Cartagena Capital Newsletter | Issue 6 | Deal News

Welcome to a new edition of our newsletter

Cartagena advises French Coronis on its sale to Elster Group

Munich/Paris - June 27, 2007 - Cartagena Capital, the international technology corporate finance firm, acted as exclusive financial advisor to the shareholders of Coronis Systems on its sale to the Luxembourg-based Elster Group. Coronis Systems is a leading developer of ultra-low-power wireless solutions. Elster Group, the world's largest metering company and supplier of high quality integrated metering and utilization solutions has acquired Coronis Systems from its management and a group of venture capital shareholders led by Banexi Ventures and AXA Private Equity in order to expand further into the AMI (Advanced Metering Infrastructure) solutions market.

Coronis Systems designs and develops ultra-low-power long-range wireless solutions and platforms for value-added resellers (VARs), original equipment manufacturers (OEMs), and integrators. Since its inception in 2000, Coronis Systems has become the global leader in ultra-low-power consumption wireless communication technology. With more than 1.2 million devices deployed in small, medium, and large-scale wireless mesh networks around the world, Wavenis technology addresses the specific characteristics and needs of today's smart sensor networks.

The Elster Group’s acquisition of Coronis Systems strengthens its portfolio of standards-based AMI solutions for utilities. As part of the Elster Group, Coronis Systems will continue to supply and support its current customer base and seek to expand the market and standardization for Wavenis-enabled platforms. Coronis Systems will also reinforce its line of transversal ultra-low-power wireless platforms and solutions, leveraging the Elster Group’s leading market position.

Anne-Valérie Bach, Partner of Banexi Ventures,  commented: "Cartagena Capital did a fantastic job for us when advising on the sale of Coronis Systems. Their professional attitude ensured a successful outcome for all shareholders”, while Jean-Marc Fiamma  of AXA Private Equity added: “Their understanding of both the buyer’s and sellers’ position and their knowledge of the industry really helped us complete this sale”.

Laurent Maleysson, Coronis Systems’ Co-Founder and General Manager pointed out: ”We are very satisfied with Cartagena’s services and can recommend them highly to other entrepreneurs. We would work again with Cartagena any time!" 

About Cartagena Capital GmbH
Cartagena Capital is an international technology corporate finance advisor with a particular focus on wireless. The company was created by senior industry experts and experienced investment bankers. It is providing advise in the areas of M&A, fundraising and strategy. Cartagena Capital is present in Germany, France, Finland and the US.

For more information, please, contact:
Olivier Perraudin, Partner
olivier@cartagena-capital.com
Tel . +33 6 7387 7263

COUNTING DOWN - THE APPLE iPHONE by Jane Zweig, CEO of The Shosteck Group and Executive Advisor of Cartagena Capital

About 80 hours to go til the Apple iPhone hits AT&T and Apple store shelves. In my nearly 20 years in the industry I can’t ever remember a time when a product has been so anticipated. Having said that I can’t ever remember a product which has been so misunderstood and so hyped.

Yes, the Apple brand has iconic status. It has taken "lifestyle" and "cool" to new extremes. Maybe it even invented "cool".

But the Apple iPhone won’t take over the world. It won’t displace Nokia, Motorola, SonyEricsson, LG and Samsung. AT&T won’t kill Verizon, Sprint and T-Mobile.

The Apple iPhone will however shake up current business models and propel an industry to do business differently.

Newspaper columnists from The Financial Times, The Wall Street Journal and other noted publications are writing articles comparing features of the iPhone to other products on the market from major handset vendors. Featuresets such as memory, battery, camera, music, display, keyboard are compared to Nokia’s N95, SonyEricsson K810i, LG’s Prada, Samsung’s Blackjack, and Motorola’s Rokr Z6.

Yes, those are all important features but the pundits and others are missing the fact that the iPhone isn’t really about a phone which will go head-to-head with other handsets. It is about a lifestyle which will compete. Apple will continue to leverage what it already has with its iPod and MAC products. The phone is almost an incidental part of the proposition. The iPhone will sync with iTunes, MAC OS, and other Apple specific features. Very little of what iPhone offers will "go over the air".

