Mobile Consolidation Game Has Begun with WiderThan and Jamba Dealsposted by MR WAVETHEORY at 9/13/2006 06:35:00 PM
WiderThan Co Ltd had $93 million of cash. So, the enterprise value of the company was closer to $257 million. WiderThan generated $14.2 million of EBITDA in the first half and we can assume it will do even better in the second half since that is when. Just being conservative, let's assume EBITDA for full year 2006 of $28.4 million, and you get a EV/EBITDA ratio of 9 times. Real (Nasdaq RNWK) paid 9x EBITDA for a global mobile distribution business! Nice!
News Corp buys 51% of Jamba for $187.5 million from Verisign Inc.
EBITDA at Jamba? It's anyone's guess. The deal values Jamba at $367 million. If price is indicative of value, then Verisign Inc didn't add much value to Jamba since its acquisition of Jamba two years ago for $274 million.
Which deal was better?
I think strategically Verisign needed to do a deal more than Real Networks needed to do a deal. Verisign's Jamba business wasn't getting crushed because content licensing fees were reducing its gross margin into non-existence. With News Corporation on board, Jamba gets content and escapes the death grip of the spiral costs of content licensing fees. It also introduces the possibility of captive distribution through News Corp's print and online publications.
Real Networks on the other hand got a steal with WiderThan. Real's biggest problem has been EBITDA and generated profits. Now, Real can:
- distribute online games to cell phone users
- show profits to shareholders
- have direct access to mobile carriers - key to a mobile platform/story that is credible