Verizon Communications (VZ) is living up to their name. In a recently announced deal, Verizon will pay $60 a share, totaling $2.4 billion, for a 100% stake in Fleetmatics Group (FLTX), a fleet management technology company.
The deal can only go through after approval from Fleetmatics stakeholders approve, but it is expected to go through during the final quarter of 2016.
Although Fleetmatics stock surged 39% shortly after the announcement, Verizon stock declined by 1%, showing minimal impact. That’s logical, because Verizon’s revenues are currently at $131 billion while Fleetmatics only made $285 million last year – a drop in the ocean for Verizon.
However, the acquisition will position Verizon squarely in the fleet operations technology arena – something that will give them the diversity they are looking for.
Verizon already has a significant market share for wireless operations in the United States, and sources say that by 2020, wireless connection penetration could be as much as 128% – meaning, multiple connections will be sold to the same subscriber.
That’s not a good scenario for the country’s largest wireless operator, and they have been trying to diversify into web assets and other areas for the past several years.
Last year they acquired AOL and all of its assets including TechCrunch, HuffingtonPost and others. They also announced their acquisition of Yahoo Inc.’s core assets last month. Their acquisition history is dotted with big names like Alltel ($28 billion in 2008), MCI in 2005 and XO Communications earlier this year for $1.8 billion. But it is their acquisition of Telogis that I believe set the groundwork for the company to move into this space.
Verizon Telematics, a subsidiary of Verizon, gave this explanation of the proposed deal through its CEO, Andres Irlando:
“The powerful combination of products and services, software platforms, robust customer bases, domain expertise and experience, and talented and passionate teams among Fleetmatics, the recently acquired Telogis, and Verizon Telematics will position the combined companies to become a leading provider of fleet and mobile workforce management solutions globally.”
Fleetmatics’ 37,000 customers and 1,200 employees will be able to significantly position Verizon in an advantageous position as a leading fleet management provider, but it will also give them a foot in the Software-as-a-Service (SaaS) space because Fleetmatics software is essentially web-based and served on the cloud.
For now, this may seem like an insignificant acquisition for Verizon, but we can clearly see that it is becoming a conglomerate of sorts – more and more like General Electric than ever before – with a presence in multiple domains that will give it more security and stability as the wireless market undergoes a kind of saturation point in the Americas over the next few years.
