Spyglass scoops up Navitel for $11.3 million

Spyglass today said it was acquiring privately held Navitel, a developer of Windows CE-based software for Internet-enabled telephones, in a stock only transaction.

After seeing its stock languish the last three months, shares in Spyglass rose another 29 percent in midday trading to $17.6875. The stock has gained almost 52 percent from its 52-week low of $8.50, which the company hit earlier this month.

Spyglass said it will issue 1,250,000 shares to Navitel stockholders and option holders, resulting in a transaction at approximately $11.3 million. The transaction is expected to be completed within 15 days.

The acquisition follows one day after the company said it had signed a three year, $20 million deal with Microsoft to help develop and integrate Internet-ready applications for Windows CE device manufacturers.

Spyglass said today's deal would boost its capabilities in providing telephony applications for Windows CE, which in turn would benefit its ability to deliver on its contract with Microsoft.

"With the Navitel acquisition, Spyglass will gain significant expertise in developing Internet enabling software and applications running on the Windows CE platform," said Spyglass chief executive Doug Colbeth in a statement. "This deal will help facilitate the development and integration services that Spyglass will provide to Microsoft under the separately announced $20 million strategic Internet solution agreements with Microsoft," he added.

Microsoft deal could go beyond services
While the Microsoft deal is predominantly for engineering services, Microsoft has also licensed unnamed Spyglass technology and is looking at ways to boost the usability of Windows CE with the technology.

While Spyglass declined to confirm what technologies were being examined by Microsoft, both the company's Web browser and its "Prism" software for automatically converting Web content for viewing on handheld and other devices could potentially play an important part in Microsoft's plans.

"We are working on a variety of different areas," including handhelds, Internet phones, and other consumer electronics devices, said Randy Littleson, vice president and general manager of Spyglass. Some of the specifics about different projects-including specific technology licensing arrangements--will be worked out over time, Littleson noted. Separate announcements will come as those details are worked out-deals which could further boost the company's earnings once products start shipping from manufacturers.

Microsoft has designs on moving content from its MSN service to devices such as handhelds and smart cell phones via wireless connections. It has also formed a new company with Qualcomm, called Wireless Knowledge to provide wireless data services.

In 1997, Spyglass became embroiled in a dispute with Microsoft over whether or not Microsoft was keeping up with royalty payments due to Spyglass for technology used in the Internet Explorer browser. The issue was later settled when Microsoft offered a lump sum payment to Spyglass for its technology.

"Despite that brouhaha, we have retained a good relationship with Microsoft and worked on a variety of things," said Littleson. Littleson said the company isn't worried that similar issues would arise with the current deal because it is predominantly for engineering services, instead of royalties based on product shipment numbers, like the previous deal.