• 08.01.16

Why Verizon is spending $2.4 billion to snap up Fleetmatics

Cars and trucks are getting smarter, and Verizon sees that evolution as a multi-billion dollar opportunity. 

The telecom company announced today that it had entered into an agreement to acquire Fleetmatics, based in Dublin, for $2.4 billion in cash, with the deal expected to close by the end of the year. Through its GPS tracking systems, Fleetmatics helps companies with fleets of cars and trucks monitor their vehicles’ location, fuel usage, speed, and more. 

Demand for smart, connected vehicles is growing fast, as automakers, ride-sharing startups, and Silicon Valley heavyweights vie for control of transportation’s future. Verizon’s willingness to pay a 40% premium for Fleetmatics, or $60 per share, reflects a belief that enterprise customers will comprise the first large-scale application of these new technologies. 

Verizon plans to fold Fleetmatics into Verizon Telematics, its own fleet management division and one of three new business units that CEO Lowell McAdam expects to reach $5 billion in revenue in the next couple of years. The company’s other two areas of focus—IoT (Internet of Things) and digital media—are similarly extensions of Verizon’s core value proposition around network connectivity. 

Verizon executive vice president Marni Walden, who oversees product innovation and new business, has been relying on acquisitions in order to meet those $5 billion targets. Last week her team announced that it would acquire Yahoo for $4.83 billion in cash, her largest digital media deal to date. 

[Photo: Flickr user vxla]AH