two year stretch on the mobile vendor side of the world. Tony also spent five years as the Director of Mobile Research for 451 Research. Before his jump into mobility Tony spent a year as a publishing consultant for CMP Media, and served as the Editor in Chief of Internet World, NetGuide and Network Computing. He was the founding Technical Editor of Microsoft Systems Journal.Edited by
Braden Becker 
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