By DON CLARK
Staff Reporter of THE WALL STREET JOURNAL
January 11, 2005; Page B5
VeriSign Inc. agreed to buy LightSurf Technologies Inc., a pioneer in cellphone photography led by entrepreneur Philippe Kahn, for about $270 million in stock.
The deal represents the latest expansion in the mobile-phone market for VeriSign, a Silicon Valley provider of telecommunications and Internet services that has been on a growth tear lately.
It also marks another big payday for Mr. Kahn, 52 years old, who sold his StarFish Software to Motorola Inc. in 1998 for $253 million. He is best known in Silicon Valley for founding what is now Borland Software Corp., a once-formidable rival to Microsoft Corp. that went into a slump that led to Mr. Kahn’s ouster in 1995.
VeriSign, based in Mountain View, Calif., said it expects the transaction to generate at least $30 million in additional revenue in 2005, to be neutral to 2005 earnings per share and to “modestly” add to VeriSign’s 2006 earnings per share. VeriSign’s shares were off 12 cents at $30.83 at 4 p.m. in Nasdaq Stock Market composite trading.
The deal highlights the surging popularity of camera-phones, which consumers use to take and share photos and video clips. LightSurf , a closely held Santa Cruz, Calif., company founded in 1998, has developed software and services for cellular carriers that allow phone users in North America to e-mail such images. LightSurf also works with cellphone makers to be able to electronically modify images so they can be properly displayed on various kinds of handsets and other computers.
Mr. Kahn saw a need for such services in June 1997 — before the advent of phones that can store images — after successfully cobbling together a camera and a cellphone to transmit a photo at his daughter’s birth. He and his wife started LightSurf to help make the process easier.
He has been ahead of the pack before. The French-born mathematician is credited with programming the Micral, a 1973 product that was one of the first personal computers. At Borland, Mr. Kahn helped to pioneer computer languages; at Starfish, he helped to develop early technology for synchronizing information between computers and portable devices.
VeriSign, meanwhile, has branched out from securing Web-commerce transactions to a range of other communications services. It operates a network that handles about 30% of the text messages sent by cellphones in the U.S., as well as other systems needed to call up Web pages based on the “.com” and “.net” addresses.
Vernon Irvin, a VeriSign executive vice president, said LightSurf’s business in sending images was “a great complement” to VeriSign’s text-messaging business and a strategy to move into other forms of electronic communications. In June, VeriSign purchased Jamba, a German wireless-content services firm, for $273 million in cash and stock. Mr. Irvin added that VeriSign and LightSurf have common customers, including Sprint Corp. and Verizon Wireless, a unit of Verizon Communications Inc. and Vodafone Group PLC.
In an interview, Mr. Kahn said LightSurf had been headed for an initial public offering of shares when it was approached by VeriSign about the purchase, an appealing alternative because that company already operates the kind of global network that LightSurf would need to expand in other markets. “They have data centers all around the world,” Mr. Kahn said. “There is a lot of synergy.”
Mr. Kahn said he expects to remain with VeriSign after the transaction.
Write to Don Clark at don.clark@wsj.com