Apple Inc has agreed to buy fingerprint sensor technology developer AuthenTec Inc for about $356 million, in a deal that could put its iPhone at the center of the emerging mobile payments market. Apple is paying $8 per share, a 58-percent premium, for the Melbourne, Florida-based AuthenTec, which announced the deal in a regulatory filing on Thursday.
Shares of AuthenTec surged $3.19, or 63 percent, to $8.25 on Nasdaq in morning trading. Apple stock was down $1.18 at $573.70. AuthenTec, which was spun off from Harris Semiconductor in 1998 and went public in 2007, provides mobile security software licenses to companies like Apple's arch rival Samsung Electronics Co Ltd and provides fingerprint sensor technology to computer makers such as HP and Dell Inc.
Its fingerprint technology, which is also used in mobile phones in Japan for authentication of mobile payments, could help Apple bring those services to markets such as the United States, where mobile wallet services have been slow to take off. Some analysts expect the next version of the iPhone to include some form of mobile payments technology.
Apple officials weren't immediately available for comment. While companies such as Apple's rival Google Inc already have mobile payments offerings, such services are not widely used in the US and have been dogged by security concerns. "To have security behind it would give people peace of mind. It could be a major differentiator for them," said Dougherty & Co analyst Charlie Anderson who noted that fingerprints are more secure than passwords because they cannot be copied or stolen.
Anderson said Apple was buying a rich portfolio of patents from AuthenTec that could help it dominate mobile payments. Mobile wallet users will want to be sure their money is safe but would like something more secure and easier to use than typing in passwords, analysts said.
"If you're storing credit card information in your phone for mobile payments, it would be more secure if it has fingerprint authentication rather than just a password protection," BWS Financial analyst Khorsand Hamed said. Anderson said Apple may continue to offer AuthenTec's existing products to its rivals to help gain regulatory approval but it may keep future developments for its own products.
BGC Partners analyst Colin Gillis said AuthenTec technology could potentially help Apple combat problems such as theft of its more portable products such as iPhones. "If they could have a way where they could tie the phone to a user more tightly, that would make sense for them," he said.
He described the price tag for AuthenTec as a drop in the bucket of Apple's cash pile of $117.2 billion, and noted the company had not been as acquisitive as some other technology firms. "We'll see if it's a one off or if Tim Cook will start to level his cash balance and acquire talent," Gillis said referring to Apple's chief executive. AuthenTec, which also counts Lenovo Group Ltd and Fujitsu Ltd as customers, has annual revenue of about $70 million. Piper Jaffray advised in the deal, the company said.