Shares of Aliso Viejo software maker Smith Micro Inc. soared Tuesday as Wall Street gave a thumbs up to its $60 million cash buyout of a unit of Chicago’s PCTEL Inc.
The stock closed up more than 12% on a recent market value of about $264 million.
Smith Micro, which makes software used by wireless carriers on cell phones and other handheld devices, said Monday it’s set to get PCTEL’s cell phone and wireless Internet software unit in the deal.
JPMorgan analyst Lauren Ye said the deal, expected to close Jan. 4, could grow Smith Micro’s sales by 40% next year, according to an Associated Press report.
“We view this as a positive transaction helping to diversify Smith Micro Software’s customer base,” Ye said in a note to clients.
The acquisition knocks out one of Smith’s biggest competitors and brings it six major customers, including wireless carriers Cingular, which is owned by AT & T; Corp., and T-Mobile USA Inc.
“This acquisition also helps to get a foot in the door which is often difficult and creates opportunity to cross sell other products,” Ye said.
The move also helps Smith Micro diversify its customer base away from Verizon Wireless, a unit of New York’s Verizon Communications Inc.
More than 70% of Smith Micro’s yearly sales were from Verizon, which uses the company’s software to run its mobile music store.
The deal should bring sales to Verizon below 60%, Ye said in the report.
The buy is expected to add roughly $302,000 to profits next year, she said.
