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This is How Future iPhones Will Know Who You Are

Evan Niu
July 27, 2012

They don’t happen all too often, but Apple (Nasdaq: AAPL  ) has made another acquisition. This time, the target is the mobile and network security company AuthenTec (Nasdaq: AUTH  ) , for $8 per share. It's a roughly 58% premium for the smaller company that pegs the deal’s price at $356 million.

Never heard of ‘em?
AuthenTec’s offerings include fingerprint sensor modules, embedded security software and IP, and identity management software, among others. It was founded in 1998, and went public in 2007. The company has a broad patent portfolio surrounding fingerprint biometrics, and has shipped over 100 million fingerprint sensors that are integrated into various devices. Notable customers include rivals like Hewlett-Packard (NYSE: HPQ  ) , Lenovo, LG, Motorola, Nokia (NYSE: NOK  ) , and Samsung. Samsung even uses AuthenTec’s security technology in its newest Galaxy Android devices.

Interestingly, shares have surpassed that $8 threshold during trading, reaching as high as $8.83 so far, as of this writing. Analysts are chalking this up to the possibility that a bidding war may erupt with rivals Google (Nasdaq: GOOG  ) or Samsung stepping up with an offer, especially as both are currently customers of AuthenTec (via the Motorola subsidiary, in Google’s case).

If any competing bids do materialize, though, they'll have to be unsolicited, because AuthenTec is now subject to a "no-shop" restriction to solicit alternative proposals, according to the merger agreement. It’s not allowed to provide information or participate in talks in these cases, but it can do so with unsolicited offers.

As a public company, the prospective pair will have to jump through the standard loops of various regulatory approvals and shareholder votes. Until then, it’s possible for competing bids to show up. Apple might also keep offering some of AuthenTec’s current products to rivals to avoid being accused of locking down the technology and subsequent antitrust implications; but, surely, future innovations would be off the table for competitors.

This is a characteristic iAcquisition in many ways -- it’s small in size (less than $500 million), and is centered on IP and technology that can be integrated into Apple devices in various ways, in order to bolster their functionality. Apple almost never purchases a company for its revenue stream -- it has