Wednesday, January 02, 2008

Hughes to buy Helius for $10.5M, then maybe another $20M

Well, we're barely starting the new year and already we have the first signs of all this industry-wide consolidation that we've been hearing about. Bizjournals tells us that satellite provider Hughes has decided to buy Helius for $10.5M in cash, with the prospect of another $20M if the company meets various performance goals in the future.

Hughes and Helius have been close from the start, so I'm not too surprised by this notice. The real question in my mind is what this will do to the relationship between Hughes and various other digital signage software providers that have "partnered" with Hughes to provide multicast satellite support? I'd be pretty pissed if I had selected them as a premier partner (or whatever) and suddenly found myself competing against them. In fact, we've won a number of deals in the past for exactly that reason (though with different companies).

The deal is expected to close some time this quarter.

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4 comments:

Jeremy said...

Wow, Helius must have been seriously out of money. With almost 2/3 of the total price being paid in the form of an earn-out, it doesn't seem like Helius was coming from a position of strength :)

Bill Gerba said...

That's certainly one possibility.

Assuming that the $20M earn-out was based on bringing in a new... I dunno... $8M in revenues this year (since we all have "big things in the pipeline", right?), that would mean that Hughes essentially valued Helius's technology and past business at $10M.

Figure that they got the typical 8-16X FY sales, and suddenly it doesn't look like they were selling a whole lot of software, does it?

DailyDOOH said...

Bill, thanks for the heads-up on this. You are 'spot-on' when you ask what it will mean for those who have partnered previously with HNS. Scala for example are in bed with HNS with Tesco Screens, but I bet Helius would like that business (instead)!!!

Bill Gerba said...

Adrian,

Spot-on indeed (luckily I have a British mother-in-law to teach me the meaning of such things :)

you're exactly right about Tesco Screens too. After all, why would a company pay for product "A" product when they could get another, similar product "B" for free (or a deep discount) from an existing vendor?

Nevermind that product "B" might suck, or that product "A" might have features that significantly improve the business operations for the customer.

This is a scenario we've seen when dealing with Cisco, Sony, Fujitsu and others who are "partners" to a great many solution providers in the industry, but will also compete with anyone for any part of a deal that looks lucrative.