Back in July, Apple surprised us by announcing that it was acquiring mobile security firm AuthenTec for approximately $356 million.
The acquisition gave Apple non-exclusive rights to AuthenTec’s Intellectual Property, which includes control of fingerprint sensors, touchchips, security technologies and patents owned by the company.
It was speculated that the acquisition could be related to the company’s fingerprint scanning technology, which could be put to use in Apple’s ambitious, yet incomplete, mobile wallet.
A report from The Next Web earlier today, which takes a look at the U.S. Securities Exchange Commission filing, highlights that there was urgency in Apple’s talks with AuthenTec, suggests that Apple may be planning to incorporate the fingerprint scanning technology sooner than we expected.
According to the regulatory filing, Apple and AuthenTec began discussions in late 2011. Apple was initially interested in a commercial agreement to license Authentec’s technology and started negotiations in late February 2012, which continued through March and April.
But Apple had changed its mind and decided that it wanted to acquire the company in May.
On May 1, Apple decided it wouldn’t be satisfied with a commercial agreement and notified AuthenTec’s representatives of its proposal to acquire the company instead. Apple offered a price of $7.00 per share, valuing AuthenTec at a 115% premium over the closing price of its common stock as a day previous, pricing that Apple believed “other potential buyers would be unwilling to pay.”
On May 2, Apple started tightening the screws. The company believed its price was “very attractive” as AuthenTec would face challenges trying to develop new technologies for its rivals, which “have dozens of different smartphone platforms, in contrast to Apple’s unique narrow product platform, which allows for unity of design in component parts across significant unit volumes.”
A transaction structure and timeline for the deal was proposed and this resulted in the showing of Apple’s hand. The company wanted to use AuthenTec’s technology and it needed it fast.
Apple also wanted to move quickly with the deal due to its “product plans and ongoing engineering efforts” and informed Authentec that it did not want to participate in an auction process and also warned that the deal would be off the table if Authentec’s board decided to solicit alternative acquisition proposals for the company.
Authentec countered Apple’s bid and demanded $9.00 per share if it wanted to close the deal. Apple said it would not offer more than $8.00 per share. Authentec’s board buckled down and agreed to the deal. However, on May 31, Apple put an halt the transaction as it discovered some unacceptable issues during the due diligence process and was not willing to proceed with the deal until the issues were resolved.
But Apple was still very keen to integrate Authentec’s technology in its products, so it again started discussions about signing a commercial agreement.
Instead, focus switched to licensing the technology (again), and from June 1 to July 3 both parties continued to “design and develop the technology for Apple and continued to negotiate to narrow the significant differences between the parties regarding acceptable terms for a commercial agreement.”
But in mid-July when Authentec informed Apple that the issues pointed out during the due diligence exercise were resolved, the deal was back on the table and Apple agreed to pay $8.00 per share, provide $20 million for AuthenTec’s technologies and license its technologies for up to $115 million on July 26th. The deal was announced on July 27th.
As The Next Web points out the regulatory filing does indicate that Authentec’s fingerprint technology will certainly makes its way to Apple’s products.
So how could Apple use Authentec’s fingerprint technology?
On May 8, 2012 Authentec launched a fingerprint sensor, which is specifically designed for secure NFC based mobile payments.
The product is a new 192 pixel by 8 pixel fingerprint sensor that includes “hybrid fingerprint matching, AES, RSA and SHA encryption blocks, and One Time Password (OTP) generation.”
As The Next Web points out, Apple could incorporate the fingerprint sensor in the Home button, which could interact with the new Passbook app introduced in iOS 6 to offer secure authentication and help process NFC commands based on the positive authentication of the user.
It remains to be seen if Apple had enough time to incorporate the fingerprint technology in upcoming lineup of iOS devices such as iPhone 5, iPad mini, next generation iPod touch that will be unveiled next month.
It will also be interesting to see if the fingerprint scanning technology will convince users to buy or upgrade to iPhone 5. What do you think? Sound off in the comments.