Apple acquisition is a disappointment: Over the past two years, PrimeSense lost part of its motivation and capabilities, and however respectable the end, it was far from its potential

Apple acquisition is a disappointment

Over the past two years, PrimeSense lost part of its motivation and capabilities, and however respectable the end, it was far from its potential.

24 November 13 14:41, Shmulik Shelach

On March 5, 2000, graphic chipset vendor Nvidia Corporation (Nasdaq: NVDA) broke through the glass ceiling. It signed a contract to supply graphic processing units (GPUs) to Microsoft Corporation (Nasdaq: MSFT) for its Xbox game consoles. Nvidia received a down payment of $200 million (30% of turnover that year), strongly contributing the jump in its sales from $735 million to $1.91 billion.But the Nvidia-Microsoft deal had a dark and draconian side. Nvidia stated in its financial reports over the years that Microsoft had the right of first refusal should any third party want to buy a substantial bloc of shares in the company. It is difficult to know whether Microsoft ever exercised this condition, which could have harmed rivals’ strategies for graphic processors, but it might explain why Nvidia has never been acquired.

If the deal with Nvidia was draconian, then Microsoft had the means to affect the future ofPrimeSense Ltd.

, at least from the moment the companies signed a contract. The agreement with the Israeli company, which supplied Microsoft with gesture recognition hardware and software for the Xbox, was less dramatic, but at least once, PrimeSense had to obtain Microsoft CEO Steve Ballmer’s permission for a deal: the $50 million private equity investment by Silver Lake Partners in late 2010.

An urban legend about PrimeSense says that Microsoft made an offer to acquire PrimeSense that was hard to refuse, but when PrimeSense refused it, Microsoft moved on, acquiring the technology of a rival and developing it in-house. Whether or not any such offer was actually made, it seems that the convoluted history of the technology world did not allow PrimeSense to become the Israeli Nvidia. Both achieved breakthroughs in the same way for the same product by the same company, but the two companies then went down different roads.

PrimeSense’s acquisition by Apple Inc. (Nasdaq: AAPL) resembles its acquisition of another Israeli company – Anobit Technologies in early 2012. In that case, too, the acquisition was the less desirable option by a successful technology company that had promised great value, but ended with an acquisition at a merely reasonable price.

In late 2010, PrimeSense was en route to become another Nvidia, but the PrimeSense of 2013 is headed to become a sexy feature in the Apple ecosystem. Such a development might be the dream of every start-up, but PrimeSense had hoped for more. After all, it was already part of the ecosystem of the company that (still) operates almost all of the world’s computers, providing a solution that users dream of, and with enough cash reserves to finance its next move. But as often happens, things went wrong. Over the past two years, PrimeSense lost part of its motivation and capabilities, and however respectable the end, it was far from its potential.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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