In something of a surprise pre-Christmas frenzy, two French firms triggered an apparent bidding war for Gemalto – a Dutch (on paper, mostly French) security specialist best known for its SIM cards, credit card, passport, security access cards, and NFC chips, which has been expanding into the IoT. Gemalto turned down a $5.06bn (€46 per share) offer from Atos, a technology and IT consulting firm, but then later accepted an all-cash $5.43bn (€51 per share) from aerospace and defense firm Thales, representing a 57% premium on its share price.
Both Gemalto and Thales have strong overlapping portfolios and expertise in security, with Thales offering security systems and services for things like government facilities and airports, as well as a newer big data protection and integrity offering. Thales says it plans to use Gemalto to flesh out the data security and cryptography wing.
Security is a very hot topic for the IoT, and as more enterprises realize the opportunities that IoT technology can provide for their organizations, there are going to be a lot more chances for the likes of Gemalto to sell into. Combined, Gemalto and Thales will hope to use the influence of their joint reputations to net contracts with larger companies that are looking to protect their newly connected assets – particularly in markets that are very sensitive to data privacy or intrusion.
In the past three years, Thales has made three acquisitions to advance its digital tech offerings (Sysgo, Vormetric, and Guavus), and claiming to have invested more than €1bn in its own offerings when combined with the value of those three purchases – spanning AI, analytics, cybersecurity, and connectivity.
There should be immediate benefits for Thales to enjoy, tapping into all the IP and expertise that Gemalto used to achieve €3bn in revenue last year. In terms of structure, Thales will move its digital businesses into Gemalto, and will retain the Gemalto brand. From the sounds of the statements, Gemalto will have some level of autonomy, and will be headed by its current CEO. There are no planned layoffs.
“The acquisition of Gemalto marks a key milestone in the implementation of Thales’ strategy. Together, we have big ambitions based on a shared vision of the digital transformation of our industries and customers. Our project will be beneficial to innovation and employment, whilst respecting sovereign strategic technologies,” said Thales’ CEO and Chairman, Patrice Caine.
The initial Atos bid (announced on the day of a Gemalto strike) seems to have been prompted by Gemalto’s four profit warnings, which were posted within the past year. Atos evidently thought its bid was strong enough to sway shareholders, and it must have stung to see Gemalto so quickly accept the Thales bid, given that Gemalto’s management had said it was ‘best positioned to grow on a standalone basis.’
“I am convinced that the combination with Thales is the best and most promising option for Gemalto, and the most positive outcome for our company, employees, clients, shareholders, and other stakeholders,” said Gemalto CEO Philippe Vallee, who added that it would allow the company to “accelerate its development and deliver its digital security vision.”
As for Gemalto’s IoT plans (which span Automotive, mHealth, Asset Tracking, Wearables, and Consumer Electronics), the focus remains on security. It has both modules and back-end network service offerings, and has partnered with Huawei (NB-IoT), Sequans (LTE-M) and Senet (LoRa).
The Cinterion family of connectivity modules are perhaps most well-known, and Gemalto’s Cinterion PLS62-W was announced back in November as the ‘first all-in-one’ IoT module – providing global LTE, 3G, and 2G. Gemalto’s embedded-SIM (eSIM/eUICC) offerings have also been gaining traction among developers.
The LinqUs On-Demand Connectivity (ODC) subscription management system is also pitched at companies looking to manage global IoT deployments, and the company also provides device ID and device hardware security modules (HSMs) to ensure that only authorized devices are allowed onto networks or into clouds. The on-device security tech also covers things like tampering and reverse-engineering protection.
As for its enterprise-focused offerings, Thales will be hoping that Gemalto’s data protection portfolio, SafeNet, tracks the increasing interest in data protection – both for at-rest and in-motion data. For cloud deployments, Gemalto offers cryptographic key protection, more encryption protection, and secure data center migrations too.
Thales should be able to add some value to Gemalto’s expertise here, as it has a long history in government and defense – both of which are rather security conscious. A little over half its total sales are in the defense sector, in which it is a top-ten player – designing aircraft carriers, tankers, UAV systems, and surface-to-air missiles. Air Traffic Control (ATC) is a big part of its Aerospace wing, and Thales’ Ground Transportation operations (mostly rail) are also big business.