Posted by Tom Foremski - February 12, 2007
To succeed in the consumer space, scale is very important which means an M&A wave is inevitable. Fabrik, a startup based in San Mateo, late Sunday announced it had acquired the consumer products business of SimpleTech.
Fabrik offers online consumer media storage along with software to manage all types of media such as movies, music, and photos. This deal gives the web services company a physical presence through SimpleTech's retail channels
Fabrik says that SimpleTech is the third largest US "provider of hard disk drive-based external, portable and network storage solutions for consumers and small business users. The purchase also includes the company’s flash memory cards, USB flash drives and memory upgrades."
It is a cash deal valued at about $43m. It also brings together executives who used to work with each other, which will help, since the two businesses are very dissimilar.
Foremski's Take: Fabrik's move is smart because it can acquire new customers for its web services business at a low cost. Customers of SimpleTech's products are very likely to be consumers looking for solutions to storing large numbers of media files, which is Fabrik's business.
Memory/storage devices can easily be linked to online media management services such as the free version of myfabrik. Then come the opportunities to upsell premium services and other memory products into the consumer media market.
Otherwise, to rise above the noise level in consumer media would cost Fabrik tens of millions of dollars in annual marketing costs. This strategy is a more effective use of its capital.
Additional info from Fabrik:
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myfabrik (www.myfabrik.com), provides a simple way for people to store, organize and share photos, videos, music and documents either publicly or privately; and myfabrik lite ( www.myfabrik.com/lite) serves as a free hosting and delivery conduit for large files and personal media.
The two leading investors in Fabrik are Comventures and Intel Capital. Wells Fargo Foothill, part of Wells Fargo & Company (NYSE: WFC), provided the debt financing for the acquisition. VisionPoint Capital, LLC (www.vpcap.com), member NASD and SIPC, advised Fabrik on the acquisition and the related financings.
Note: SimpleTech’s OEM/Industrial flash business is now called “STEC” and will be traded on NASDAQ: STEC. Please visit www.stecinc.com for more information.