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News & Updates - Wednesday, April 19, 2006

The Qpass Back Story

Qpass has emerged from the grave to become one of the biggest acquisitions of the year with its $275M . We did a double-take on Qpass because we knew them as an online copy-right service for newspapers, magazines and other online publishers. But this Qpass is a ring-tone back-end. Turns out we missed the re-launch of the company.

Qpass had raised $85M prior to its recapitalization in 2002, giving it a valuation worth hundreds of millions of dollars. But just prior to the recap, Qpass was valued at a mere $3.5M. The company was forced to lay-off two thirds of its staff

Flash forward 4 years to 2006, and Qpass was enjoying a bidding war that ended Tuesday with Qpass agreeing to be sold for $275M in cash to St. Louis-based Amdocs. Amdocs paid more than six times Qpass’ 2005 revenue. Last year, Qpass posted revenue of $42M, about a 140% gain over 2004.

Qpass says that despite the wash-out in 2002, early investors in the company, including Venrock and SeaPoint, “did very well in the deal.”

Why does this deal make sense? Both companies handle billing for digital content sold through wireless carriers such as Cingular, Sprint and T-Mobile, with Qpass last year processing 480M mobile transactions worth $1.2B. Qpass toyed with the idea of an IPO, but the market is very competitive making this option dicey for a company that has pushed its luck past the grave once already. Competitors include Openwave, Mobiltec, Motricity, VeriSign, InfoSpace and WiderThan.

Thanks to the purchase last year of Vienna, Austria-based UCP Morgen, Qpass delivers a new wrinkle by helping wireless carriers, deliver music, games and video.

CEO Franklin Chase Founded Qpass in 1997

Read - Qpass sold for $275 million (Seattle PI)