But AT&T is requiring a two-year contract and minimum data and voice packages so they won’t "lose". However, it won’t get full benefit from what Apple has to offer other than an iconic brand and lifestyle - which isn’t bad news for AT&T.

AT&T is said to have a 5 year exclusive arrangement with Apple for this product – an eternity in the life of a cell phone. AT&T expects that at least a million people will abandon its competitors Verizon and Sprint just for the iPhone. Some consumers may in fact defect but most probably AT&T won’t see as many defections as it would hope – especially given a $500 price-tag.

AT&T has hired an extra 2,000 employees to help with crowd-control during the first few weeks of sales. The phone will go on sale at 6 p.m. Eastern US time Friday, June 29. AT&T expects lines to form early and people to camp out overnight. Rumor has it that a million people have shown interest in this product.

Distribution issues abound. There are no subsidies on this device -- $499 or $599 depending on amount of memory. Does this mean that other operators will stop subsidizing devices? That wouldn’t be a bad thing. As the mobile industry blurs with the consumer electronics industry the subsidization issue will rear its ugly head. In the past, operators and vendors have used subsidies to move products and services. As devices become more complex and expensive the return on investment from subscriber usage is more difficult. Subsidies made sense in an exploding growth industry. In a mature one, subsidies make far less sense. So maybe Apple is shaking the apple cart on subsidies – no pun intended.

AT&T has a 14 day return policy on the device and will handle all service related issues. The iPhone device, features, and software are solely designed and controlled by Apple. But AT&T will have to handle any problems associated with them. AT&T is not in the music, nor component, nor software industry. Thus, the potential problems associated with the iPhone may not be familiar to sales forces or support teams. Training a sales and support team to deal with the issues which might arise will not be trivial nor inexpensive.

Apple is in the lifestyle industry. It has set itself up through different product divisions to capture the imaginations and lifestyles of its loyal customer base.

But so has Nokia. On June 20, 2007 Nokia announced a new company structure from January 2008. It is aimed at "the convergence of the mobile communications and Internet industries - in the devices business as well as in the consumer internet services and enterprise solutions." Nokia has a formula which is tough to beat – in terms of efficiencies, device volumes, new services and price points.

Apple will have to compete with Nokia who is clearly moving from dominating the mobile industry into a space which has been dominated by Apple (and some others). Apple hasn’t been in the mobile industry before. One hundred million iPods have been sold since 2001.

Far more than one hundred million mobile phones were sold in just the past year. Nokia captured more than a third of that market. Nokia has higher margins than anyone in the industry. It has scale which leads to efficiencies. Nokia is breaking out of a mobile device business into a consumer electronics player – some of its new devices don’t even have cellular capabilities. It is selling these devices outside of mobile channels. We would expect SonyEricsson – through its Sony parent to leverage similar expertise as Nokia.

Though AT&T’s competitors Verizon and Sprint will offer "competing products" (LG Prada and Samsung’s Upstage respectively), these products alone aren’t changing the operator business.

It is a bigger story which is changing the operator business. AT&T and Verizon are both offering "the lifestyle experience". They are aligning themselves organizationally to address this "digital paradise". Cable companies are doing the same. Sprint is promising to offer the "true mobile broadband/Internet" through its WiMAX offering.

Apple could be viewed as a catalyst for some of the reorganization and refocus of operators and vendors – which isn’t a bad thing. As industries mature, new ways of doing business need to be addressed. Status quo doesn’t sustain itself in a mature market.

At a conference in Germany last week at which I was a keynote presenter, I was asked the question "what can the industry do about the disruption that Apple is causing?" After my initial disbelief to this question, my answer was "let the disruption continue - and disruption may be viewed positively as enabling new types of services, devices, and prices all benefiting the end-user. You can’t stop disruption or progress."

Operators will need to change their business to recognize the "lifestyle" factor. So too will traditional handset vendors. Infrastructure vendors are acquiring companies to help them supply end-to-end solutions to address this lifestyle shift.

And Apple is helping lead the way – but it will only be a part of a realignment of forces. One thing is for sure - the jury will weigh in on June 30 after the iPhone hits the shelves. 

Visit www.shosteck.com to see the host of other new products and services that The Shosteck Group is offering.