On July 26, 2012, Netgear (NASDAQ: NTGR, market cap: $1.3b) announced the acquisition of Avaak, Inc. Architect Partners was the financial advisor to Avaak on this transaction.
[Note: In August 2018, Netgear spun out Arlo Technologies, based on the Avaak product and cloud services. At that time Arlo reported 2.2 million registered users. Services represented 8% of revenues and growing. Arlo had a market cap of almost $2 billion at launch.]
Avaak develops and markets wireless products for the smart home market. Avaak’s flagship product line is the VueZone™ home video monitoring system, featuring the only completely wire-free IP cameras on the market. The VueZone system includes a gateway unit, small wire-free (no networking or power cables required) cameras and a mobile application for viewing video on smartphones or tablets. Users can view their cameras via the mobile app or a browser, receive motion detection alerts, record and share video with others. VueZone is sold through the company’s web site and Amazon, and customers must sign up for a subscription service to watch video on mobile devices. Competitors include Dropcam, iControl, Logitech’s WiLife, Xanboo (acquired by AT&T;), Motorola’s 4Home and Comcast’s and Verizon’s newly-introduced home networking offerings.
This transaction rides two major trends: growing interest in SaaS business models (even for network-connected hardware vendors), and increasing use of video for sharing, monitoring and collaboration.
This deal underscores how the fast-growing smart home sector is attracting quite a bit of interest from consumer electronics manufacturers, security vendors and communications service providers.
Expanding retail distribution can be quite costly, and startups like Avaak frequently turn to large partners/acquirers to reach mass markets.
Netgear’s main business is in wireless routers. This is a very competitive business, and Netgear is working to differentiate its offerings with leading edge WiFi routers, network attached storage products, video solutions and other innovations and to create new revenue streams by launching services.