Monday, November 19, 2007

Qualcomm investing in GSM technology

This was a major announcement last week and quite a surprise to every observer of mobile banking: Qualcomm intends purchasing Firethorn for $210 Million. In looking at this announcement many questions will probably stay unanswered, but it is still good fun to ask them:

1. On what basis did Qualcomm get to a valuation of $210 Million? Firethorn had very little revenue and to all accounts technology that have not yet been proven in robust business environments. The number of subscribers utilising Firethorn technology is so low that this could also not have been the basis of the valuation. Seeing that Qualcomm is a publicly traded company, one would expect some more info being made available rather than the sketchy press release provided last week.

2. How does the major partners of Firethorn feel about the acquisition, and have they been consulted? It is really interesting that Qualcomm (major CDMA and Brew supplier) should purchase a Java based company with some of the major GSM Operators as customers (Verizon and Cingular). Interestingly, neither Verizon nor Cingular are mentioned in the press release (only the banking partners).

3. Qualcomm is currently an investor in Obopay - a direct competitor to Firethorn in terms of their technology and business model. What does this acquisition say about the future of Obopay? Does this mean that Qualcomm has discarded Obopay? Are they thinking of merging the propositions... very difficult. I just have difficulties getting my mind around this.

4. Which investors will gain most from this transaction and how could they have influenced the transaction? Maybe this deal does not have anything to do with the fundamentals of the solution and how this will change the landscape of mobile banking, but rather about more complex economic principles that not all of us can understand.

If I were a Qualcomm shareholder, I would really have felt aggrieved about this transaction, but then, I am not and now I am just frowning...

2 comments:

owais said...

Hi I have met with OBOPAY and i feel that the business model is a bit limited and they do not have the neccessary security infrastructure in place to go mass market smoothly with mobile banking.

Anonymous said...

Thanks for the information. It was interesting to note your blog on qualcomm's investment in obopay. Now that, Clairmail and mfoundry has a triple play offer, does this mean we can soon see a triple play offer from firethorn (qualcomm) and obopay now? As mobile banking heats up will we see more such strategic partnerships? And will vendors be looking at exit strategies as in the case of firethorn?

The one thing that still bothers me with mobile banking is that who provides the support. MNO, Bank or the Vendor (OR) is it a combination of all the three. How does the split work out here.

Yes, its a lot of questions! But then I find this an interesting subject to explore.

Regards,
Rakesh
rr2413@columbia.edu