Qualcomm to Sell Omnitracs; $800 Million Deal Called Largest in Truck Telematics

By Seth Clevenger, Staff Reporter

This story appears in the Sept. 2 print edition of Transport Topics.

Qualcomm Inc. said it would sell its trucking technology business, Omnitracs Inc., to a private equity firm for $800 million in what is believed to be the largest deal in the commercial-vehicle telematics industry.

If approved by federal antitrust regulators, Vista Equity Partners will take ownership of the trucking industry’s biggest provider of onboard communications systems.

The agreement also marks wireless technology giant Qualcomm’s exit from the U.S. truck technology business. The company pioneered wireless onboard communications in the trucking industry in the late 1980s with its original satellite-based Omnitracs system.

“We believe Omnitracs is well-positioned to continue its leadership position as a stand-alone entity,” Derek Aberle, Qualcomm’s executive vice president, said in the company’s Aug. 23 announcement.

Qualcomm said Vista Equity is “uniquely qualified to help position Omnitracs for continued growth and will enable the company to strengthen and expand its product offerings.”

Robert Smith, Vista’s founder and CEO, said in the joint statement that his firm is “impressed with the compelling value proposition Omnitracs’ products and services offer their customers.”

Vista Equity, which has offices in Austin, Texas; Chicago and San Francisco, owns enterprise software and technology companies that serve a variety of industries. The company did not respond to a request for additional comment.

The sale will include all Omnitracs operations in the United States, Canada and Latin America, which include Sylectus and FleetRisk Advisors. Qualcomm will retain Omnitracs’ European operations.

The transaction must receive federal approval under antitrust law. Qualcomm said it expects to close the deal during its fiscal first quarter, ending in December.

Norm Ellis, Omnitracs’ vice president of transportation and logistics sales, services and marketing, told Transport Topics in an e-mail that the current Omnitracs management team will continue to manage the company.

“Qualcomm and Vista Equity Partners will strive to make this transition as smooth as possible, keeping it ‘business as usual’ for customers, employees, vendors and partners,” Ellis said.

Clem Driscoll, founder and president of consulting and research firm C.J. Driscoll and Associates, said the $800 million price tag would make the transaction the largest in the commercial-vehicle telematics business.

“I’m sure it’s the biggest deal that’s been done, and probably by a lot,” said Driscoll, whose firm has been covering the mobile technology space for 20 years. His firm estimates that Omnitracs has about 300,000 in-cab units in service in the United States, representing a roughly 40% market share, as well as about 200,000 trailer-tracking units.

As a stand-alone business, Omnitracs will “have the ability to prioritize its own needs and control its resources,” Ellis said. “This can also result in more nimble decision-making and increased flexibility in meeting the needs of its transportation and logistics customers.”

He also said Vista will bring “meaningful capital to invest strategically.”

Fleet customers said they expect their relationships with Omnitracs to continue without a hitch.“Our expectation is business as usual,” said Paul Will, CEO at Celadon Group Inc. in Indianapolis. “[Vista] is making a large investment in this, and our expectation is that they’re doing it for a reason,” he said.

The truckload carrier runs Omnitracs’ MCP200 platform on its trucks and the company’s Trailer Tracks 210 tracking technology on its trailers.

Likewise, Ron Hall, senior director of equipment and fuel at C.R. England Inc., said his Salt Lake City-based company doesn’t expect  significant changes.

“We’ve confirmed that all of our regular contacts are going to remain in the same positions and that no major changes are expected with the data or operations centers,” he said.

C.R. England has been a Qualcomm customer for about 22 years and uses the MCP200 and MCP100 platforms.

Likewise, Jed Duggan, senior vice president and general manager of Harris Trucking Co., said, “I don’t expect anything different.”

The Madison Heights, Va.-based carrier adopted Qualcomm’s original Omnitracs system around 1991 and recently upgraded, Duggan said.

Technology companies that collaborate with Omnitracs on software integrations also said they expect those partnerships to continue.

“We are excited about the potential this acquisition represents for our longtime partner and industry pioneer, Omnitracs,” said Dave Wangler, president of transportation management software provider TMW Systems, which is part of Trimble Navigation Ltd.’s transportation and logistics division.

Tom McLeod, founder and CEO of McLeod Software, said the acquisition may give that company new momentum.

“Because [Omnitracs] has become such a minor part of Qualcomm’s overall business, which is mainly in cellular technology these days, it’s likely this transaction will result in really a renewed energy and focus for the company,” McLeod said.

Driscoll said Qualcomm agreed to sell Omnitracs because it hadn’t been growing at a fast enough rate in comparison with the rest of the company and because fleet tele-matics “is just not a core business for Qualcomm anymore.”

“The rest of Qualcomm is continually growing and extremely profitable with their chipset and their licensing business,” he said, adding that fleet tracking only constitutes about 2% of the business.

Qualcomm reported a profit of $6.11 billion, or $3.51 per share, on revenue of $19.12 billion in fiscal 2012, which ended Sept. 30. That year, Qualcomm’s Wireless & Internet segment, which includes Omnitracs, posted a loss of $15 million before taxes and $633 million in revenue.

On April 1, Qualcomm renamed its trucking business Omnitracs and moved it into a subsidiary. The business unit previously was a division of Qualcomm known as Qualcomm Enterprise Services.

While Qualcomm’s original Omnitracs system paved the way for the commercial-vehicle telematics industry, the success of that product helped enable Qualcomm to grow into the wireless technology giant it is today.

“It was actually the Omnitracs business that really got Qualcomm going in the late ’80s,” Driscoll said. “The large trucking companies at the time wanted to be able to communicate with their drivers across the country.”