Synaptics follows Apple's lead, buys fingerprint-reader firm Synaptics (SYNA), a maker of touch interfaces, saw its stock rise more than 6% on Thursday to an all-time high on news that the company is buying a fingerprint-reader firm to expand its technology portfolio.
San Jose, Calif.-based Synaptics is the leading provider of touchpads for notebook computers and has diversified into touch-screen technology for smartphones and tablets. Late Wednesday, Synaptics announced it would acquire Validity Sensors, a provider of biometric fingerprint authentication solutions for tablets, smartphones and notebook PCs, for $92.5 million in cash and stock. The terms of the deal include potential performance payments that could raise the total cost to as much as $255 million.
Synaptics is making the acquisition to have a play in the fast-growing fingerprint ID security technology market. It expects the deal to close this quarter.
"Biometrics has long been of interest to Synaptics as it complements our existing touch-based solutions and offers an exciting new way to interact with devices," Synaptics CEO Rick Bergman said in a statement.
Fingerprint security is one of the big selling points for Apple's (AAPL) new iPhone 5S smartphone. Apple acquired the fingerprint sensor technology for its Touch ID feature when it bought AuthenTech in July 2012 for $356 million. With Touch ID, iPhone 5S users can unlock their phones with the touch of a finger on the home button rather than typing in a password. It also has potential uses in mobile commerce.
Synaptics also announced Wednesday that it expects sales for its fiscal first quarter ended on or near Sept. 30 to be about $220 million, above the $217.5 million midpoint of its guidance range. Plus, it said that last quarter it repurchased 1.2 million shares of common stock, or more than 3.5% of shares outstanding, and still has $110 million available under its stock buyback authorization. Synaptics is scheduled to report Q1 results on Oct. 24.
The Validity acquisition will give Synaptics more room to grow in smartphones and tablets, Pacific Crest Securities analyst John Vinh said in a research note Thursday.
"With Synaptics having limited growth opportunities in smartphones and tablets because of its dominant market share, we view the acquisition as positive," Vinh wrote. "It provides an opportunity for Synaptics to expand its content opportunity with key smartphone, tablet and PC (makers). In particular, we believe Synaptics could benefit, as we anticipate Samsung will be a fast follower of Apple and adopts fingerprint sensing in its high-end smartphones next year."
Validity currently generates about $15 million to $20 million in annual revenue, Bergman said on a conference call with analysts.
Vinh rates Synaptics stock outperform, or buy, with a price target of $58. In afternoon trading on the stock market Thursday, Synaptics was up 6.5%, near 49.20.
Wedge Partners analyst Brian Blair said Validity competes with Fingerprint Cards of Sweden. Both companies will be vying for non-Apple/AuthenTech business, he says.
"We understand that numerous (Google (GOOG) Android-based devices will have biometric solutions incorporated into them in 2014, and whether supplied by Fingerprint Cards or by Synaptics/Validity, it is clear that the non-Apple players in the market see the emergence of a critical technology," Blair wrote in a research note Thursday.
Related: Touchpad Or Gesture, Synaptics Thrives In Mobile Tech.
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