Look to Aliso Viejo to find a key component of a new digital strategy crafted by the nation’s largest telecom as it integrates several recent buys into a new business unit.
That’s where you’ll find Telogis Inc., the logistics software maker, which was acquired in July by Verizon Communications Inc. for about $900 million. It joins a group of new and old-guard companies under the banner of Product Innovation and New Businesses, a division formed last year to make headway in telematics, Internet of Things, digital media, smart cities and other emerging segments.
Co-founder Newth Morris, our Business Person of the Year, shepherded the company’s growth to position it as a prime takeover target for a global player such as Verizon.
Other counterparts include Yahoo, which Verizon acquired last year for $4.8 billion; AOL, which sold in 2015 for $4.4 billion; and Fleetmatics Group PLC, which agreed to a $2.4 billion sale in a deal that was estimated to close last month.
“It’s all about new innovative applications and solutions,” said Telogis co-founder Jason Koch, president of its Fleet division.
The acquired telematics companies, along with Verizon’s in-house network, are in discussions on the go-to-market brands for all three entities.
Telogis targets original-equipment and auto manufactures, while Fleetmatics focuses more on small and medium-sized businesses. Verizon’s operation has deep connections in federal government and local municipalities.
“There’s very little overlap,” said Morris, president of the new Route and Telogis Navigation divisions.
Telogis’ software relies on GPS technology and analytics to improve fuel use, driver and vehicle performance, shipments and deliveries, and routes, among other features.
Niche
The company has carved out a lucrative niche by syncing partnerships with leading auto brands and influential investors and pushing innovation in one of the hottest areas in technology: connected vehicles.
This year’s honor is Morris’ second Business Journal nod in less than two years. He received one of the inaugural Innovator of the Year awards in September 2015, shortly after the company struck a deal with Dallas-based AT&T Inc. to provide its growing roster of big-name customers with improved vehicle and workforce connectivity and security throughout the world.
The AT&T partnership also provided some flexibility in pricing as Telogis rolled out new mobile services, such as its vehicle-as-a-hub offering, which creates mobile hot spots in customers’ fleets.
Room to Grow
It appears Verizon will give Telogis room to grow its OC operation, since the only employment changes following the sale included the exits of Chief Executive Dave Cozzens and of Chief Financial Officer Kyle Messman, who now holds the same title at El Segundo-based sales software maker Velocify.
“I think it bodes well for our presence in Orange County,” Morris said. “I think it will play well over the long term for the region.”
Telogis closed out last year as OC’s 15th largest software maker, with 147 local employees. New York-based Verizon also has a sizeable operation in Irvine that employs about 1,500 and offers resources to Telogis’ workers and operation.
“Now our employees qualify for subsidized Verizon wireless plans, and we get all the enterprise leads from the 4,000 wireless reps that are out there,” Morris said.
The latter should help boost the top line as Telogis continues to line up big-name customers with sizeable fleets.
The software maker was the 110th largest private company based in OC last year, with about $111 million in revenue in the 12 months through June, up 25% year-over-year.
Verizon, by comparison, reported 2015 revenue topping $131 billion, roughly 1,200 times more.
Momentum
The courtship and transaction were brisk as the two sides began intense negotiations in May, closing the deal in less than three months. They knew each other well in the close fraternity of logistics providers, and Telogis would often beat Verizon in acquiring customers over the years.
“They wanted to get this deal done,” Morris said. “That made it very easy to come to terms and make the deal happen.”
Telogis became a prime takeover target after securing a $93 million investment in 2013 from Menlo Park-based venture capitalists Kleiner Perkins Caufield & Byers.
“We’ve been in overdrive since then,” Morris said.
Subsequent rounds brought funds from GM Ventures, the venture capital arm of General Motors, and Fontinalis Partners LLC, which was co-founded by William Clay Ford Jr., executive chairman of Ford Motor Co. and son of the Detroit Lions owner.
The Fontinalis strategic investment extended a relationship with GM that began in early 2014 to integrate telematics software into GM’s OnStar connectivity system, which has more than 6.5 million subscribers.
The GM deal is one of several signed with large commercial vehicle makers. Others include an exclusive agreement with Isuzu Commercial Truck of America Inc. to supply the Anaheim-based company with new telematics systems to improve the fleet’s connectivity services.
The Isuzu commercial truck division, part of Isuzu Motors Ltd. in Tokyo, has been among the biggest sellers of low cab forward trucks in the U.S. since the mid-1980s.
Telogis also has a software contract with the U.S. unit of Hino Motors Ltd., the third largest truck maker in the world.
The company reached an agreement in March 2013 with Volvo Group’s North American truck division to develop fleet-management services using its cloud-based technology. Gothenburg, Sweden-based Volvo takes in more than $33 billion a year.
Telogis signed a deal a month later with Manitowoc Co. to power its upgraded Global CraneSTAR telematics offering, which monitors and transmits crane operation data back to the company’s Wisconsin headquarters. Manitowoc has annual sales of about $3.4 billion.
Telogis’ first significant contract came in 2011, when it embedded telematic software in Ford’s commercial trucks and vans, allowing its fleet customers to remotely manage vehicles through a website.
The deal with the Dearborn, Mich.-based automaker helped put Telogis on the map in the automotive industry and with serious investors.
Its trajectory, coupled with the evolving telematics industry—littered with new, well-backed influential players, such as Tesla and Google—left Telogis with few options to scale and compete on the global stage.
“We assessed what it would take to really compete and be relevant in the five- to seven-year time frame, and it would have involved a significant amount of capital,” Morris said. “We knew the next (group of competitors) weren’t coming with hundreds of millions. They were coming with billions.”
