DeviceAnywhere produces a cloud-based platform for testing and monitoring mobile websites and applications. With the DeviceAnywhere acquisition, Keynote now believes it can grow the mobile testing, quality assurance and monitoring part of the company alone into a $100 million-plus business.
DeviceAnywhere brings testing expertise as opposed to the ability to monitor mobile systems, which Keynote has had since 2005, says Umang Gupta, CEO of Keynote, based in San Mateo, Calif. With the acquisition, Keynote has expanded the scope of its business by moving into the adjacent space, ultimately giving its users the ability to do quality assurance as well as monitoring, he says.
The acquisition will allow Keynote to set up a hundred models of smartphone and let its users test their applications on those phones, rather than having to acquire and manage all the telephones themselves, Gupta says. The company can make money in two ways: first, by providing connections to the phones on a per-hour basis, for which DeviceAnywhere has earned $8 million in the last 12 months, and second, by selling licenses, dedicated hardware platforms and professional services, for which the company has earned $12 million, he says.
"If I look at the mobile testing space, it’s highly fragmented, and at square one of where it’s going to go," says Michael King, a research director for Gartner who called it a good acquisition. "Mobile apps are one of these areas that’s just going to grow at a phenomenal rate for five to 10 years." Areas that will grow include the companies building the applications, employees and customers, and all the different aspects of the mobile app lifecycle, including testing performance management, rollout, and all of the various bits and pieces of testing, proving an application works, and meeting service-level agreements, he says. "The market has been fragmented for so many years, with all the different players, and each do one thing very well. This acquisition rolled up two of the main pieces--ongoing performance monitoring and testing, as well as the device testing side."
The transaction is expected to close in the next two weeks. The purchase price consists of $60 million in cash plus a potential cash earn-out of up to $30 million if certain bookings, revenue and earnings thresholds are met. DeviceAnywhere’s revenues have grown over 15% on a compounded annual basis during the last three years to approximately $20 million in revenue for the trailing 12 months ended Sept. 30. Keynote doesn’t expect the acquisition to affect earnings per share in 2012, and expects it to make money in 2013.
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