MoPowered. UnderPowered.

Just because the world has gone mobile doesn’t mean that it’s easy to make money.

MoPowered floated on AIM at 100p in January, gaining a cash injection of £4m and a market capitalisation of over £15m. Impressive stuff given that 2013 revenues were just £1m.

This year, Q1 seems to have been okay, but from May 2014 the company announced a series of profit warnings. The FD left suddenly, then MoPowered made an unexpected cash call last week. The company will now raise an emergency £3.5m at 5p per share, valuing the business at just £1m. The stock price doesn’t make happy reading.

mopowered

MoPowered has some interesting technology that screenscrapes e-commerce websites and repurposes them for viewing on mobile phone and tablets. It was early into this market and, although it has publicised its ambitions with SME’s, has some good enterprise customers such as Next and SuperDry.

From the outset, MoPowered made much of its lack of direct competition. While largely true, this igores the growing mobile savvy of the e-commerce platform providers as a whole. Any retailer buying a new site based on Magento, say, has mobile optimisation available out of the box.

So, MoPowered is fishing in an ever smaller pool of retailers selling on old technology. Revenues are up 40% YTD but that’s not been enough to cover expenses until break-even is achieved.

Sensibly its new strategy is to focus on larger retailers rather than SME’s. Helpfully, Beaufort Securities has MoPowered as a “speculative buy”, the same view it held in May when the stock price was 80p.

Clear the decks for cross-selling.

Oracle has closed the Micros acquisition and issued a celebratory slide deck from which I’ve extracted one chart.

oracle micros strategy

Micros brings Oracle over 100.000 sites across the world running one of the large variety of EPOS applications rolled up by Micros in the US and Torex in Europe. Key UK customers include Selfridges and Monsoon.  As far as retail is concerned, the strategy looks like a straight cross-sell initiative. Sell Oracle HR, financials, merchandising and marketing software to the Micros base. Sell EPOS, workforce management and loss prevention the other way.

This is going to be challenging, on this side of the Atlantic at least. Micros Retail in Europe is primarily the old Torex business which was strong in mid-market fashion and general merchandise. These clients, with one or two exceptions, simply won’t pay Oracle prices.

There’s also a set of integration challenges ahead. Customers will expect all the new Oracle products to work together but (so I was told) Torex had 98 different software products and versions alone. This will present a few roadmap dilemmas if costs are not to be loaded onto the customers.

It’s Logical, Captain. Barclays buys TLG

The Logic Group (TLG) is the go-to brand for payments for Tier 1 retail and is well respected for its technical expertise. Customers include Tesco, Primark, WH Smith’s and many others. But turnover has been stuck c. £18m for years and the business has never been profitable. Indeed, it’s made an operating loss most years. Barclays hasn’t bought the business for the cash. It’s the capability that counts. Barclays is ambitious in payments and wants to be able to offer a full service to its customers. Right now, it’s too reliant on partners for delivery of many products. TLG brings it most of the capability it will need to succeed.

  • PSP and terminal management capability – Barclays and many other acquirers are worrying reliant on 3rd parties to manage their large estate of payment terminals. TLG gives Barclays what it needs to take control of its own business. Moreover, connecting the card machines through TLG’s payment gateway makes it much easier to integrate additional 3rd party services – China Union Pay cards, gift cards or loyalty schemes for example.
  • EPOS integration – a major gap in Barclays capability was that (until now) was that couldn’t connect a payment terminal to a till. This is a standard requirement for many retailers.
  • Online payment gateway – Its customers increasingly want to take money online but Barclays has only been able to offer a white label solution from Ogone (for SMEs) and a partner arrangement with Adeyn for larger ones. TLG brings a scalable, robust online payment gateway (albeit weak on alternative payments types) which allows Barclays to insource this critical capability.
  • Omni-channel – TLG have probably the most mature Omni-channel payment service available in the UK with a single MI portal and a single tokenisation engine. This will play very well with Barclay’s large customers.
  • Loyalty and insight – Barclays has made a big play around loyalty – Bespoke Offers – but also in its ability to derive insight from payment data. TLG brings it an experienced team that knows what retailers want.

TLG will remain independent, trading under its own brand and continuing to be acquirer agnostic. However, the deal does give Barclays a strong competitive differentiator with its larger customers. TLG conforms to the latest PCI standards (P2PE) and many retailers will find the proposition of encryption all the way from card machine to acquirer a very attractive one. It’s also unique in the market. WorldPay bought YESpay last year for similar reasons but don’t yet have the P2PE certification What could go wrong? Well, not too much. This is a low risk purchase. TLG is an established business and shouldn’t have too much difficulty fitting in culturally.

One observation, though. The announcement indicates that the deal probably includes an earn-out. In my experience, having been on the wrong end of a couple of these, this is will cause unnecessary delay. Large companies that acquire small ones for the capability are best served by integrating the business from day one. Whether TLG makes money next year or not is tangential to delivering the much larger strategy of which it is surely part of.

UPDATE: I understand that there is no earn-out on this deal. Smart move.