The $1.10 a share cash offer, which has already been accepted by holders of 40% of the stock, comes at a low point for Virage as its shares had just been booted onto the Nasdaq SmallCap market after languishing below the minimum $1 mark.
The company has a miserable financial history and last year made a net loss of $18.1m on revenue 22.7% lower at $12.9m. But the attraction for Autonomy is that Virage has spent considerable sums building up a blue-chip customer base of more than 400 customers and Autonomy can now tap this market for a relatively small outlay. Virage claims to be the largest provider of technology for searching video clips.
Despite Virage’s hefty losses, Autonomy believes the acquisition will be accretive to earnings within six months of the transaction closing. For a start, Virage will be relieved of the cost of maintaining its listing as a public company. With integration of Autonomy’s technology, it will no longer have to pay royalty fees for indexing software to Verity Inc, one of Autonomy’s major competitors.
Autonomy CEO Dr Mike Lynch said the transaction would further extend the adoption of its intelligent data operating layer (IDOL) and, with its Dremedia video technology at the core of Virage products, it would be better able to take advantage of its leadership position.
Completion of the acquisition will still leave Autonomy with a cash pile of $110m and other acquisitions may be on the horizon.
Source: Computerwire
